A bank has failed. Scratch that. Two banks have failed (RIP Signature Bank, too, but no one seems to care as much about that). The collapse of Silicon Valley Bank (SVB) represents the second largest bank failure in U.S. history. As anxiety over the banking system spread over the weekend, some people rushed to their regional banks to pull out their cash while others sat at home on Twitter and almost wished they had cash to pull out. Federal and State officials took phone calls late into the night, scrambling for solutions, while reassuring their friends in the tech and banking industries that they would not let this “contagion” spread to their businesses (or their own investment firms).
“It was a very intense 48-plus hours for everyone who was involved,” says Utah Governor Spencer Cox at a Silicon Slopes town hall on Monday. “Especially those whose deposits were at risk.” Earlier Cox had tweeted, “We recognize the serious impact this [SVB collapse] has on many Utah firms with significant assets at risk. We will push regulators and federal partners to work quickly for stability, certainty and solutions.”
If it was anything like the last time (2008 was not so long ago for us millennials), we all knew what to expect: golden parachutes for executives, government bailouts for the banks “too big to fail,” and a lot of little people left to suffer and fight over scraps in the fallout. But it was different this time. The “contagion” did not spread, as far as we can tell. At least, that’s what all of our elected officials keep saying.
“The people at Silicon Slopes and across our state had a big impact on the Fed and the FDIC and the administration making the right decision,” says Utah Senator Mitt Romney at the Silicon Slopes town hall. That “right decision” is the Federal Government covering all of the money depositors had in Silicon Valley Bank, not just the FDIC-insured amount of up-to $250,000.
According to some market commentators, if you have that amount deposited with a single bank, then maybe you should suffer the consequences? As The Kobeissi Letter explains, “If you have $1 million at 1 bank, then only $250,000 of it is insured by the FDIC. If you have $250,000 at 4 banks, then $1 million of it is insured by the FDIC. This is the logic that runs the current banking system. We need a reform or this systemic collapse will continue.”
Regardless, why did Federal and Utah State politicians want to bend the rules for the depositors of this bank in particular? To keep this “contagion” from spreading. “Both the Federal Reserve and the FDIC are very anxious and willing to take the steps necessary to make sure people realize that their deposits in a federally regulated bank are not going to get lost and are going to be fully covered,” says Romney.
Confidence here is key. A lack of confidence in their bank means depositors all at once rush to pull their money out of a bank, like SVB—to the tune of $42 billion in a matter of hours— “which no bank could withstand,” according to former Vice Chair of the Federal Reserve Board, Randal Quarles. “It’s not indicative of a general systemic problem within the banking industry.” What confidence.
However, it looks like some clients and markets do not share that confidence at the moment. U.S. Regional Bank stocks took a hit on Monday, including Zions Bank Corp., based in Salt Lake City, whose stocks were down -43% at one point.
How is Utah impacted by the SVB collapse?
Cox says one of the major concerns (as far as Utah is concerned) was payroll. Utah firms who pay their employees through Silicon Valley Bank might not get those checks to come through if their deposits weren’t covered. “We know that hundreds of businesses were impacted and thousands of employees would have been impacted. It could have been devastating to our state…If the Feds didn’t step up, the State would have. To make sure we are helping those who are struggling.”
Who were some of “those who were struggling?” Companies with large deposits in SVB include:
- Circle, $3.3 billion
- Roku, $487 million
- BlockFi, $227 million
- Roblox, $150 million
- Ginkgo Bio, $74 million
- iRhythm, $55 million
- Rocket Lab, $38 million
- Sangamo Therapeutics, $34 million
- Lending Club, $21 million
- Payoneer, $20 million
We know a number of Utah firms—like Kickstart Seed Fund, a Utah-based venture capital firm—were clients of Silicon Valley Bank, which had offices in Salt Lake City (2750 E. Cottonwood Parkway).
Some important events of note:
January 2006: SVB opens in SLC
Silicon Valley Bank announced “a support and back-operations facility” in Salt Lake City, Utah. “The facility is part of the company’s business continuity strategy to ensure the continuous availability of critical client operations in the event of an unforeseen disaster,” read the press release. “With the opening of this facility in Salt Lake City, we are ensuring that we can perform all essential operations independently, even if our resources in other parts of the country are temporarily or permanently disabled,” said Lynda Ward Pierce, then head of Human Resources for Silicon Valley Bank.
August 2008: SVB expands in Utah
SVB announces its expanding presence in Utah. “Silicon Valley Bank has worked closely with Utah’s technology, life science and private equity firms, offering financing solutions, treasury management, corporate investment and international banking services,” read the press release. “Silicon Valley Bank is a critical part of the technology community in Utah and we’re glad to see they are making this a permanent location,” said Will West, CEO, Control4 Corporation. “Silicon Valley Bank helps give an emerging technology company its best shot at success and we’re grateful for its partnership.”
May 2017: SVB gets a bigger Utah office
SVB announces its move to a larger location in Utah. “The Utah innovation economy has experienced dramatic growth in the last 10 years,” said Gary Jackson, managing director for Silicon Valley Bank in Salt Lake City, in the press release. “The quality and diversity of local companies forming along with greater VC investment in the region have created a robust ecosystem. Our new, larger space will allow us to foster increased collaboration with our clients and the investment community.”
2020: SVB enjoys tech boom, low interest rates
During the pandemic, Silicon Valley Bank’s deposit base starts growing exponentially, thanks to a tech boom. The bank invests the lionshare of its funds in bonds that typically deliver consistent returns when interest rates are low.
2022: Interest rates rise
The Fed raises interest rates, and the tech industry hits a bit of a slump—two things that SVB investments depend on.
February 2023: SVB executive sells millions in company stock
C-level executives at the SVB sell off more company shares. CNBC reports Silicon Valley Bank CEO sold $30 million in stock over the last two years and $3.6 million in a single day in February.
Early March 2023: SVB Snow Summit in Deer Valley
The Financial Times reports that, “40 chief financial officers from various technology groups gathered in the Utah ski resort of Deer Valley for an annual ‘snow summit’ hosted by Silicon Valley Bank.”
March 8, 2023: SVB plan to shore-up losses
SVB announces plan to raise $2.25 billion in common equity and preferred convertible stock after it sold a portfolio of Treasury and mortgage bonds at a $1.8 billion loss.
March 9, 2023: Depositers make a run on the bank
SVB clients start pulling their money from the bank after some apparent encouragement on Twitter. That amounts to $42 billion of deposit withdrawals, in a “run” on the bank.
March 10, 2023: SVB shut down
Regulators shut down Silicon Valley Bank. The FDIC takes control.
March 12, 2023: Government ‘backstop’
The FDIC says in a statement that depositors will have access to all of their money starting Monday, claiming that no losses will be borne by the taxpayer.
If you like timelines about financial fails, check out Salt Lake magazine’s story on The Church of Jesus Christ of Latter-day Saints’ scheme to conceal $32 billion in assets.
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