The latest on the Silicon Valley Bank collapse

Newly appointed Silicon Valley Bridge Bank CEO Tim Mayopoulos asked customers to return some their funds into the bank.

“If you, your portfolio companies, or your firm moved funds within the past week, please consider moving some of them back as part of a secure deposit diversification strategy. We are also open for business for any new customers. We are actively opening new accounts of all sizes and making new loans,” he wrote.

Mayopoulous replaced former CEO Greg Becker on Monday following the bank’s collapse that triggered widespread concerns about how the tumult could spread to other regional banks. Customers rushed to yank their money out of the bank after Becker and his team revealed a bid to raise $2.25 billion in capital as well as $21 billion in asset sales last week, sparking anger among employees and helping pave the way for SVB’s downfall.

The CEO also reassured customers that dispositors have access to their funds and that all deposits are protected by the FDIC, echoing his message from the day before. “

We recognize the past few days have been an extremely challenging time, and we are grateful for your patience,” he wrote.

Some context: The FDIC created the SVB bridge bank to handle customers’ transferred deposits and banking services. 

The Securities and Exchange Commission and the Justice Department are both in the early stages of their investigations into the collapse of Silicon Valley Bank, according to sources familiar with the matter.

Both federal agencies are looking into the bank’s failure and the actions by senior executives in the lead-up to the decision by federal regulators to shutter the lender last week, one of the sources said.

No one has been accused of any wrongdoing and the person familiar with the matter noted that investigations into a significant event like the failure of Silicon Valley Bank are common in the immediate aftermath. 

SEC Chair Gary Gensler, while declining to identify any specific institution, appeared to allude to the likely step in a statement on Sunday. 

“Without speaking to any individual entity or person, we will investigate and bring enforcement actions if we find violations of the federal securities laws,” Gensler said in the statement. 

CNN previously reported the Justice Department probe.

CNN’s Paula Reid contributed to this report.

US stocks closed higher on Tuesday, recovering some of their losses after the collapse of three banks tested markets on Monday.

While most bank stocks rallied Tuesday, the smoke hasn’t cleared just yet: Moody’s Investors Service slashed its outlook for the US banking sector and placed six US banks on review for potential credit rating downgrades.

Traders cheered the lack of surprises in the February Consumer Price Index inflation reading and looked ahead to Wednesday’s Producer Price Index, which economists say could show a slowing in wholesale prices. Ahead of the Federal Reserve’s policy meeting next week, investors are keeping a close watch for any signs that inflation is cooling.

February retail sales data is also on deck Wednesday morning, along with a homebuilders survey that should give some insight into the health of the housing market.

The Dow closed up 335 points, or 1.1%, on Tuesday.

The S&P 500 rose 1.7%.

The Nasdaq Composite gained 2.1%.

Senate Majority Leader Chuck Schumer said on Tuesday that the US banking system is stable thanks to swift action by the Biden administration, the Federal Reserve and the Federal Deposit Insurance Corporation. 

“If the damage had spread across our financial system, the deposits and savings of tens of millions of families and small businesses could have been at serious risk,” Schumer said in remarks on the Senate floor. 

He added that in the weeks ahead, Congress will look closely into what caused the collapse of the Silicon Valley Bank and “how we can prevent similar events in the future.”

Moody’s Investors Service cut its outlook for the entire US banking sector Tuesday after placing six US banks on review for potential credit rating downgrades, in the wake of last week’s collapse of Silicon Valley Bank.

The credit ratings firm said it expects more banks will be will come under pressure after SVB’s failure — particularly those with large hoards of uninsured deposits and long-term Treasury bonds that have crumbled in value. Moody’s said it expects pressure on the banking sector to persist as the Fed continues to hike interest rates to combat inflation.

Another concern: US banks are raising the interest rates they pay on savings accounts. Although they hope the higher rates will retain customers worried by the collapse of SVB, that could also eat into profits, Moody’s warned.

The good news, Moody’s said, is that America’s banking system is generally healthy. It has enough cash and liquid assets to withstand an economic downturn. The bad news, for banks anyway, is that US regulators may require them to hold more capital after SVB’s rapid failure. 

SVB was brought down by a bank run, but its exposure to long-term Treasuries that tumbled in value during the Fed’s historic rate-hike campaign aggravated its liquidity problem. Moody’s predicts the newly “stressed operating environment” for banks could lead some to lend less, buy back fewer shares or cut dividends to preserve capital in case of emergency.

The US Justice Department is investigating the collapse of Silicon Valley Bank, according to a source familiar with the matter. The Securities and Exchange Commission is also looking into what happened, according to a Wall Street Journal report on Tuesday.

The two major federal agencies are conducting separate probes, which are in their preliminary phases and may not lead to any charges or allegations of wrongdoings, the Journal reported. These probes are commonplace following a big loss, and are reportedly focused on the bank’s collapse and stock sales that financial officers made days before the failure.

The DOJ and SEC did not immediately respond to CNN’s requests for comment.

In an extraordinary action to restore confidence in America’s banking system, the Biden administration on Sunday guaranteed that customers of the failed Silicon Valley Bank will have access to all their money starting Monday. By guaranteeing all deposits – even the uninsured money that customers kept with the failed banks – the government aimed to prevent more bank runs and to help companies that deposited large sums with the banks to continue to make payroll and fund their operations.

