Silicon Valley Bank, a unit of SVB Finance Group SIVB, was shut down by the California Department of Financial Protection and Innovation on Friday due to “inadequate liquidity and insolvency.” The Federal Deposit Insurance Corporation was named as recipient for the bank.
Pershing Square Capital Management Bill Ackman called out Silicon Valley bank officials for their mismanagement of the institution and the federal government for improper oversight of the bank’s activities, which led to its collapse.
During a recent conference in Los Angeles last week, Bloomberg quoted Managing Director of the SVB Financial Group Gregory Becker “We pride ourselves on being the best financial partner in the most difficult times.”
Just a week later, the Silicon Valley bank collapsed after a staggering 48 hours in which a bank run and capital crisis led to the collapse of the financial institution.
Regulators said investors and depositors were trying to withdraw $42 billion, leaving the bank with almost $1 billion in negative cash. According to the report, SVB’s fate was sealed long ago when the post-COVID pandemic financial crisis loomed over the US.
During this time, the Federal Reserve kept interest rates at unprecedentedly low levels. Furthermore, the Fed promised to keep them there until inflation was well above 2%.
SVB took billions of dollars from its venture capital clients, confident that interest rates would remain stable. It then put that money into longer-dated bonds, Bloomberg reports.
“SVB took a lot of risks that other banks wouldn’t take,” Bloomberg quoted as saying Sarah art, managing director of venture capital fund Cleo Capital. “That was ultimately part of her downfall.”
As the country reeled under the pandemic in 2021, SVB’s customers were hard cash. According to Bloomberg data, the SVB total is…
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