The U.S. government launched emergency measures on Sunday to shore up confidence in the banking system after the failure of Silicon Valley Bank, the largest bank collapse since the 2008 financial crisis.
The measures seem, at least so far, to have stemmed any broader run on banks. They came after under heavy pressure from California’s tech industry to act, and fueled several long and dramatic days in Washington and beyond.
As U.S. Treasury Secretary Janet Yellen prepares for a Friday hearing before the Republican-controlled House Ways and Means Committee, investors are raising concerns about a liquidity crisis at Silicon Valley Bank, sending the stock plummeting.
Questions had been swirling for weeks around the tech-focused bank, which had assets of $209 billion, and a quickening pace of withdrawals triggered alarm bells.
Amid growing concern the bank would not last the weekend, the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve Board decide to move it into receivership.
Yellen’s staff plan a meeting with the Office of the Comptroller of the Currency, the Fed and the FDIC for Friday.
FRIDAY, MARCH 10
Officials arrive to close the bank at its Santa Clara, California headquarters before West Coast branches open, noon Eastern time.
U.S. President Joe Biden is briefed on the SVB situation by his new chief of staff Jeff Zients and former Fed Vice Chair Lael Brainard, who took over as director of Biden’s National Economic Council on Feb. 21, as Yellen testifies for three hours in the contentious congressional hearing. Only one lawmaker asks about SVB.
Yellen assures Congress she is monitoring events surrounding “a few banks” very carefully and says any bank’s financial losses are concerning.
Yellen holds a 1 p.m. Eastern virtual meeting on SVB with Fed Chair Jerome Powell, FDIC Chair Martin Gruenberg, Michael Hsu, acting Comptrolller of the Currency, and Mary Daly, president and CEO of the San Francisco Federal Reserve.
At 2:30 p.m., Treasury issues a statement about confidence in regulators and the overall resilience of the U.S. banking system.
Yellen heads to the White House, Brainard meets with her staff and holds Zoom calls in her wood-paneled office in the West Wing.
Some tech investors start offering cash to prop up their companies, others take to Twitter to push the Biden administration to act.
“Thousands of companies will fold or lay people off next week because of lack of access to accounts through no fault of their own,” tweets former presidential candidate Andrew Yang in a typical message, asking Treasury to step in or risk “spreading financial contagion.”
Late Friday, Treasury officials brief lawmakers on the Senate Banking Committee and the House Financial Services Committee; one Republican staffer seeks assurances the plans will not lead to more regulation.
The FDIC makes a record withdrawal of $40 billion from the Treasury General Account as it seizes control of Silicon Valley Bank, an amount many times larger than any previous draws.
SATURDAY, MARCH 11
Regulators learn a second bank, New York-based Signature, which had almost a quarter of its deposits from the cryptocurrency sector, is facing similar liquidity problems.
U.S. Treasury staff hold virtual morning meetings, deciding to: 1) Look for a buyer; 2) provide a systemic risk exemption to protect depositors; 3) revamp the terms of a Fed facility to permit more borrowing.
Yellen meets again with Powell, Fed Vice Chair for Supervision Michael Barr, and Gruenberg from the FDIC, and they agree to do all three. The rush is on to assure SVB’s depositors that they can make payroll on Monday and get ahead of Asian markets opening on Sunday around 6 p.m. ET.
Depositors will be “made whole,” but the bank’s management will be removed and investors will lose their funds.
U.S. officials jump into “hundreds of Zoom calls” and answer emails from anxious lawmakers worried about small businesses in their districts, tech industry executives, and business owners who fear they will have to lay off workers, a White House official says.
Meanwhile, Garry Tan, the CEO of startup accelerator Y Combinator, fearful of what he calls a potential “extinction level event” in the tech sector, launches a petition signed by more than 3,500 CEOs and founders, appealing directly to Yellen.
Saturday evening, more than 600 Washington VIPs, including administration officials, lawmakers, reporters and editors gather for the annual white-tie Gridiron Dinner. Brainard and a key aide to Yellen both cancel at the last minute.
Yellen, Secretary of State Antony Blinken jokes during a speech to the elbow-to-elbow crowd, is not there because she is at a 9 p.m. screening of the wildlife thriller “Cocaine Bear.” While Yellen was not actually scheduled to attend, Blinken’s joke draws hearty laughs – after all, many in the room figured Yellen was scrambling to stem a bank run.
Treasury staff hustle to get Yellen on CBS News’ “Face the Nation” program on Sunday, in an attempt to reassure markets.
SUNDAY, MARCH 12
Sporting a purple blazer and pearls, Yellen arrives at CBS News in Washington before 8 a.m. on Sunday to tape a nearly 13-minute-long segment on the SVB situation.
Federal officials are working on a “timely” solution, she says, and rules out a bailout.
Meanwhile, the FDIC’s auction for SVB’s assets is not going well, and the pressure is on to finalize the other options before Sunday evening, Eastern time, when Asian markets open. Two early suitors – PNC Financial Group Inc and Royal Bank of Canada – back away.
Without a deal, the Fed and FDIC boards each vote unanimously to proceed with the plans hammered out over the past two days. White House officials draft news releases with various scenarios, uncertain until shortly before 6 p.m. if an acquisition can still happen.
Shortly after 6 p.m., New York regulators close Signature Bank.
Minutes later, the Federal, Treasury and the FDIC issue a joint statement outlining their plans to protect depositors at Silicon Valley Bank and Signature.
As he leaves Delaware to return to the White House, Biden tells reporters he will make a statement on Monday.
Treasury and White House officials reach out to members of Congress and their staffs throughout the evening to explain the plan, with discussions continuing into Monday.
MONDAY, MARCH 13
Just after 9 a.m., Biden makes a four-minute statement at the White House, pledging to protect the depositors of both banks and vowing to prevent similar situations from happening again by strengthening bank regulations.
The remarks don’t soothe markets immediately, but by
Tuesday they have calmed.