Silicon Valley Bank Collapse Leads to Biggest U.S. Banking Crisis Since

2008

Seth Schouten

It is a turbulent time for U.S. financial markets after the collapse of Silicon Valley Bank (SVB) on March 10. Just shy of forty years in operation, the California-based bank faced a plummeting stock price and a bank run by clients after facing heavy financial losses. SVB was a major hub for tech startups, venture capital firms, and other technology-based companies in California. It collapsed in just two days, marking the biggest bank failure since the 2008 financial crisis.

Just two days later, the New York-based Signature Bank collapsed, showing signs that the banking crisis was starting to spread. Signature Bank was the home of many crypto-currency and other high-risk investments. By the end of Sunday, March 12, U.S. officials announced major steps to halt the crisis and protect the clients of Silicon Valley Bank and Signature Bank. Yet, insecurities in the U.S. market are still very real and many banks are fearful of a similar fate as that of SVB.

to elevate the crisis by ensuring depositors that all of their funds including and beyond the initial $250,000 would be insured by FDIC. The Fed announced later that day that they would be establishing a new emergency borrowing system for financial institutions in crisis.

Monday, March 13 — In an address from the White House on Monday morning, President Joe Biden stressed that the U.S. banking system was not on the verge of collapse. “Americans can rest assured that our banking system is safe,” Biden said. “Your deposits are safe. Let me also assure you, we will not stop at this. We’ll do whatever is needed.”

SET-UP AND PAY-OFF

Some Democrats and economists have begun to levy blame on Trump-era financial policies for the collapse of SVB. In 2018, a bipartisan bank reregulation bill reestablished which banks would receive the strictest federal oversight. The law increased the ceiling on which banks would be deemed “systemically important” by federal regulators from banks holding $50 billion USD in assets to banks holding $250 billion USD in assets.

SVB, which had $208 billion USD in assets at time of closure, was exempt from the strictest oversight for the past several years. The same goes for Signature Bank which had $108 billion in assets at the time of its closure.

In an op-ed for The New York Times, Democrat Senator Elizabeth Warren, who argued against deregulation in 2018, wrote, “Had Congress and the Federal Reserve not rolled back the stricter oversight, S.V.B. and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks. . . . But because those requirements were repealed, when an old-fashioned bank run hit S.V.B., the bank couldn’t withstand the pressure—and Signature’s collapse was close behind.”

Five Days Of Chaos

Wednesday, March 8 — SVB announces a $1.8 billion USD loss from selling its securities and bonds, which were all losing money due to severe interest rate hikes at the Federal Reserve. Although their rate of return is often low, these sorts of government bonds are seen as safe investments because of their nature of being associated with the federal government. Banks would not sell this many of their bonds unless they were nearly depleted of cash.

Thursday, March 9 — SVB customers began to withdraw deposits en masse fearing that SVB would soon run out of money causing a “bank run.” Shares in the bank fell by 60 per cent over the course of the day.

Friday, March 10 — The Federal Deposit Insurance Corporation (FDIC) shuts down SVB and takes control of its assets. FDIC clarifies that customers with less than $250,000 USD in the bank will be fully insured. However, since most depositors were corporate entities, most of their accounts went far beyond $250,000.

Sunday, March 12 — Signature Bank closed on the orders of the federal government after it began to show early signs of the onset of a bank run. Hours before financial markets reopened in Asia after the weekend, the Biden Administration revealed plans

In 2015, former SVB CEO Greg Becker made a statement to the U.S. Senate to raise the $50 billion USD threshold saying that failure to do so would have small-to-mid-sized banks stuck with “significant burdens that inherently and unnecessarily will reduce our ability to provide the banking services our clients need.”

SVB did not have an official chief risk officer employed in the months before the collapse, which would have been required if it was still under stricter regulation.

Becker, along with the rest of SVB’s senior management, was fired by federal regulators in the wake of the crisis, announced the U.S. treasury department on March 12. That was not before SVB handed out widespread bonuses to its top employees.

The Weeks Ahead

The White House has been cautious about doing anything that might be seen as “bailing out” the failed banks, according to insiders. The spectre of the 2008 financial crisis still looms large over the recent bank failures. Former President Barack Obama was criticized heavily in 2009 for using federal funds to bail out large banks while leaving working-class

Americans to suffer the fallout of the crisis unsupported. Initial solutions to the SVB failure from the Biden administration have attempted to support the customers directly affected rather than the business executives behind it all.

“Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out,” Treasury Secretary Janet Yellen said on March 12. “The reforms that have been put in place mean that we’re not going to do that again, but we are concerned about depositors and are focused on trying to meet their needs.”

The failure of SVB and Signature Bank might just be the first step in greater market uncertainty to come. On Friday, March 17, a collection of 11 U.S. banks—including JPMorgan Chase and Bank of America—infused $30 billion USD into another mid-sized bank, First Republic Bank, after it showed early signs of collapse.

