Can chaos be contained by the collapse of Silicon Valley Bank?

NEW YORK (AP) — Can Washington come to the rescue of Silicon Valley Bank depositors? Is this a politically possible option?

These were some of the questions circulating in Washington on Sunday as politicians grappled with whether the federal government — and its taxpayers — should bail out the failing bank that operated primarily in Silicon Valley, with all of its wealth and power.

Silicon Valley VIPs and executives pushed the huge panic button, saying that if Washington doesn’t come to the rescue of Silicon Valley depositors, there could be more bank runs this week.

“Deposits in the United States are either safe or they are not. If not, beware,” warned David Sacks of Craft Ventures, a company with close ties to billionaires Elon Musk and Peter Thiel, on Twitter.

Silicon Valley Bank collapsed on Friday as fearful depositors withdrew billions of dollars from the institution within hours, forcing federal banking regulators to urgently shut down the bank in the middle of the business day to avert a panic. banking. It is the second-worst banking collapse in US history, behind that of Washington Mutual at the height of the 2008 financial crisis.

Silicon Valley Bank was a unique creature in the banking world. The 16th-largest bank in the country primarily served tech startups, venture capitalists, and high-paying employees in the tech industry, as its name suggests. For this reason, the vast majority of deposits at Silicon Valley Bank were in business accounts with balances well above the insured limit of $250,000.

Its collapse left more than $150 billion in deposits now stranded in bankruptcy, meaning startups and other businesses may not have access to their money for a long time.

Workers at the Federal Deposit Insurance Corporation (FDIC), the agency that insures bank deposits under $250,000, searched all weekend for a possible buyer of the bank’s assets. There were several bids for the assets, but as of Sunday morning they remained in federal custody.

Despite the panic coming from Silicon Valley, there is no indication that the banking meltdown could lead to a crisis similar to that of 2008. The country’s banking system is in good shape, with more capital than at any time in its history. history, and has been through several stress tests which show that the whole system could withstand even a severe economic downturn.