After facing significant losses on their security portfolios and the funding struggle to reassure its capital-backed investors, Silicon Valley Bank (SVB) shocked investors when it announced its raising of $2.25 billion in capital as a means to ‘shore up its balance sheets.’ Within 48 hours of the announcement, word became widespread that SVB was short on capital–from here the mania began. Prominent venture capitalists advised their companies to withdraw their money–plunging SVB’s stock by over 60% until SVB became virtually inaccessible. 

But what about investors who had far more holdings than their insured $250,000? Well, they pleaded for the federal government’s assistance, reasoning that if they did not have prompt access to their funds–the collapse would have a cascading effect. After all, they were right. Back during the Great Recession: the event that left an impression on income inequality, unemployment rates, economic policy, the gross domestic product (GDP), and 198 countries–similar repercussions were present. Amid the Great Recession, global trade declined by 15%, global unemployment rose by 3%, and there was a loss of over $2 trillion in potential economic growth. And of course, there was a classic government bailout by the Federal Deposit Insurance Corporation (FDIC), paralleling the Great Recession.

Hypocritically some of these depositors–who were desperate for a government bail–were indeed the same individuals who suggested “that the government should keep its tentacles away from the innovative geniuses of the Valley” (Levy 1). 

But the depositors still knowingly stored all of their money–far surpassing the $250,000 that was covered–in one bank: Silicon Valley. Why? Well SVB is known as a ‘regional and low profile bank,’ however when discussing their deep ties in the tech’s industry this title can become porous. Due to SVB’s catering to starting tech companies, these businesses can turn from nothing into a company like Apple at an amazing speed. The ‘startup heaven’ understands “you will have cash in multiple banks, [and] they would like to be one of them,” wrote Mark Suster–an investor encouraging others to house 50% of their capital with SVB. And just as quickly as investors sought to store their assets–they sought to withdraw them, forcing the FDIC to act. 

SVB investors and stockholders were the groups primarily affected by the bank’s collapse, for the FDIC does not cover their investments. But, on March 12th the federal government guaranteed that they would back all deposits–not including shareholders or uninsured depositors. As a means to merge those insured and uninsured, all deposits of SVB were now shifted to the National Bank of Santa Clara. Those who were uninsured were paid an advanced dividend, while those who were insured had access to their assets a day later on March 13th. Although, America’s banks may seem “sound” for now, as testified by Janet L. Yellen before the Senate’s Finance Committee–the future for the technology industry is unclear, with the collapse of their biggest proponent.