In an eerily familiar scene from the 2008 economic collapse, some high-profile banks walked a treacherous path before their inevitable collapse. Silicon Valley Bank (SVB), “provided banking services to nearly half of all US venture-backed technology and life science companies..it also has operations in Canada, China, Denmark, Germany, Ireland, Israel, Sweden, and the United Kingdom. SVB benefited hugely from the tech sector’s explosive growth in recent years, fueled by ultra-low borrowing costs and a pandemic-induced boom in demand for digital services.”
“Axios reported that SVB paid eligible U.S. employees their annual bonuses on March 10—a few hours before Federal Deposit Insurance Corporation (FDIC) took over the bank.” Its CEO, Greg Becker, and other top executives sold shares worth $4.5 million before its collapse. One SVB employee called Becker’s response to the bank’s financial crisis “completely idiotic.” Becker, in an effort to be transparent, according to the employee, “publicly acknowledged the extent of the bank’s financial troubles before privately lining up the necessary financial support to ride out the storm.” That move created a stage for panic, sending customers on a bank run.
SVB financial group and two of its top executives are now being sued by shareholders. They are being accused of “concealing how rising interest rates would leave its Silicon Valley Bank unit “particularly susceptible” to a bank run.” President Biden, along with U.S. financial regulators, rushed to reassure the financial world that the emergency had been contained. “Americans can rest assured that our banking system is safe. Your deposits are safe. Let me also assure you, we will not stop at this. We’ll do whatever is needed,” Biden said on Monday.” Those reassurances didn’t seem to convince investors who took it on Wall Street sending stocks to plummet.
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