That didn’t stop tremors from the collapse impacting markets around the world. However, US stocks surged Tuesday as bank stocks rebounded. The moment of crisis may be over, but the bank sector and the economy remain on a knife’s edge.

CNN’s Paula Reid contributed reporting to this post.

Bank runs happen when customers panic and everyone tries to get their money out at once. CNN’s Christine Romans explains that’s what happened at Silicon Valley Bank, leading to the second-biggest bank failure in US history.

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01:59 - Source: cnn

The massive amount of customer withdrawals that led to the collapse of Silicon Valley Bank had all the hallmarks of an old-fashioned bank run, but with a new twist befitting the primary industry the bank served: much of it unfolded online.

Customers withdrew $42 billion in a single day last week from Silicon Valley Bank, leaving the bank with $1 billion in negative cash balance, the company said in a regulatory filing. The staggering withdrawals unfolded at a speed enabled by digital banking and were likely fueled in part by viral panic spreading on social media platforms and, reportedly, in private chat groups.

In the day leading up to the bank’s collapse, multiple prominent venture capitalists took to Twitter in particular and used their large platforms to raise alarms about the situation, sometimes typing in all caps. Some investors urged startups to rethink where they kept their cash. Founders and CEOs then shared tweets about the concerning situation at the bank in private Slack channels, according to The Wall Street Journal.

On the other side of a screen, startup leaders raced to withdraw funds online — so many, in fact, that some told CNN the online system appeared to go down. Still, the end result was a modern race to withdraw funds, which House Financial Services Chair Patrick McHenry later described in a statement as ” the first Twitter fueled bank run.”

“Even back in the ancient days, way before we had any form of modern communication, this stuff tended to be rumors that moved really fast. The reason it would happen is people would walk down the street and observe people standing outside of banks,” Andrew Metrick, Janet L. Yellen Professor of Finance and Management at the Yale School of Management, told CNN. “Now we don’t have that, but we have Twitter.”

The experience of the bank run was also far removed from prior eras when a large number of customers would physically show up at a bank to withdraw funds (though some did line up outside Silicon Valley Bank locations, too.) Now, many could do so online or through mobile devices.

“What made the Silicon Valley Bank run unique was (1) the ease with which its customers could execute withdrawals and (2) the speed with which news of Silicon Valley Bank’s impending demise spread,” Ben Thompson, an analyst who tracks the tech industry, wrote in a post on Monday. “It was the speed, fueled by zero distribution costs for both rumors and withdrawals, that was so destabilizing.”

US stocks surged Tuesday, breathing a sigh of relief as inflation data for February met economists’ expectations and bank stocks rebounded.

The Consumer Price Index measured 6% for the year ended in February, down from 6.4% in January, marking a cooldown in prices for the eighth consecutive month. Core CPI grew 0.5% month over month and 5.5% on a yearly basis.

Bank stocks bounced back after a calamitous day of trading Monday. Shares of First Republic opened up 62%. Western Alliance stock rose 53%. Both stocks made up the previous day’s losses during extended trading.

Traders are now pricing in a nearly 82% probability that the Federal Reserve will raise interest rates by a quarter point at its meeting next week, according to the CME FedWatch Tool. Market expectations for the central bank’s next move have remained volatile this week as investors digest the collapse of two major banks, Silicon Valley Bank and Signature Bank.

The Dow was up 326 points, or 1%, on Tuesday.

The S&P 500 gained 1.4%.

The Nasdaq Composite was 1.6% higher.

Here’s where things stand for customers and employees of Silicon Valley Bank and Signature Bank, both of which failed this week and were promptly taken over by the FDIC.

Will customers have full access to all of their money on deposit? Yes. US government intervened over the weekend and assured that depositors of the banks will have access to all of their money starting Monday, March 13 and that losses related to SVB’s collapse will not be borne by taxpayers.

That means customers will be able to access their insured deposits as well as their uninsured deposits from the “bridge bank” that the FDIC created for SVB deposits and the one it created for Signature deposits.

Both SVB and Signature were FDIC-insured. That means the FDIC insures up to $250,000 per depositor for each account ownership category. Some customers may be insured for more than $250,000 if they had more than one type of deposit account, since each account is covered separately. What’s more, if more than one person owns an account jointly, each owner is covered up to $250,000.

But the move by the three agencies to provide customers access to their uninsured deposits as well was critical. Most SVB customers, for instance, are businesses, and they have a lot more than $250,000 on deposit because they used SVB for much of their cash management, including payroll.

What are the ways customers can access their money? Customers can access their funds by ATM, debit cards and checks — just like before, according to the FDIC.

What about lines of credit? Per FAQs specific to the SVB and Signature closures, customers’ lines of credit have been transferred to the new bridge banks the FDIC created to handle customers’ transferred deposits and banking services. The agency notes that customers should contact the bank if they have questions about their credit lines.

Can customers continue to keep their money where it is? Yes, but the FDIC will communicate to customers how long they can continue to do so. So far, the FDIC has not established any end dates of services for SVB or Signature customers.

