Silicon Valley Bank collapse could impact Boston economy
BOSTON -- It's being called the second largest bank failure in US history. Now the government is stepping in to help customers of Silicon Valley Bank.
"On Friday the FDIC took control of Silicon Valley's assets. Over the weekend, took control of Signature Bank's assets," says President Joe Biden. "Americans can have confidence that the banking systems is safe. Your deposits will be there when you need them."
The Federal Deposit Insurance Corporation (FDIC) took control of the bank following its collapse last week. President Biden announced that the government will protect all depositors in the bank whether they are insured or not. Financial experts say the move helped to calm the banking industry, but some regional banks are still seeing stock prices plummet.
"We are seeing significant movement from people taking money from small regional banks, especially banks that had significant exposure to technology," explains Larry Glazer, Managing Partner with Mayflower Advisors. His team has been fielding calls from concerned clients all weekend.
Glazer fears more banks could fall, especially if they invest heavily in the tech sector like Silicon Valley Bank. The fallout from this may force larger banking institutions to second guess lending to tech companies.
"That growth in technology, coupled with the rapid rise of interest rates for certain financial institutions like Silicon Valley Bank, led to significant losses in their bond portfolios. The biotech community, technology community, Silicon Valley Bank banked reportedly half of all startups in this country. [This includes] many startups in and around the greater Boston area," adds Glazer. "We could see other banks forced to merge, forced to collapse. Many of these have a significant presence in the Boston area. Boston is the second most impacted economy as a result of this banking fallout. There are other banks with a presence in Boston whose stocks are down precipitously today. Those are the most concerning today."
Consumers should figure out if their bank is FDIC insured. If they are, Glazer says people will want to stay under the $250,000 insurance protection cap from the FDIC. Anyone with more than that in the bank may want to diversify their extra cash into other banks. He also says there may be a silver lining to this situation.
"For consumers, interest rates have declined significantly over the last few days as a fallout from Silicon Bank," Glazer said. "May mean mortgage rates come down, credit yields moderate, so that's a good thing for financial markets."