After Silicon Valley Bank collapses, US seizes entity’s assets and fear reigns in tech companies

US regulators The assets of the Silicon Valley bank were seized on Friday after there was a bank rushthe largest failure of a financial entity in the country since the Washington Mutual in the midst of a financial crisis more than ten years ago.

Silicon Valley, the 16th largest bank in the United States, went bankrupt after depositors, mostly tech workers and venture capital-backed companies, they will be rushing to withdraw their money this week as concern spread over the bank’s financial health. It is the second largest bank failure in US history.

The bank had strong ties to Silicon Valley industries and startups. Y Combinator, a startup incubator that launched companies like Airbnb, DoorDash and Dropbox, has referred hundreds of entrepreneurs to the bank.

“This is an extinction level event for startupssaid Y Combinator CEO Garry Tan. “I’ve listened to literally hundreds of our founders asking for help understanding how they can get through this. They’re asking me, ‘Should I temporarily lay off my workers?’ »

Tan estimated that nearly a third of Y Combinator startups won’t be able to pay their payrolls over the next month if they can’t access their money. He said he was asking regulators and lawmakers whether startups could be eligible for financial aid.

The Silicon Valley bank was heavily exposed to the tech industry, but the chaos is unlikely to spill over to the wider banking sector in the same way as happened in the months leading up to it. the Great Recession more than ten years ago. The biggest banksmost likely to cause widespread economic collapse— have sound financial statements and abundant capital.

In 2007, the biggest financial crisis since the Great Depression swept the world after the price of mortgage-backed securities linked to imprudent home loans plummeted. Panic on Wall Street led to the demise of Lehman Brothers, a company founded in 1847. Because the big banks were so exposed to each other, a cascading collapse of the global financial system ensued, putting millions of people out of work.

There has been unease in the banking sector all week, with news of the Silicon Valley bankruptcy sending shares of nearly every financial institution plummeting on Friday, stocks that had already fallen by double digits since Monday.

The Silicon Valley Banking Crash Happened With Incredible Speed. Still, some industry analysts suggested on Friday that it was a good company and likely still a wise investment. Silicon Valley bank executives were trying to raise capital early Friday and find additional investors. However, Trading in the bank’s shares was halted before the stock market opening bell rang due to their extreme volatility.

Shortly before noon, the US Federal Deposit Insurance Corporation (FDIC) closed the bank. In particular, the FDIC did not wait until after business hours to seize the bank, as is the case in a well-organized liquidation of a financial institution. The FDIC could not immediately find a buyer for the bank’s assets, an indication of how quickly depositors had withdrawn their money.

(With AP information)

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