Feds backstop all deposits of Silicon Valley Bank, second bank plunges
SANTA CLARA — Federal officials moved to insure all deposits at failed Silicon Valley Bank, hoping to inoculate the banking system against contagion, but shares of another Bay Area regional bank plunged on Monday.
Scores of customers lined up outside the Santa Clara headquarters of the fallen Silicon Valley Bank on Monday to await the opening of the financial firm’s doors. Officials began to allow customers into the bank at 10 a.m.
One of those was Bob, a San Jose resident who asked that his last name wasn’t used. Bob, whose expertise is in financial services, said all of his money was at the bank, which was able to meet his requirements. Bob said he endured an anxious few days after he heard on Friday that the bank had collapsed and was seized by the FDIC.
“Oh yeah, I was worried,” Bob said after leaving the bank Monday. “After I heard about it Friday, I was worried most of the weekend.”
The move to protect Silicon Valley Bank depositors arose over fears that tech startups might be forced to shut down or furlough employees due to a cash squeeze if their uninsured deposits weren’t available to tap for their ongoing operations — andas well as to ward off runs against other banks with a high percentage of uninsured deposits.
The U.S. Treasury Department, the Federal Reserve Bank and the Federal Deposit Insurance Corp. teamed up to lead the quest against a banking system contagion in the wake of the collapse and takeover by the FDIC of the insolvent Silicon Valley Bank.
“The FDIC today transferred all deposits — both insured and uninsured — and substantially all assets of the former Silicon Valley Bank to a newly created, full-service FDIC-operated ‘bridge bank’ in an action designed to protect all depositors of Silicon Valley Bank,” the FDIC announced Monday.
Signs quickly emerged on Monday, however, that Wall Street and big investors were skeptical about the federal actions in the case of Santa Clara-based Silicon Valley Bank.
San Francisco-based First Republic Bank’s shares nosedived Monday morning and plunged more than 60% in midday trades on Monday. An one point, the bank’s stock had plunged about 65%.
Like Silicon Valley Bank, First Republic is a regional bank with a considerable amount of wealthy depositors.
Investors became queasy about First Republic Bank after the bank announced Sunday that the FDIC and JPMorgan Chase (Chase Bank) had teamed up to provide access to $70 billion in funds through an array of sources.
New York City-based Signature Bank joined Silicon Valley Bank in a collapse and was taken over by the FDIC during the weekend.
In a fresh sign of skepticism over small banks, federal officials failed to round up a buyer for Silicon Valley Bank despite an hours-long auction on Sunday.
Bob said that he believes top executives at Silicon Valley Bank should face consequences for the blunders that allowed the bank to collapse and be forced into an FDIC takeover.
“The officers of the company should have something done to them,” Bob said in an interview Monday.
On Feb. 27, Chief Executive Officer Greg Becker sold $3.6 million of stock in Silicon Valley Bank, an insider trade that occurred less than two weeks before the bank’s problems began to surface publicly.
Plus, an unknown number of bank employees received their annual bonuses on Friday, just ahead of the takeover of the bank.
“They were entrusted with people’s money,” Bob said of the bank’s executives and officials. “They didn’t take their responsibility seriously. They made decisions that was hurting the bank and hurting the people. They need to be punished. If that happens once, this might not happen again.”