What if a customer has a loan through SVB or Signature? Customers with a loan still have to make payments to the same payment address, even if the FDIC ends up selling the loan. Any changes will be communicated.

Will SVB and Signature employees keep their jobs? Very likely, but perhaps not for long. Typically, in an FDIC takeover, the employees of the failed bank are kept on to help with the transition. Their salary and benefits are paid for by the FDIC during that time. Should the FDIC find a buyer for either bank, the acquiring institution will be the one deciding whether the banks’ employees stay on.

The experts say America’s banks are healthy. There are no solvency problems, former FDIC Chair Sheila Bair told CNN. There is no systemic banking issue, former Treasury Secretary Larry Summers told Wolf Blitzer. Silicon Valley Bank’s collapse won’t cause a recession, said Mark Zandi, chief economist of Moody’s Analytics.

So … what is causing problems for America’s banks? Fear.

Moody’s this morning downgraded six regional banks’ credit ratings because customers keep withdrawing money from them and transferring deposits to larger banks. The first bank runs of the smartphone era were created by viral social media posts, text chains and instant access to banking apps that exacerbated both widespread concern and rapid customer withdrawals.

But there’s good news: The government’s plan to intervene in the banking sector worked. No banks failed Monday. Regional bank stocks, after plummeting over the past several days, are bouncing back sharply.

The banking crisis may be over, at least for now. Tech companies that banked with the failed SVB were rescued, escaping what an industry insider called an “extinction-level event.”

Now, it’s up to the Federal Reserve to keep the banking sector stable. It has been on a yearlong effort to slow the economy to keep inflation in check. Now it faces a no-win situation: Annual inflation is at 6%, triple what the Fed considers to be healthy. But rate hikes got us into this mess in the first place, collapsing the value of banks’ government bond holdings.

The moment to panic is over. But the bank sector and the economy remain on a knife’s edge.

There are some key differences between the collapse and fallout of Silicon Valley Bank and Signature Bank and what happened in 2008.

For one thing, the 2008 crisis was, in part, worsened by financial institutions holding assets (like mortgage-backed securities) that were difficult to value, making it hard for banks to determine how much they were worth. This time, however, the assets causing trouble for banks (US Treasuries and bonds) are easy to value and sell. That also makes intervention by the federal government much more effective.

And it has taken measures. This time around, the US federal government stepped in early to guarantee customer deposits and restore confidence in the US banking system. 

The Federal Deposit Insurance Corporation (FDIC) insures depositors up to $250,000 and large US banks have the money to weather storms — they’re regularly stress-tested by the Federal Reserve to make sure that they can. 

“Compared to 2008, the system is more transparent, with a more solid foundation, and the government has identified the remaining problems and put programs in place to deal with them,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. 

But that doesn’t mean there isn’t more pain ahead. Smaller banks – like SVB was – aren’t put through the same stress-testing larger banks have to go through. And shares of banks, both regional and large, plummeted on Monday. 

“This is bad news for US bank shareholders,” wrote BlackRock analysts in a note on Monday. “We see knock-on effects for the economy – reinforcing our expectation of recession.”

Investors are searching for clarity in the wake of Friday’s collapse of Silicon Valley Bank — the biggest failure of a US bank since 2008. And as they attempt to predict what comes next — be it wider financial chaos, more government regulation, a pause in rate hikes from the Federal Reserve or something else entirely — they’re looking to the past for guidance. 

While the collapse of a top-20 bank easily begets comparisons to the global financial crisis of 2008, analysts are looking all the way back to 1991 — though they may only need to go back to last fall.

Here’s how they’re thinking about the state of the banking industry and the economy. 

Let’s take it to 1991: Analysts are looking at the Savings and Loans crisis of the late 1980s and early 1990s as a better model for how this current crisis may play out. 

Some quick background: S&Ls were like banks, but they specialized in accepting savings deposits and making mortgage loans. In the 1980s, they were deregulated and began making risky investments with depositors’ money. Those investments went sour and S&Ls found themselves at a loss just as the Fed was raising interest rates. That meant that many borrowers couldn’t afford to pay back their loans.

As a result, many S&Ls failed and the government had to step in to bail them out.

Sound familiar? 

“If anything, this appears to be a typical bank failure like we saw during the Savings & Loan crisis,” wrote Jaret Seiberg at TD Cowen. “The only difference is that we are dealing with a bank that focuses on technology rather than on real estate.”

Since the S&L crisis, regulators have pushed banks away from short-term investments “for the very reasons that appear to have brought down Silicon Valley Bank,” Seiberg said. 

So what can we learn from the crisis? A review of regulation and central bank policy seems certain, wrote Societe Generale’s Kit Juckes in a note on Monday.

“If the S&L crisis is a model of what happens next, we are closer to the peak in rates than the market thought,” he said, meaning that the Federal Reserve could soon stop hiking interest rates to fight inflation. It’s also very possible that the US economy will slip into a mild recession within the next year, he added.

Investors might not have to look so far back to see their own future.

Six months ago an alarm went off in the United Kingdom, when the gilt market (UK government bonds) spun out of control. We may be hearing that same siren across the pond today. 

