Why Silicon Valley Bank Collapsed and What Steps Joe Biden Will Take

Wall Street fears over the collapse of Bank of Silicon Valley


Silicon Valley Bank collapsed after an impressive 48 hours in which its Capital crisis raised fears of a collapse in the banking sector.

The U.S. government intervened to guarantee the deposits of the customers, but SVB collapse continues to affect financial markets from all over the world. The government also shut down Signature Bank, a regional bank. on the verge of bankruptcy, and secured its deposits.

California regulators shut down the technology lender and gave SVB control of the Federal Deposit Insurance Corporation of The FDIC acts as a receiver, which generally means that liquidate the bank's assets to pay its customers, including depositors and creditors. The FDIC is an independent government agency that guarantees bank deposits and supervises institutions Financial.

SVB shares fell on Friday morning after falling more than 60% in pre-market operations. Stocks fell by 60% on Thursday after the bank said it had to sell a wallet of U.S. Treasuries and $1.750 billion in stocks with losses to cover rapidly shrinking customer deposits.

Several other bank actions were temporarily suspended on Friday, including First Republic, PacWest Bancorp and Signature Bank.

The bank has partnered with nearly half of all tech companies and venture capital-backed healthcare in the United States, many of which have withdrawn deposits from the bank.

As bank stocks around the world fell in response to the On Thursday, fears of contagion spread to Wall Street. Hedge fund manager Bill Ackman compared the situation of SVB with the last days of Bear Stearns, the first bank to collapse Beginning of the global financial crisis of 2007-2008.

"The risk of bankruptcy and loss of deposits here is that the next bank less capitalized break and dominoes continue to fall," he wrote. Ackman in a series of tweets.

Crypto lender Silvergate announced on Wednesday that it would close its operations and liquidate the bank after it was affected financially due to the turbulence of digital assets. Signature Bank, Another cryptocurrency-enabled lender was hit hard by the liquidation of the bank, and the shares fell 30% before blocking the Volatility on Friday.

"SVB's institutional challenges reflect a larger systemic problem and More widespread: the banking sector is sitting on a ton of low-yielding assets that, thanks to the last year of rate increases, now they are overwhelmed and sunk," said Konrad Alt, co-founder. of the Klaro Group.

In a sign of the seriousness with which officials are taking the The collapse of the SVB, US President Joe Biden told the Americans on Monday who "can rest assured that our system banking is safe" and that "we will do everything we can, especially that."

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