The collapse of the Silicon Valley Bank (SVB) and Signature Bank has sent shockwaves throughout the financial industry. Due to the Federal Reserve's ultra-accommodative monetary policies and the resulting quantitative easing (QE), speculative investments in tech stocks, crypto currencies, NFTs and other risky assets surged, which caused a bank run as clients began to withdraw their deposits due to SVB's failure to adapt to the changing rates and the FDIC standard insurance that only covers up to $250,000 per depositor account.
The news of the banks' fall has caused fear that it could signal the end of an era of innovation, as SVB was unique in taking risks that other banks were not willing to take. In response to the crisis, President Biden has agreed to a sweeping intervention to protect depositors, including the large companies. The US Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation have ensured that SVB and Signature Bank clients will have access to their money without expense to the American taxpayer.
The closure of Signature Bank has forced many crypto companies to rethink their financial holdings, leading to alternative, often riskier, banking options. Rich Dad Company co-founder Robert Kiyosaki has also predicted that credit Suisse could be next due to the fall of the bond market and suggests exploring or investing in silver and gold during a volatile market. ?
The collapse of SVB has created new challenges for president Biden's climate agenda, as many start-ups working on clean energy technologies were banking with the defunct institution. Investors and analysts are now assessing how to move forward, as many of these firms had just closed new funding rounds days before the collapse and were out of their accounts. The situation has left them in a more uncertain landscape, as President Biden's inflation reduction act seeks to infuse hundreds of billions of dollars in public money into the clean tech market.
In the wake of the bank's fall, two of the SVB executives, Kim Olson and Joseph Gentile, have come under public scrutiny. President Biden has called for the firing of SVB's leadership team and warned that executives responsible for the collapse will be held accountable. However, no wrongdoing has been attributed either to Gentile or Olson in connection with the SVB collapse.