Federal Reserve Investigates Silicon Valley Bank Collapse: What Happened and What’s Next

The Investigation into Silicon Valley Bank

The Federal Reserve is on a mission, and no, it’s not to find your lost keys or figure out why your plants keep dying. The institution is currently investigating the workings and eventual collapse of Silicon Valley Bank (SVB), which was once a beloved favorite of startups and entrepreneurs. This examination is led by none other than Vice Chair for Supervision Michael Barr, who has promised a thorough review with a public report coming out by May 1. That ought to make things clear, right? In principle, at least!

Why Did SVB Collapse?

March 10 will be remembered not just for its tacos and tacos, but as the day SVB was shut down by the California Department of Financial Protection and Innovation. Unfortunately, the reasoning behind this drastic move was less satisfying than a cold cup of coffee. Reports indicate that the bank was teetering on the brink of failure due to major liquidity issues and losses on government bond investments. Add to that a sudden rush of withdrawal requests from jittery depositors, and you have a recipe for disaster!

The Wider Implications for Banking

SVB wasn’t the only bank that took a nosedive. Just a few days prior, crypto-friendly Silvergate also announced a voluntary liquidation. It’s almost like a game of musical chairs. When the music stops, you learn who packed up their bags and left, and boy oh boy, it’s not looking good for digital currency supporters. A title of ‘most fragile bank’ now seems to be shared with another institution, Signature Bank, which met a similar fate shortly thereafter.

How is the Federal Reserve Responding?

In response to these banking tumbles, the Federal Reserve rolled out a $25 billion Bank Term Funding Program. This is aimed at providing liquidity to troubled banks, meaning they can borrow against their loan losses. Fancy right? Still, one has to wonder – are these banks learning from their mistakes or merely getting a hefty band-aid for an open wound?

Actions from the Biden Administration

President Biden has also jumped into action faster than a cat on a laser pointer. He reassured the public that there’s no need to panic. “Your deposits are safe. Your money will be there when you need it,” he declared, before launching into a promising political melody about accountability. Management of the collapsed banks will face scrutiny, and he’s calling for stronger oversight going forward. Because hey, we can only learn from our mistakes if we actually acknowledge them!