Timeline: How US gov’t scrambled as Silicon Valley Bank collapsed
The United States government took emergency measures over the weekend to bolster confidence in the banking system following the bankruptcy of Silicon Valley Bank (SVB), the largest bank collapse since the 2008 financial crisis.
European bank shares fell on Wednesday with Credit Suisse plunging as much as 30 percent on renewed investor concerns about tensions within the industry.
The US government implemented the measures under heavy pressure from the California tech industry to act. The collapse of the SVB made for several long and dramatic days in Washington and beyond.
Here’s a look at how things unfolded:
9th of March
As U.S. Treasury Secretary Janet Yellen prepares for a hearing on Friday before the Republican-controlled Ways and Means Committee in the House of Representatives, investors are raising concerns about a liquidity crisis at Silicon Valley Bank, sending shares plummeting.
There were weeks of questions surrounding the technology-focused bank, which had assets of $209 billion, and an accelerated rate of withdrawals set alarm bells ringing.
Concerned that the bank would not survive the weekend, the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board decide to place the bank in receivership.
Yellen’s staff is scheduled to meet with the Office of the Comptroller of the Currency, the Federal Reserve and the FDIC for Friday.
10th of March
Officials arrive to shut down the bank at its headquarters in Santa Clara, California, before its West Coast branches open at 9 a.m. (4 p.m. GMT).
US President Joe Biden is being briefed on the SVB situation by his new chief of staff, Jeff Zients, and former Fed Vice Chairman Lael Brainard, who took over as director of Biden’s National Economic Council on Feb. 21. Meanwhile, Yellen testifies for three hours in a contentious congressional hearing. Only one legislator asks about SVB.
Yellen assures Congress she is following events surrounding “a few banks” and says each bank’s financial losses are worrying.
She will hold a virtual meeting with Fed Chairman Jerome Powell at 1pm (5pm GMT); FDIC Chairman Martin Gruenberg; Michael Hsu, acting controller of currency; and Mary Daly, president and CEO of the San Francisco Federal Reserve Bank.
At 14:30 (18:30 GMT), the US Treasury Department will release a statement on confidence in regulators and the overall resilience of the US banking system.
Some technology investors are starting to offer cash to support their business. Others take to Twitter to urge the Biden administration to action.
Late Friday, Treasury officials briefed lawmakers. A Republican staffer is seeking assurances that the plans will not lead to more regulation.
The FDIC withdraws a record $40 billion from the Treasury’s general account as it takes control of Silicon Valley Bank. The amount is many times larger than in previous draws.
11 March
Regulators are learning that a second bank, New York-based Signature, which had nearly a quarter of its deposits in the cryptocurrency sector, is facing similar liquidity issues.
U.S. Treasury officials hold virtual morning meetings and decide to: 1) find a buyer, 2) provide a systemic risk waiver to protect depositors, 3) review the terms of a Fed facility to allow more borrowing.
Yellen meets again with Powell, Fed Vice Chairman for Oversight Michael Barr, and Gruenberg, and they agree to do all three. There is a rush to assure SVB corporate savers that they can do their payroll on Monday and beat the Asian markets opening around 22:00 GMT on Sunday.
The government says depositors will be “cured”, but the bank’s management will be removed and investors will lose their money.
US officials are plunging into “hundreds of Zoom calls” answering emails from tech industry executives, concerned lawmakers concerned about small businesses in their districts and business owners fearing they will have to lay off workers, a U.S. official says. the White House.
Garry Tan, CEO of start-up accelerator Y Combinator, fearful of what he calls a potential “dying event” in the technology sector, is launching a petition signed by more than 3,500 CEOs and founders, appealing directly to Yellen.
On Saturday night, more than 600 Washington VIPs, including government officials, legislators, reporters and editors, gather for the annual white-tie Gridiron Dinner. Brainard and one of Yellen’s key assistants both cancel at the last minute.
Treasury staff are doing everything they can to get Yellen on CBS News’ Face the Nation program on Sunday to reassure the markets.
12 March
Yellen arrives at CBS News in Washington before 8 a.m. (12:00 GMT) to record a nearly 13-minute clip on the SVB situation. Federal officials are working on a “timely” solution, she says, ruling out a bailout.
Meanwhile, the auction of the SVB’s assets by the FDIC is not going well and pressure is mounting to finalize the other options before Asian markets open. Two early suitors – PNC Financial Group and the Royal Bank of Canada – pull out.
Without a deal, the boards of directors of the Fed and FDIC vote unanimously to proceed with the plans that have been fleshed out over the past two days. Shortly after 6 p.m. (10 p.m. GMT), regulators in New York Signature Bank close.
The Federal Reserve, Treasury and FDIC are issuing a joint statement outlining plans to protect depositors at Silicon Valley Bank and Signature.
The Treasury Department and White House will be in touch with members of Congress and their staff throughout the evening to explain the plan, with talks continuing through Monday.
13 March
Just after 9 a.m. (1:00 p.m. GMT), Biden makes a four minute statementpledging to protect depositors and prevent similar situations by strengthening banking regulations.
The comments don’t calm markets immediately, but they have calmed down by Tuesday.
March 14
The FDIC says Friday’s withdrawal of a record $40 billion in US Treasury funds, when it took control of Silicon Valley Bank, will have no effect if the Treasury runs out of operating room under the debt ceiling.
The Federal Reserve is considering stricter rules and oversight for medium-sized banks, a source familiar with the matter said.
A review of the $209 billion bank bankruptcy conducted by Barr could lead to stricter regulations for banks in the $100 billion to $250 billion range.
Mar. 15
The top US markets regulator is renewing a pledge to prosecute any wrongdoing that threatens global markets, saying it has a responsibility to protect market resilience.
“Let us not forget that eight million Americans lost their jobs, millions of families lost their homes, and small businesses across the country went out of business as a result of the 2008 financial crisis,” said Gary Gensler, president of U.S. Securities and Exchange Commission.
U.S. Senator Elizabeth Warren, who is pushing for stricter regulation, tells CNBC that all stress testing of financial institutions should be done by an outside entity.
European banking stocks slump while the controversial Credit Suisse drops by no less than 30 percent to a record low. The European banking index has seen more than 120 billion euros ($127 billion) in share value evaporate since March 8.
In the US, regional banks are also down with First Republic Bank losing 16 percent, Western Alliance Bancorp losing 8 percent and PacWest Bancorp losing about 24 percent. Large American banks such as JPMorgan Chase, Citigroup and Bank of America slide between 3.5 and 5.5 percent.