The waters are still far from calm after federal regulators seized over $300 billion in deposits and assets from Silicon Valley Bank, the tech and VC sectors’ lender of choice, in the second-biggest banking failure in U.S. history on Friday, and then the third largest, New York–based Signature Bank on Sunday. But the finger-pointing over what caused the banks’ lightning-fast collapse has already begun. Traders and clients are blaming mismanagement at SVB’s executive level, which among other things, lacked a chief risk officer for eight months last year. Cryptocurrency advocates said the centralized financial system was at fault. Venture capitalists are largely blaming one another for amplifying panic on social media that turned into a record $42 billion bank run. But for Democratic Senator Elizabeth Warren, legislative changes bank executives lobbied for years ago (including SVB’s own CEO, Greg Becker) mean the banking sector’s crisis was both predictable and overdue, and the writing on the wall is for more pain ahead.
It remains unclear what the ripple effects of SVB’s failure will be for the banking industry. The Biden administration has pledged that even customers with uninsured deposits at SVB will be made whole and that banks, not taxpayers, will bear the burden of fixing the crisis, but tensions are still on a knife’s edge as clients in the U.S. and around the world worry that other banks may spiral like SVB. As with SVB, regulators promised Signature depositors will be made whole as well, under a similar “systemic risk exception.” When markets opened for trading on Monday, regional banks on the West Coast got crushed, with dozens of them halting trading amid record drops.
