How Silicon Valley Bank failed

Planet Money

NPR

Business, News

4.6 • 29.8K Ratings

🗓️ 16 March 2023

⏱️ 21 minutes

🔗️ Recording | iTunes | RSS

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Summary

Silicon Valley Bank was the 16th largest bank in America, the bank of choice for tech startups and big-name venture capitalists. Then, in the span of just a few days, it collapsed. Whispers that SVB might be in trouble spread like wildfire through group texts and Twitter posts. Depositors raced to empty their accounts, withdrawing $42 billion in a single day. Last Friday, after regulators declared that SVB had failed, the FDIC seized the bank.

As the dust settles on the biggest bank failure — and bank rescue — in recent memory, we're still figuring out what happened. But poor investment choices, weak regulation, and customer panic all played their parts. We'll look into the bank's collapse to understand what it can teach us about the business of banking itself.

This episode was produced by Willa Rubin, with help from Dave Blanchard. It was edited by Keith Romer, and engineered by Brian Jarboe. Fact-checking by Sierra Juarez. Our acting executive producer is Jess Jiang.

Music: "I Don't Do Gossip," "Groovy Little Penguins" and "Vision."

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Transcript

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0:00.0	This is Planet Money from NPR.
0:06.9	It has been a week for the banking sector.
0:10.1	For all of us really.
0:11.8	The core of the action happened last week out in California.
0:15.1	Midweek, the tight knit startup scene in Silicon Valley got wind that their preferred bank
0:20.7	appropriately named Silicon Valley Bank might be in trouble.
0:24.9	It was unclear if it was really in trouble, but it didn't matter.
0:28.3	As soon as some prominent startup folks told other prominent startup folks they were pulling
0:32.6	their money out of the bank, quickly became a bank run.
0:36.2	$42 billion with drawn in a single day.
0:39.9	By Friday, regulators were like, this bank has failed.
0:43.4	The government seized the bank and said, we'll take it from here.
0:46.3	And over the weekend, there was a lot of hand-ranging about this.
0:48.9	What was going to happen to all the people who hadn't managed to get their money out
0:52.2	in time?
0:53.2	Should the government bail out the bank?
0:54.8	Was this going to be like the beginning of a brand new 2008 style financial crisis?
1:00.0	Sunday night, the government made it clear.
1:02.1	They did not want this to spread.
1:03.9	They seized a second bank, signature bank of New York.
1:07.2	They also guaranteed that everyone who had their money in Silicon Valley Bank or signature
1:11.5	was going to be paid in full.
	...

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