Key takeaways:
- Silicon Valley Bank experienced a staggering $42 billion in customer withdrawals in a single day, leaving the bank with a $1 billion negative cash balance.
- The bank run was likely enabled by digital banking and fueled in part by panic spreading on social media platforms and private chat groups.
- The collapse of Silicon Valley Bank is the largest bank failure since Washington Mutual went under in 2008, and the U.S. government is taking emergency measures to backstop the financial system and prevent a repeat of the financial meltdown.
In a dramatic turn of events, two large banks catering to the tech industry have collapsed after a bank run. Silicon Valley Bank, based in Santa Clara, California, experienced a staggering $42 billion in customer withdrawals in a single day, leaving the bank with a $1 billion negative cash balance. In response, the U.S. government has seized the two financial institutions over the last three days.
The bank run was likely enabled by digital banking and fueled in part by panic spreading on social media platforms and private chat groups. In the day leading up to the bank’s collapse, multiple prominent venture capitalists took to Twitter to raise alarms about the situation.
In response to the news, President Joe Biden has reassured Americans that the money they have in banks is safe. The U.S. government is taking emergency measures to backstop the financial system and prevent a repeat of the financial meltdown that began with the bursting of the housing bubble 15 years ago.
The collapse of Silicon Valley Bank is the largest bank failure since Washington Mutual went under in 2008. It is unclear what the long-term effects of the bank run will be, but the government is taking steps to ensure that the financial system remains stable.
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