No Federal Bailout for SVB, Says US. Bank Had Weakened Regulations, Paid Bonuses

The Associated Press reports that deposits insured by the federal government are supposed to be available by Monday morning…

The Federal Deposit Insurance Corporation insures deposits up to $250,000, but many of the companies and wealthy people who used the bank — known for its relationships with technology startups and venture capital — had more than that amount in their account. There are fears that some workers across the country won’t receive their paychecks….

[Yellen] emphasized that the situation was much different from the financial crisis almost 15 years ago, which led to bank bailouts to protect the industry. “We’re not going to do that again,” she said. “But we are concerned about depositors, and we’re focused on trying to meet their needs….”

Silicon Valley Bank is the nation’s 16th-largest bank. It was the second biggest bank failure in U.S. history after the collapse of Washington Mutual in 2008. The bank served mostly technology workers and venture capital-backed companies, including some of the industry’s best-known brands…. Yellen said she expected regulators to consider “a wide range of available options,” including the acquisition of Silicon Valley Bank by another institution. So far, however, no buyer has stepped forward.

CNBC reports that just hours before regulators seized the failing bank — employees were paid their annual bonuses, “according to people with knowledge of the payments.”
And the Intercept reports that earlier the bank had successfully lobbied for the rollback of protective rules established in the wake of the 2008 financial crisis. “The lobbying effort managed to exempt banks the size of Silicon Valley Bank from more stringent regulations, including stress tests aimed at uncovering the type of weaknesses that led to the bank’s implosion Friday.”

But the Washington Post reported that as dramatic as the seizure is, “one thing it doesn’t seem likely to do — at least for now — is trigger a wider financial meltdown, banking experts said.”
Unlike the giant banks that ignited a global crisis in 2008, SVB was heavily dependent upon a single risky sector of the economy for both its depositors and its customers. That concentrated bet proved to be very bad news for the ambitious start-ups that dominate the high-technology world. But it means that the tech-friendly bank lacked the sophisticated financial entanglements with other institutions that can turn one bank’s losses into a threat to the entire industry.

Read more of this story at Slashdot.