Back in September, former Prime Minister Liz Truss unveiled a huge package of tax cuts, spending and increased borrowing aimed at getting the economy moving. Markets feared the plan would drive up already persistent inflation, forcing the Bank of England to push interest rates significantly higher. As a result, investors dumped UK government bonds, sending yields on some of that debt soaring at the fastest rate on record. 

The scale of the tumult put enormous pressure on many pension funds by upending an investing strategy that involves the use of derivatives to hedge their bets.

As the price of government bonds crashed, the funds were asked to pony up billions of pounds in collateral. In a scramble for cash, investment managers were forced to sell whatever they could — including, in some cases, more government bonds. That sent yields even higher, sparking another wave of margin calls.

Here’s the takeaway: The Bank of England was able to bring things back under control quickly by launching into crisis mode. After working through the night, it stepped into the market the day after the plunge with a pledge to buy up to £65 billion ($73 billion) in bonds if needed. That stopped the bleeding and averted what the central bank later told lawmakers was its worst fear: a “self-reinforcing spiral” and “widespread financial instability.”

US authorities are acting in similar ways today.

On Sunday, the Federal Reserve announced a new emergency lending program which would deliver cash to banks facing steep losses because of higher interest rates. Chair Jerome Powell also announced on Monday that the central bank would launch a review into what went wrong at SVB. 

US stock futures rose Tuesday morning as traders looked to find stable ground after days of whiplash-inducing volatility.

Investors celebrated an inflation report that met economists’ expectations: February’s Consumer Price Index showed the annual inflation rate for February was 6%, down from 6.4% in January; and the monthly rate was 0.4%, down from 0.5% in January.

Shares of regional banks were significantly higher after taking a brutal beating in the wake of the SVB and Signature Bank collapse.

The SPDR S&P Regional Banking ETF was up nearly 8% in early trading after falling 12.3% on Monday, and shares of First Republic bank were about 45% higher after dropping more than 60% yesterday.

Large bank stocks also popped on Tuesday morning. JPMorgan Chase was nearly 2% higher and Citigroup was up 2.9% after falling more than 7% on Monday.

Dow futures were up 200 points, or 0.6% on Tuesday morning.

S&P 500 futures were 0.8% higher.

Nasdaq Composite futures gained 0.6%.

Inflation remains elevated but the temperature is coming down, according to the latest Consumer Price Index.

The closely watched gauge of inflation, released Tuesday morning, showed that annual price increases continued to slow in February. 

CPI measured 6% for the year ended in February, down from January’s 6.4% and in line with economists’ expectations.

On a monthly basis, prices were up 0.4%, representing a cooldown from the January monthly growth rate of 0.5%. Economists were expecting a gain of 0.4%.

When stripping out volatile energy and food prices, core CPI grew 0.5% on a monthly basis and 5.5% year over year. 

China’s Andon Health, a maker of medical devices, says it has full access to funds parked at Silicon Valley Bank, after the United States government intervened to backstop all the deposits at the failed lender.

The Tianjin-based company, which manufactures consumer health devices and supplied Covid test kits to the US during the pandemic, has cash deposits at SVB worth 5% of its total cash and cash equivalents.

That amounts to approximately 675 million yuan ($98 million), according to calculations based on its most recent earnings report.

“Our deposits at Silicon Valley Bank can be used in full and have not suffered any losses,” the company said in a Tuesday filing to the Shenzhen Stock Exchange.

The collapse of SVB, which courted Chinese start-ups, has caused widespread concern in China, where a string of founders and companies rushed to appease investors by saying their exposure was insignificant or nonexistent. So far, more than a dozen of firms have issued statements trying to pacify investors or clients, saying that their exposure to SVB was limited. Most were biotech companies.

SVB, which worked with nearly half of all venture-backed tech and healthcare companies in the United States before it was taken over by the government, has a Chinese joint venture, which was set up in 2012 and targeted the country’s tech elite. The SPD Silicon Valley Bank, which was owned 50-50 owned by SVB and local partner Shanghai Pudong Development Bank, said Saturday that its operations were “sound.”

As the collapse of Silicon Valley Bank and Signature Bank scared investors and pummeledEuropean banking stocks, Credit Suisse’s share price fell to a new record low Monday, with the stock down 3.7% in morning trade.

Credit Suisse on Tuesday acknowledged “material weakness” in its financial reporting as it scrapped bonuses for top executives in the wake of its worst annual performance since the global financial crisis.

The embattled Swiss bank also said that chairman Axel Lehmann had proposed to “voluntarily waive” a share award worth 1.5 million Swiss francs ($1.6 million) for the 2022/2023 financial year, given the firm’s “poor financial performance.”

Credit Suisse (CSGKF) said in its annual report that it had found “the group’s internal control over financial reporting was not effective” because it failed to adequately identify potential risks to financial statements.

The revelations come just days after the bank delayed the publication of the annual report after an eleventh-hour query from the US Securities and Exchange Commission over cash flow statements for 2019 and 2020.

The board concluded that “this material weakness could result in misstatements of account balances or disclosures that would result in a material misstatement to the annual financial statements of Credit Suisse,” it added. Credit Suisse said it was urgently developing a “remediation plan” to strengthen controls.

