Lawmakers in the US held a meeting with the Federal Reserve and Federal Deposit Insurance Corporation on Friday to discuss the swift and stunning collapse of Silicon Valley Bank (SVB).
Democratic US Representative Maxine Waters reportedly discussed with officials from the two federal bank regulators, as well as the Treasury Department, hours after SVB collapsed. Lawmakers from both the Democratic Party and the Republican Party were present at the meetings.
“I am alarmed by the failure of Silicon Valley Bank, which marks the second largest bank failure in U.S. history,” Waters reportedly said in a statement, adding that she is closely monitoring and convening Committee members with regulators to understand the latest around the closure of Silicon Valley Bank (SVB). She added:
“I appreciate the DFPI and the FDIC for taking decisive action today, and I remain confident in America’s financial markets and the ability of our regulators to protect consumers and investors.”
Silicon Valley Bank, one of the most popular lenders to Silicon Valley tech and growth startups, failed on March 10, falling into the hands of the Federal Deposit Insurance Corporation (FDIC). On Friday, the federal agency took control of the bank and created the Deposit Insurance National Bank of Santa Clara, which now holds the insured deposits from SVB.
Several other lawmakers have also said they were also following the situation. In a Friday tweet, Representative Ro Khanna said he reached out to both the White House and the Treasury Department to discuss the situation with the bank.
Furthermore, US Treasury Secretary Janet Yellen met with banking regulators, including the FDIC, on Friday to discuss the collapse of SVB. In a statement, she said that the banking system “remains resilient” and regulators have effective tools to address this type of event.
Notably, the swift collapse of Silicon Valley Bank came just two days after crypto-friendly bank Silvergate collapsed. As reported, Silvergate Bank’s parent company, Silvergate Capital Corporation, announced Wednesday that it has decided to wind down its operations and liquidate its subsidiary.
Silvergate was among the lenders hit hardest by the fall of FTX in November last year. The crypto bank suffered a run following the collapse of FTX and had to sell $5.2 billion of debt securities it was holding on its balance sheet at a significant loss to cover around $8.1 billion in user withdrawals.
Meanwhile, the aggravating user sentiment around the banking sector has seen the shares of another crypto-friendly, Signature Bank, go downhill. The bank’s shares were down nearly 23% on Friday and more than 37% since the start of the week.
Crypto Firms Take a Hit as SVB Collapses
While venture capital firms and tech startups were most severely affected by the collapse of Silicon Valley Bank, some major crypto companies have also revealed exposure to the bank. For one, USDC issuer Circle has $3.3 billion of its USDC reserves at the collapsed lender.
Furthermore, bankrupt crypto lender BlockFi has $227 million in uninsured funds stuck in an account maintained by the failed lender. Crypto-focused venture capital firm Pantera may also have an unknown amount of exposure to SVB’s collapse.
The Avalanche Foundation, which supports the Avalanche blockchain, Yuga Labs, the entity behind the Bored Ape Yacht Club NFT project and some other blue-chip collections, as well as Web3 company Proof are some other crypto companies that have been hit hard by the recent collapse of Silicon Valley Bank.
Lawmakers are pushing for answers from the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) about the collapse of Silicon Valley Bank, which left hundreds of depositors with significant losses.
The bank, founded in California in 1983, filed for liquidation in January after its parent company, Silicon Valley Bancorp, abruptly ceased activity. The failure of Silicon Valley Bank leaves 350 depositors, including customers from multiple states, with an estimated $1.7 million in losses which are expected to be reimbursed by the FDIC insurance fund upon determination of the magnitude and scope of the losses.
At a recent Congressional hearing, lawmakers sought more information on the events leading up to the closure, as well as assurance that steps are being taken to protect consumers from similar closures in the future.
Committee members asked representatives from the Federal Reserve and FDIC how the bank was able to continue operating after it was reported to have failed to turn a profit since 2018 and continuing to incur heavy losses. The representatives replied that the Federal Reserve had been monitoring the bank for years and had implemented corrective measures prior to it entering an FDIC-mandated resolution process.
In addition, the lawmakers sought to understand why depositors were not notified of the bank’s closure until over two months after it ceased operations, and the representatives indicated that financial institutions are not required to do so until after receiving the termination notice from the FDIC.
The representatives also discussed the FDIC’s Deposit Insurance Fund, which covers customer deposits up to $250,000, and the measures they are taking to improve security measures in future cases.
Lawmakers were generally unsatisfied with the answers provided and promised to further investigate the Silicon Valley Bank debacle as questions remain concerning the Federal Reserve and FDIC’s responsibility in the collapse. The representatives committed to continuing their dialogue with the Committee and promised to provide additional information as it becomes available.