—Treasury Secretary Janet Yellen

In a joint statement, the 11 banks said that this $30-billion investment “reflects their confidence in First Republic and in banks of all sizes,” adding that “regional, midsize, and small banks are critical to the health and functioning of our financial system.”

The move came two days after bank rating companies Fitch Ratings and S&P Global Ratings downgraded First Republic’s standing for fears that it could not fulfil depositors’ withdrawals.

Meanwhile, megabank Credit Suisse received $53.7 billion USD in support from the Swiss National Bank. While markets had come to an uneasy equilibrium when they closed on Friday, March 17, the exact fallout of the crisis will not be seen until the next week. Early predictions advise depositors in other major banks to stay aware of the crisis but that U.S. markets are not yet in panic mode. The largest U.S. banks still remain stable.

Reviews From The Brink

Venting My Spleen: Complaints Concerning Cocaine Bear

Bret van den Brink

“I am now in the country, and reading in Spencer’s fairy-queen. Pray, what is the matter with me?”

—Anonymous, 1712 of truth” that Samuel Taylor Coleridge in his Biographia Literaria finds necessary to procure, in his striking phrase, the “willing suspension of disbelief.” The writing is, for the most part, terrible, and the actors, though they do their best, do not remedy that prior deficit. at nothing to protect her daughter and her daughter’s friend?” What of them?! They are so clichéd as to be banal, and anyone who could fail to appreciate these values before watching Cocaine Bear is beyond Cocaine Bear’s help and is likely to be further misled by it.

Iam now in the country (well, in Chilliwack) and have just finished watching Cocaine Bear. Pray, what is the matter with me?

The matter is that I have friends from Mars’ Hill who, I suppose, must enjoy watching me suffer. (Or, perhaps, who enjoy the rhetorical exuberance born of that suffering.) Typically, I choose to focus on what I find to be the particular beauties or excellencies of a given work, finding a charitable mode of discourse to be the most illuminating. Today, however, I come solely to rebuke.

Cocaine Bear, directed by Elizabeth Banks and screen-written by Jimmy Warden, is an unmitigated flood of drugs and violence. This drug-induced gore, of course, surprises no one who has read the title. This film, I can safely say, repaid my expectations to the uttermost farthing. (Though to actually watch it costs many farthings indeed.) Children consume cocaine off their knives, and bears—a mother bear and its two cubs—devour cocaine by the block. There may be something humorous in a bear doing a line of coke from a severed arm, but is there anything worthwhile in a film that is in itself nothing other than a string of such moments? The movie could do something, anything, interesting, but it feels as though it has nothing behind it other than the impetus of one fancy-catching idea—Cocaine Bear Though perhaps apt for it, the movie suggests nothing about the human corruption of nature or nature’s revenge on humanity.

While a work of art as art should be judged primarily for its aesthetic, rather than its moral, qualities, in the complete lack of the former, I cannot help but consider the latter. These additional considerations will be of no benefit to Cocaine Bear. Thomas Babington Macaulay famously stated that “The puritan hated bear baiting [the practice of setting dogs to fight chained bears for entertainment], not because it gave pain to the bear, but because it gave pleasure to the spectators.” This characterization may be fair to the silliest sort of Puritans, but most would surely object primarily to taking pleasure in the wrong sorts of things, such as the needless suffering of God’s creatures. As Philip Stubbes asks in The Anatomie of Abuses, “What Christian hearte can take pleasure to see one poore beast to rent, teare, and kill an other, and all for his foolish pleasure?” Cocaine Bear is, of course, not comparable to bear-baiting insofar as it has human actors and CGI bears suffering (and inflicting) the abuse. Nonetheless, while it may be true that to delight in the simulacra of an immoral act is not to delight in an immoral act itself, it is not far from it.

“While a work of art as art should be judged primarily for its aesthetic, rather than its moral, qualities, in the complete lack of the former, I cannot help but consider the latter.”

For a movie that bookends itself with reminders that it is based (somewhat) on a true story, Cocaine Bear is consistently unbelievable. It lacks the “human interest” and “semblance

“But Bret,” I hear that annoying voice in my mind cry, “what of the downfall of the drug dealer? What of the moral conversion of his son, who would live a better life for his own son’s sake? What of the mother who would stop

Life may sometimes seem, in the words of Shakespeare’s Macbeth, “a tale / Told by an idiot, full of sound and fury, / Signifying nothing,” but it is not; Cocaine Bear, on the other hand, is. Insofar as I have understood it, the film has no redeeming value, whether aesthetic or moral. Time flies, and I irreparably have lost 95 minutes of my life—I implore you, do not lose that time yourself. Tell someone you love them, catch up on some sleep, or read Spenser’s The Faerie Queene—just do something, anything, worthwhile.