Senator Elizabeth Warren is calling on Federal Reserve Chairman Jerome Powell to recuse himself from newly-launched review into the collapse of Silicon Valley Bank.

“Fed Chair Powell’s actions to allow big banks like Silicon Valley Bank to boost their profits by loading up on risk directly contributed to these bank failures,” Warren said in a statement. “For the Fed’s inquiry to have credibility, Powell must publicly and immediately recuse himself from this internal review.”

The Fed announced late Monday it has launched a review into the supervision and regulation of Silicon Valley Bank. That bank failure raises questions about whether regulators – including those at the Fed – provided enough oversight and should have seen this trouble coming.

The review will be led by Michael Barr, the Fed’s vice chair for supervision, and the results will be released by May 1, according to the Fed.

“It’s appropriate for Vice Chair for Supervision Barr to have the independence necessary to do his job,” Warren said.

Sheila Bair, a top banking regulator during the 2008 global financial crisis, said she hopes “people keep their head” after SVB’s collapse, adding that she believes that the problem facing the banking sector is more about fear than bank insolvency.

Appearing on CNN This Morning, Bair told anchor Poppy Harlow that it’s “not clear” if more banks will fail, but said that the Silicon Valley Bank was embroiled in an “unusual situation.”

“I do hope people keep their head,” Bair said. “I think most of these regional banks are just fine, but it concerns me that everybody is getting tagged with the same problems Silicon Valley Bank had and that was an unusual situation.”

“I do think fear is the problem now, not so much bank solvency trouble,” she added. “I don’t see any pervasive problems in our banking system,” she added.

Bair also reiterated that the Federal Reserve needs to halt its war on inflation.

“The Fed needs to hit pause and assess the full impact of its actions so far before raising short rates further,” Bair, the former chair of the Federal Deposit Insurance Corporation, previously told CNN.

The monthly Consumer Price Index inflation report has become must-watch economic data over the past year. But the February report, set to be released at 8:30 a.m. on Tuesday, has taken on extra significance in light of market volatility because of SVB’s collapse and the Federal Reserve’s quest to prevent other banks from failing.

It’s also one of the last major pieces of economic data to come out before the Fed’s rate-setting meeting next week.

Prior to the SVB collapse and related banking stresses, economists viewed February’s CPI as the potential decisive factor as to whether the Fed would stick with another quarter-point hike or ramp back up to a half-point hike.

Now, markets anticipate that it’s more likely that the Fed will go with another quarter-point hike — or even no hike at all.

In January, consumer price inflation surged by 0.5%, the highest monthly move since October. Economists surveyed by Refinitiv expect February CPI will show an overall slowing, with monthly inflation at 0.4% and yearly inflation at 6%.

That could mean a smaller rate hike at the Fed’s March 21-22 meeting. The central bank has been battling inflation with rate hikes for almost exactly a year now, hiking its benchmark lending rate eight times in that period. But the US economy still isn’t seeing enough of a turnaround in inflation.

That’s partly because the labor market remains truly strong. A robust job market — and, in turn, higher wages — puts upward pressure on inflation, even when other areas of the economy are slowing or seeing outright price declines.

Silicon Valley Bank was established in 1983. Before the collapse, it was America’s 16th largest commercial bank that provided banking services to nearly half of all US venture-backed technology and life science companies.

It benefited hugely from the tech sector’s explosive growth in recent years, fueled by ultra-low borrowing costs and a pandemic-induced boom in demand for digital services.

It also has operations in Canada, China, Denmark, Germany, Ireland, Israel, Sweden and the United Kingdom.

The bank’s assets, which include loans, more than tripled from $71 billion at the end of 2019 to a peak of $220 billion at the end of March 2022, according to financial statements.

Deposits ballooned from $62 billion to $198 billion over that period, as thousands of tech startups parked their cash at the lender. Its global headcount more than doubled.

The shocking implosion of Silicon Valley Bank should not deter the Federal Reserve from its war on inflation, according to former FDIC and Fed official Thomas Hoenig, who urged the Fed to keep hiking rates because inflation hasn’t gone away.

“The Federal Reserve is in the hot seat. It’s a no-win situation for them,” Hoenig, the former vice chair of the Federal Deposit Insurance Corporation, told CNN in a phone interview on Monday.

Raising interest rates at the Fed’s monetary policy meeting next week could add to the financial pressure facing the banking system, in part by further depressing the value of the bonds that banks are sitting on.

“It says to the world inflation is still the problem,” said Hoenig, who is now a distinguished senior fellow at the Mercatus Center at George Mason University in Virginia. “Get inflation down. Then you can have a long period of stability, hopefully. If you don’t get inflation down, you get a long period of instability.”

Despite high inflation, many investors are betting there is a growing chance the Fed holds steady at next week’s meeting. That marks a significant shift from just a week ago when the markets were pricing in a half-point rate hike.

“In light of the stress in the banking system,” the Fed is likely to keep rates unchanged next week, Goldman Sachs told clients on Sunday.

Nomura is going a step further, predicting the Fed will completely reverse course and start cutting interest rates next week and halt the shrinkage of its balance sheet. This marks a dramatic reversal, given that the Japanese investment bank previously expected a half-point rate hike.

