The Implosion of Silicon Valley Bank

The Daily

The New York Times

Daily News, News

4.4 • 102.8K Ratings

🗓️ 14 March 2023

⏱️ 34 minutes

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Summary

With federal regulators planning to take over the collapsed Silicon Valley Bank, a 40-year-old institution based in California, nearly $175 billion in customer deposits will be placed under the authorities’ control. The lender’s demise is the second-largest bank failure in U.S. history and the largest since the financial crisis in 2008. The debacle raised concerns that other banks could face problems, too. Guest: Emily Flitter, a finance correspondent for The New York Times.

Transcript

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0:00.0	From New York Times, I'm Michael Barrow. This is Sadeh Lee.
0:07.0	Today, we look at what caused the collapse of Silicon Valley Bank and why it required an
0:18.2	emergency federal rescue plan for the entire industry. My colleague, Emily Flitter, explains.
0:34.2	It's Tuesday, March 14th. Emily, it has been a truly remarkable 72 or 96 hours.
0:48.2	Depending on how you measure it in the world of finance. I think for those of us who lived through the 2008 financial crisis,
0:55.2	which also unfolded over a weekend, everything about this feels like day job, like here we go again.
1:05.2	That's right. I was a banking reporter during the financial crisis in 2008 and the way I started out in these last 72 hours
1:15.2	was trying to find all the ways that this wasn't going to be like that. That's how scary that was.
1:22.2	Right. Well, we'll get to that. So let's start at the beginning. How we got into the mess we're in. Where does that start?
1:31.2	The precipitate of this crisis starts with a bank in Silicon Valley called Silicon Valley Bank.
1:40.2	It's a trendy sort of sexy name that many people may not have heard about, but it certainly was one of those banks that, you know,
1:50.2	the CEO was on CNBC and it had a reputation for being associated with innovation and the future and tech bros and things like that.
2:00.2	But the bank's origins were much humbler than that.
2:05.2	Tell me about that.
2:07.2	It's a regional bank. It was started in the early 80s and it didn't grow very quickly originally, but it had a sort of interesting side business,
2:20.2	which is that back when it was legal to do this, it had a venture capital arm.
2:26.2	That means that some of the banks own money was going toward investing in little tech startups.
2:34.2	Venture capital is the riskiest kind of investing there is and a lot of banks are really conservative and they wouldn't dream of doing this.
2:43.2	But this bank began to grow in the venture capital world and eventually Greg Becker,
2:53.2	the head of the venture capital business took over the bank and he courted the venture capitalists themselves and the bank ended up just becoming like this central figure in the world of venture capital investing and startups.
3:10.2	In a way that was so dramatic that there were little companies that had just started out on a prayer and a little idea and their founders were saying things like Silicon Valley bank is so great,
3:24.2	it's the only bank that will agree to bank me.
	...

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