Silicon Valley Bank reopens to depositors' delight

SANTA CLARA, Calif. - As they stood in line Monday morning at Silicon Valley Bank, depositors turned out to be the winners in the sudden collapse of Silicon Valley Bank last Friday. "It was unexpected and even people that have been in the business for 30 years said they have never seen anything like this," said depositor Sangeeta Dey.

The bank reopened with a line of very nervous depositors wanting to see if, as President Biden's promise, all their money would be paid out to them. This is a godsend to many tech start-ups who might not have been able to make their financial obligations.

"The money here, you know, like I have a start-up; it's rally to run the company, to pay the employees and to build the business. Right? That's what the funds are for," said start up president Ganesh Krishnan. "We still owe a lot of money to people we have hired, and I'm here for them actually, not myself. So, we do know that the money is there. We have that assurance. But access is important now which we don't have right now," said Dey.

Terry Connelly is a former Dean of the Golden Gate University Business School and a former investment banker. "The losers are the management, the senior officers and the shareholders," said Connelly.

The question is: is this the only bank in similar trouble? "The Federal authorities have promised to back them up in the affected banks we don't quite know the roster of the affected banks yet," said Connelly.

SANTA CLARA, CALIFORNIA

This bank failure, raises two important questions. One, should the Federal limit on deposits be raised, or should there be no limit at all? We certainly can do that, but the cost of doing that is going to make the cost of that insurance much, much more expensive. That could include restricting with the amount or availability of deposits to customers in the same way the stock market stops or delays trading on stocks to prevent crashes.

If Uncle Sam had not guaranteed all deposits even humongous ones, the whip lash would have been devastating to the U.S. innovation economy. "If you didn't have access to more that 250K, then that would probably be the end of our business," said Krishnan.

Experts say, overall, the banking system is very robust and well able to pay all depositors. Silicon Valley Bank shocked the nation Friday evening when Federal regulators took it over, fired its management and board, and froze all accounts. The now federally-run bank is telling customers that their money is not lost even if most of it is uninsured.

This somewhat odd bank is getting special treatment because its customers are the future of America's innovation economy.

Terry Connelly is a former Dean of the Golden Gate University Business School and a former investment banker."The losers are the management, the senior officers and the shareholders," said Mr. Connelly.

The question is: is this the only bank in similar trouble? "The Federal authorities have promised to back them up in the affected banks we don't quite know the roster of the affected banks yet," said Connelly.

This bank failure, raises two important questions. One, should the Federal limit on deposits be raised, or should there be no limit at all? We certain can do that, but the cost of doing that is going to make the cost of that insurance much, much more expensive.   That could include restricting with the amount or availability of deposits to customers in the same way the stock market stops or delays trading on stocks to prevent crashes.

If Uncle Sam had not guaranteed all deposits even humongous ones, the whip lash would have been devastating to the U.S. innovation economy. "If you didn't have access to more that 250K, then that would probably be the end of our business," said Krishnan.

Experts say, overall, the banking system is very robust and well able to pay all depositors.