- Voices from tech and finance are increasingly calling for the federal government to push another bank to take over the failed Silicon Valley Bank to protect uninsured deposits.
- Their main concern is that a failure to protect deposits over $250,000 could cause a loss of faith in other mid-sized banks.
- Some observers called out the irony of the venture capital community calling for government aid after many VCs spurred their portfolio companies to withdraw money after SVB released a surprise statement about its financial situation on Wednesday night.
Big names in Silicon Valley and the finance sector are calling publicly for the federal government to push another bank to assume Silicon Valley Bank’s assets and obligations after the financial institution failed on Friday.
The Federal Deposit Insurance Corporation (FDIC) will cover up to $250,000 per depositor and may be able to begin paying those depositors as early as Monday.
But the vast majority of SVB’s customers were businesses that had more than that on deposit at the bank. As of December, more than 95% of the bank’s deposits were uninsured, according to regulatory filings. Many of these depositors are startups, and many are concerned that they will not be able to make payroll this month, which in turn could spark a wide wave of failures and layoffs in the tech industry.