A petition that urges the regulators to step in also claims that nearly 40,000 of all depositors at Silicon Valley Bank are small businesses.
Decisions by the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) about the future of Silicon Valley Bank (SVB) could affect regional banks across the United States, putting trillions of dollars at risk from banks that say former Bridgewater Executive and CEO of Investment Company and Bob Elliot Unlimited.
In a March 11 Twitter thread, Elliot said that nearly a third of deposits in the United States are held by small banks and about 50% are uninsured. “The FDIC covers small deposits at all banks in the US, but that covers about 9 trillion of the nearly 17 trillion in outstanding deposits. […] Below insurance, the insurance rate is around 50% in most companies, while the credit officers are high (not above).
According to Fed data, small banks in the United States have $6.8 trillion in assets and $680 billion in equity as of February 2023. Given this situation, the failure of banking technology will lead to “the risk of a run on thousands of small banks,” making SBV’s situation a “major traffic problem,” Elliot said.
Elliot’s comments were among many seen on social media over the weekend as fears swirled about the future of California banks. A request created by Y Combinator CEO Garry Tan says that nearly 40,000 of Silicon Valley Bank’s depositors are small businesses. “If action is not taken quickly, more than 100,000 people may lose their jobs soon,” the document said, urging regulators “to intervene and provide workers with security protection.”
According to a report by Bloomberg, people familiar with the matter, the FDIC and the Fed are discussing the creation of funds to support more deposits in troubled banks. The fund accepts the failure of SVB and aims to reassure investors and reduce panic.
Silicon Valley Bank is one of the top 20 banks in the United States, providing banking services for many crypto-friendly financial institutions. Blockchain venture capitalists’ assets have more than $6 billion in the bank, including $2.85 billion from Andreessen Horowitz, $1.72 billion from Paradigm, and $560 million from Pantera Capital.
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