Hoenig said he would be “disappointed” if the Fed started to cut interest rates now, warning of “long-run consequences” that could invite a repeat of 1970s-style runaway inflation.

Despite US regulators’ intervention, Asian stocks fell broadly on Tuesday, dragged down by banking shares, as fears over the fallout of Silicon Valley Bank’s collapse gripped the market despite US government efforts to stabilize the financial system.

Banks were the hardest hit sector across the region.

Other Asia Pacific banking shares also fell.

Garry Tan, prominent tech investor and CEO of tech startup accelerator Y Combinator, described Silicon Valley’s collapse as an “extinction-level event for startups” that would “set startups and innovation back by 10 years or more.”

As one of the tech industry’s collapsed, startups raced to line up loans from venture funds and fintech firms to make payroll. Venture-backed retailers hosted last-minute sales to boost their cash reserves. And Tan authored an “urgent” petition calling for Treasury Secretary Janet Yellen and others to offer “relief.”

Then, the industry was relieved when the US government intervened late Sunday to guarantee that all customers of the failed bank would be made whole.

“Obviously, I’m quite relieved,” said Stefan Kalb, co-founder and CEO of Seattle-based startup Shelf Engine, who told CNN that his company would have had to shut down by the end of the week without the government intervention.

But even as the tech industry enjoys a respite from a fearful weekend, unknowns remain. It’s unclear how the aftershocks of the bank’s collapse will add to the startup industry’s growing challenges accessing capital. SVB’s collapse also risks changing how the world, and prospective recruits, think of Silicon Valley.

For years, the term itself conjured an image of an enclave of bright, contrarian, libertarian engineers and thinkers who could see around corners and make big bets on the future. Now, that same industry is relying on the federal government to survive after failing to see the risk, or worse, contributing to it through a shared hysteria.

Even before the bank’s collapse, the startup industry was in a tough moment. Venture capital funding had dwindled amid rising interest rates and broader macroeconomic uncertainty; tech companies were cutting staff and ambitious projects; and some of the biggest private companies were reportedly slashing their valuations.

The instability at a top tech lender, and the lingering questions about its impact on other regional banks and the broader financial system, risk making it even harder for money-losing startups to access the capital they need to survive.

More immediately, there’s uncertainty around how long it will take for companies to get their money out of the bank.

As of Monday, Kalb said the money in his Silicon Valley Bank account has not been transferred yet to the new JPMorgan Chase account he set up for Shelf Engine on Thursday. “I’ve been obsessively checking my email,” he said. “Hopefully the money will be able to be transferred shortly.”

Co-founder Ben Kaufman told CNN that his venture-backed toy store spent the weekend trying to “fight for survival,” including holding a last-minute 40% off sale, using the code “BANKRUN,” to raise capital over the weekend.

How and where he stores his money is “going to have to be a consideration moving forward,” he told CNN, adding, “I don’t want to do this again.”

Silicon Valley Bank collapsed with astounding speed on Friday. And while the US federal government stepped in to guarantee customer deposits, its downfall continues to reverberate across global financial markets — as seen in the subsequent shutdown of Signature Bank — and investors are on edge about whether its demise could spark a broader banking meltdown.

Here’s what you need to know about the biggest US bank failure since the global financial crisis in 2008:

Why did it collapse?: The root of its demise goes back several years. Like many other banks, SVB ploughed billions into US government bonds during the era of near-zero interest rates. What seemed like a safe bet quickly came unstuck, as the Federal Reserve hiked interest rates aggressively to tame inflation.

When interest rates rise, bond prices fall, so the jump in rates eroded the value of SVB’s bond portfolio. The portfolio was yielding an average 1.79% return last week, far below the 10-year Treasury yield of around 3.9%, Reuters reported.

At the same time, the Fed’s hiking spree sent borrowing costs higher, meaning tech startups had to channel more cash towards repaying debt. At the same time, they were struggling to raise new venture capital funding. That forced companies to draw down on deposits held by SVB to fund their operations and growth.

Then the bank run: When SVB announced that it had sold a bunch of securities at a loss and would sell $2.25 billion in new shares to plug the hole in its finances, customers panicked and withdrew their money in large numbers.

The bank’s stock plummeted 60% Thursday and dragged other bank shares down with it. By Friday morning, trading in SVB shares was halted and it had abandoned efforts to raise capital or find a buyer. California regulators intervened, shutting the bank down and placing it in receivership under the Federal Deposit Insurance Corporation, which typically means liquidating the bank’s assets to pay back depositors and creditors.

In aiming to prevent further bank runs and help companies pay staff and fund operations, US regulators said Sunday that they would guarantee all SVB customers’ deposits. The intervention does not amount to a 2008-style bailout, however, which means investors in the company’s stock and bonds will not be protected.

Will this trigger a banking crisis? There are already some signs of stress at other banks, and authorities in the US and across Europe are watching closely. Trading in First Republic Bank (FRC) and PacWest Bancorp (PACW) was temporarily halted Monday after the shares plunged 65% and 52% respectively. Charles Schwab (SCHW) stock was down 7% at 11.30 a.m. ET Monday.

