Federal Reserve Promises Review of Silicon Valley Bank Collapse

Monday’s announcement by the Federal Reserve indicated that it will investigate the demise of Silicon Valley Bank (SVB), a tech-focused bank. This includes any regulatory and supervisory failures. This comes a day after regulators closed crypto-focused Signature Bank, marking the second U.S. bank to fail days apart.

Michael Barr, the vice chair for supervision at the central banks, will supervise the review. The results are expected to be published by May 1.

“We need to have humility and conduct a careful and thorough review of how we supervised and regulated this firm and what we should learn from this experience,” Barr said in a statement.

Chair Jerome Powell says that the events surrounding SVB’s collapse require a “thorough, transparent, and swift review” Federal Reserve. This was the second-largest bank collapse in American history, after the 2008 crisis’s collapse of Washington Mutual, valued at $209 million.

It was established in 1983 and quickly rose to prominence by financing Silicon Valley startups. It mostly served tech startups, including many that were devoted to climate change and others that are related to California’s wine industry. It was also exposed to crypto-entrepreneurs and venture capitalists.

SVB collapsed due to negative sentiment. Investors and depositors attempted to withdraw $42 Billion in a bank riot on March 9. Federal authorities intervened the next day to force the bank’s closing. This was the largest bank failure since 2008 Great Recession.

Janet Yellen, U.S. Treasury secretary, identified rising interest rates as the root problem of SVB. These have been increased by the Federal Reserve to combat inflation. SVB’s substantial Treasury bond holdings and mortgagebacked securities all lost value with each Fed rate rise. In the midst of a low level of venture capital investment, startup clients at the bank were also drawing down more funds.

Signature Bank, which collapsed in the wake of SVB’s fall, held more than $110 billion in assets and some of the biggest stakes among banks in the nation in the cryptocurrency industry, and was placed into receivership under the Federal Deposit Insurance Corporation (FDIC).

‘Your Deposits Are Safe’: Biden

President Joe Biden assured Americans Monday that “your deposits are safe” After the collapsed banks.

In order to provide security and to prevent bank runs at tech-exposed institutions, regulators have intervened to guarantee customers’ deposits in Signature Bank and SVB.

Bloomberg News reported that 93 per cent of SVB’s $161 Billion in deposits were not eligible for the Federal Reserve’s emergency lending powers, the FDIC. This is funded via a levy on bank deposit accounts.

FDIC declared that it was in accordance with the U.S. Treasury Department (US Treasury) and Federal Reserve. “announcing a similar systemic risk exception for Signature Bank” To what SVB was granted.

“All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer,” You can read the joint statement by the federal regulators.

To protect taxpayers from losses, regulators disapproved of a taxpayer-backed rescue plan for the bank’s owners or investors. Instead, the FDIC would pay the risk in Signature Bank’s portfolios through an auction to repay depositors.

Trump’s former president and 2024 GOP presidential candidate is also an author who blames President Joe Biden’s economic policies for the bank failures. Truth Social posted this post.

Democrats are blaming Trump for the bank meltdowns.

Melanie Sun contributed to the report.