A Run on Silicon Valley Bank
The sudden implosion of Silicon Valley Bank (SVB) is sending shock waves through the financial system and the technology sector.
SVB plays a central role in the start-up economy of San Francisco. According to Bloomberg, it does business with about half of venture capital backed start up firms in the U.S.
Venture capitalists this week began advising their portfolio companies to “diversify” away from SVB, according to multiple reports. So, what we are seeing looks a lot like a classic bank run. No fractional reserve bank can withstand a bank run.
On Friday, the the California Department of Financial Protection and Innovation said it was shuttering the bank. The Federal Deposit Insurance Corporation (FDIC) said that all insured depositors will have full access to their insured deposits, but that might not be as reassuring as it sounds….