In Europe, the benchmark Stoxx Europe 600 Banks index, which tracks 42 big EU and UK banks, fell 5.6% in morning trade — notching its biggest fall since last March. Shares in embattled Swiss banking giant Credit Suisse were down 9%.

SVB isn’t the only financial institution whose investments into government bonds and other assets have fallen dramatically in value. At the end of 2022, US banks were sitting on $620 billion in unrealized losses — assets that have decreased in price but haven’t been sold yet, according to the FDIC.

Another key headline: HSBC stepped in Monday to buy SVB UK for £1 ($1.2), securing the deposits of thousands of British tech companies that hold money at the lender. Had a buyer not been found, SVB UK would have been placed into insolvency by the Bank of England, leaving customers with only deposits worth up to £85,000 ($100,000) — or £170,000 ($200,000) for joint accounts — guaranteed.

Is my money safe? How secure is the banking system? CNN answers your most pressing questions in the aftermath of Silicon Valley Bank’s stunning collapse:

Do I have to worry about cash I stored in my bank?

If you have less than $250,000 in your account, then you almost certainly have nothing to worry about. That’s because the US government insures the first $250,000 in eligible accounts.

Many SVB customers had much more than $250,000 deposited, and now that they can’t get their money, some companies are struggling to make payroll.

Should I pull my money out of my bank?

It doesn’t make sense to take all your money out of a bank, Jay Hatfield, CEO at Infrastructure Capital Advisors and portfolio manager of the InfraCap Equity Income ETF, said. But make sure your bank is insured by the FDIC, which most large banks are.

Hatfield’s advice was to split up your money between banks, so each one had a maximum of $250,000. “Why not? If you have a million, why not have four accounts and have them insured?”

But if I don’t run to pull my money out of the bank now, won’t it disappear?

Everyday consumers, on the whole, are unlikely to be affected. But the collapse is a good reminder to be aware of where your money is held, and not to have it all in one place.

The FDIC has different resources on its site. The “bank suite” tool offers a list of FDIC-insured banking institutions and the Electronic Deposit Insurance Estimator calculates the insurance coverage of different deposit accounts at banks.

Is this 2008 all over again?

The banking sector should be, theoretically, more stable due to the regulatory reforms put in place after the crisis in 2008.

The government’s actions this past weekend also tried to prevent the next SVB from happening, further stabilizing the sector after a chaotic week. The Fed also said it will offer bank loans for up to a year in exchange for US Treasury bonds and mortgage-backed securities that lost value. The Fed will honor the debt’s original value for the banks that take the loans.

The Treasury will also provide $25 billion in credit protection to ensure against banks’ losses, which should help banks easily access cash when they’re in need.

“The Fed ring-fenced the SVB disaster and averted a crisis of epic proportions for the banking sector,” said Wedbush Securities’ Dan Ives.

Can the US federal government contain the panic?

SVB was among the top 20 American commercial banks, with $209 billion in total assets at the end of last year, provided financing for almost half of US venture-backed technology and health care companies. Every bank has losses on their securities and uninsured deposits. US banks were sitting on $620 billion in unrealized losses (assets that have decreased in price but haven’t been sold yet) at the end of 2022, according to the FDIC.

The government took steps over the weekend to quell fears of SVB turning into a full-blown crisis. So there’s no need to panic, say analysts.

Most large US banks are in good financial condition and won’t find themselves in a situation where they’re forced to realize bond losses, said DIC Chairman Martin Gruenberg.

CNN’s David Goldman, Nicole Goodkind and Allison Morrow contributed to this report.

House Republicans are still hashing out a strategy to deal with the Silicon Valley Bank collapse, and did not announce any plans for bills or hearings during a Monday night conference call, according to multiple sources on the call. 

The House is out this week, but the House Financial Services Committee is expected to take the lead on the GOP’s legislative response. 

Instead, Republican leaders, as well as Financial Services Chairman Patrick McHenry and Rep. French Hill, used Monday night’s conference call to provide a detailed briefing to members on their view of “exactly what happened and why,” per one of the sources. 

They blamed failures in bank management and state examination for the bank’s collapse, saying SVB was too concentrated in one industry, and also at one point blamed the Biden administration’s fiscal policies and high interest rates. 

But they also urged members not get too partisan in their responses and wanted to ensure that everyone remains level headed, according to one of the sources. They also told members that the market reaction today was better than anticipated. 

Moody’s Investors Service placed six other US banks on review for potential downgrades late Monday, following last week’s collapse of Silicon Valley Bank. 

The credit ratings firm also downgraded Signature Bank deep into junk territory following that bank’s failure.

Moody’s warned it could similarly downgrade First Republic Bank, Zions, Western Alliance, Comerica, UMB Financial and Intrust Financial. The firm cited the “extremely volatile funding conditions for some US banks exposed to the risk of uninsured deposit outflows.”

The move comes after shares of regional banks got clobbered on Monday even after the federal government stepped in with a massive intervention designed to prevent depositors and prevent further bank runs. Regional bank shares are rebounding in premarket trading on Tuesday.

