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Silicon Valley Bank, the Northern California-based go-to financial institution for venture capitalists and tech entrepreneurs, shuttered its doors on Friday after 40 years in business.
The bank’s closure has sent shockwaves through the financial sector. The fall of the bank created such a panic that President Joe Biden, Treasury Secretary Janet Yellen, and U.S. Federal Reserve chair Jerome Powell each took measures to try and prevent both large-scale hysteria and economic collapse
Those moves might prove quick enough to prevent a domino effect that takes numerous regional banking chains with SVB into insolvency.
The federal government did not act quickly enough to prevent the demise of Signature Bank, which went the way of SVB on Sunday as investors who were spooked by the catastrophe in Silicon Valley rushed to withdraw money that the New York City-based bank did not have.
Barron’s reported the New York Department of Banking Services closed the institution to prevent the disease from spreading. The Federal Deposit Insurance Corporation seized control of the bank and its assets, as it did with SVB following moves from state regulators in California.
It will attempt to recoup losses incurred by the institutions.
The FDIC only insures bank deposits up to $250,000 but will make investors in both institutions whole, the Federal Reserve has pledged.
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