SVB Collapse Is Largest US Bank Failure Since 2008 Washington Mutual Shutdown: Clients With Deposits Over $250,000 Brace For Losses
- The monumental fall of Silicon Valley Bank is the second largest bank failure in US history.
- The collapse is only dwarfed by the bankruptcy of Washington Mutual in 2008
- Deposits up to $250,000 are guaranteed by the Federal Deposit Insurance Corporation, but customers with more face a nervous wait for their money.
The monumental fall of Silicon Valley Bank is the second largest banking collapse in the history of the United States.
Friday’s collapse, which left clients fearful of losing deposits totaling tens of billions of dollars, is dwarfed only by the 2008 bankruptcy of Washington Mutual.
SVB had assets of $209 billion at the time the Federal Deposit Insurance Corporation closed the bank. That compares with the $307 billion in assets Washington Mutual had when it closed.
The FDIC is a corporation owned by the US government that guarantees bank deposits of up to $250,000. SVB customers with accounts of that amount or less will have access to their money no later than Monday morning, the FDIC said.
But many of SVB’s depositors are corporate clients with much larger accounts, and now face an uncertain wait for their money. Investors in SVB bonds also face heavy losses.
The collapse of Washington Mutual in 2008 was the largest bank failure in history. The bank had assets of $307 billion. Silicon Valley Bank, which failed on Friday, becomes the second largest, with assets of $209 billion
Read more: What caused Silicon Valley Bank to collapse and will customers get their money back?
The collapse of Washington Mutual occurred during the global financial crisis of 2008.
At the end of 2007, the bank had about 43,000 employees, 2,200 branches, and deposits of $188.3 billion. By the end of the following year, he was bankrupt.
The collapse was closely related to the bursting of the housing bubble in the United States. Washington Mutual went bankrupt after customers withdrew $16.7 billion in 10 days, sparking an unmanageable bank run.
As with SVB, the bank was seized by the FDIC, which took over on September 25, 2008.
Washington Mutual was then sold to JPMorgan Chase for $1.9 billion. Merging failed lenders with large, stable institutions is a tactic used by the regulator in such circumstances to try to minimize the damage.
It is unclear how exactly the FDIC will proceed after the SVB acquisition.
Silicon Valley Bank collapsed on Friday after customers rushed to withdraw money over concerns about the bank’s finances.
The biggest losses after the Washington Mutual crash were among bondholders, shareholders and investors, as opposed to retail clients.
Bondholders lost $30 billion while investors made back just five cents a share. In early 2007, the shares were worth about $45 each.
After Washington Mutual and Silicon Valley Bank, the third largest bank failure in the US occurred in 1984, when Continental Illinois failed with approximately $40 billion in assets.
The bank, whose history dates back to the 1800s, received a bailout worth about $13.5 billion, a combination of government funds and new capital. The bailout led to the popularization of the term “too big to fail”, which was used by Congressman Stewart McKinney during congressional hearings on FDIC intervention.
In 1994, Continental was acquired by Bank of America.