For San Francisco-based First Republic, Moody’s pointed to the bank’s “high reliance on more confidence sensitive uninsured deposit funding,” high unrealized losses in its bond holdings and a “low level of capitalization” relative to its peers.

First Republic has a high amount of deposits above the FDIC’s insurance limit, Moody’s said, noting this makes the bank’s funding profile “more sensitive to rapid and large withdrawals from deposits.” 

After plunging 62% on Monday, First Republic shares are climbing 24% in premarket trading on Tuesday.

Federal Deposit Insurance Corp. officials declined a bid to purchase assets from the failed Silicon Valley Bank during an auction that took place this weekend, but that doesn’t mean their efforts to secure a sale of the bank’s assets are finished, sources familiar with the matter say. 

Officials who briefed Senate Republicans on the dramatic government actions taken in response to the failure of Silicon Valley Bank and Signature Bank said they were weighing plans for a second auction in the future, the sources said.

The timeline for a second auction was not clear, but the officials noted that the government action to backstop uninsured deposits, as well as the creation of a Federal Reserve-operated emergency lending facility for small and mid-sized banks, created new conditions that may make lenders more willing to submit bids to purchase the failed bank’s assets, the sources said. 

Biden administration officials worked furiously throughout the weekend in an effort to find a buyer for the bank’s assets before ultimately deciding to launch the dual-pronged emergency actions. 

The FDIC solicited bids from other banks to potentially purchase Silicon Valley Bank. But one senior Treasury official noted on Sunday that “things moved very quickly” and that the decision was made to “move early” and trigger the systemic risk exception — a designation that provides more leeway to immediately advance funds to those holding deposits above the current $250,000 threshold covered by FDIC. 

The official noted it would have been “pretty difficult” for a potential buyer to have gone through SVB’s books, agreed to purchase the assets and been in a position to open for business on Monday. 

Instead, the FDIC transferred all of the bank’s deposits and assets to a government-operated “bridge bank” that opened and resumed normal banking hours and business operations.  

The blame game is on for who caused Silicon Valley Bank’s collapse, and the tech sector is pointing the finger at SVB CEO Greg Becker for allowing his company to go down in history as the second-biggest US banking failure on record.

One Silicon Valley Bank employee, who requested anonymity to speak candidly, was dumbfounded by how Becker publicly acknowledged the extent of the bank’s financial troubles before privately lining up the necessary financial support to ride out the storm.

This set the stage for the panic that ensued as customers scrambled to pull their money.

“That was absolutely idiotic,” the employee, who works on the asset management side of Silicon Valley Bank, told CNN in an interview. “They were being very transparent. It’s the exact opposite of what you’d normally see in a scandal. But their transparency and forthright-ness did them in.”

What happened: Becker and his leadership team revealed last Wednesday night a hope (but no firm commitment) to raise $2.25 billion in capital as well as $21 billion in asset sales that sparked a $1.8 billion loss.

That news set off a wave of fear across Silicon Valley, where the bank serves as a key lender to tech startups. Many of them panicked, yanking $42 billion last Thursday alone when Silicon Valley Bank’s stock crashed by 60%, according to filings by California regulators.

By the close of business that day, Silicon Valley Bank had a negative cash balance of about $958 million.

The Silicon Valley Bank insider said the mismanagement of the bank’s balance sheet heading into last week was “stupidity” and questioned the strategy of the CEO and CFO.

Still, the employee, who is a Wall Street veteran, emphasized his belief that the downfall of Silicon Valley Bank was brought on by errors and “naivety,” not outright wrongdoing.

The Federal Reserve announced Monday it has launched a review of the supervision and regulation of Silicon Valley Bank following the lender’s sudden implosion.

The Fed said the review will be run by Michael Barr, the central bank’s vice chair for supervision, and the results will be publicly released by May 1.

The review comes just days after Silicon Valley Bank collapsed, raising questions about how regulators — including those at the Fed itself — missed the trouble that was brewing.

“The events surrounding Silicon Valley Bank demand a thorough, transparent, and swift review by the Federal Reserve,” Fed Chairman Jerome Powell said in a statement.
“We need to have humility, and conduct a careful and thorough review of how we supervised and regulated this firm, and what we should learn from this experience,” Barr said in a statement.

Stocks closed mixed on Monday after a volatile trading day as investors mulled over federal regulators’ plan to stymie effects from the collapse of Silicon Valley Bank and Signature Bank.

Stocks teetered throughout the day as investors assessed the US government’s actions and how upheaval in the banking sector will affect the Federal Reserve’s monetary policy going forward.

The VIX, which measures market volatility, reached its highest level since late 2022 as shares of US regional lenders dipped in and out of trading halts Monday. Shares of Western Alliance tumbled 47%. First Republic Bank tanked about 62%. Even the larger banks were affected: Wells Fargo fell by roughly 7% and Citigroup dropped by 7.4%.

The 2-year Treasury note, meanwhile, posted its largest three-day yield drop since the Black Monday stock crash in October of 1987.

Tuesday’s Consumer Price Index inflation report for February will offer more clues about inflation rates and future interest rate hikes.

The Dow fell 91 points, or 0.3% in trading on Monday.

The S&P 500 was 0.2% lower.

The Nasdaq Composite gained 0.5%.