Silicon Valley Bank Collapse

Story by Marcellus Peters-Jackson,,. Photo courtesy of Agenzia Nova.

Recently, the Silicon Valley Bank invested long term into companies that were near zero, meaning their stocks were almost at the point of crashing. Of course, this may have looked like a good idea because the worth of these low rate companies would rise, but interest rates proceeded to also rise, essentially making the Silicon Valley Bank lose everything. In just one day, around $160 billion was lost, all because they made a bad investment.

Soon after this significant loss, many depositors immediately withdrew all of their money from the bank. Unfortunately for these investors, the bank couldn’t provide them with all of their money back, as the bank only keeps a portion of their original deposit. And Silicon Valley Bank CEO Greg Becker sold $3.6 million worth of stock before this whole fiasco was leaked to the public.

As a result, popular companies like Roblox and Etsy couldn’t access more than $250,000 of their original deposits, although they had significantly more than that in the bank. Not only that, Silicon Valley was already making risky investments, and were already being watched by the Federal Reserve System. There seemed to have been signs of this collapse for a while, with their supervisors, the Federal Reserve Bank of San Francisco, putting flags on the bank. But since they didn’t fix these issues and invested in low value companies, the bank crashed. Right now there’s a small chance people with the big bucks will get all their money back, as well as many other banks that are already in trouble due to this collapse.

For now, all I can say is it really isn’t looking good for banks, especially Silicon Valley.

Marcellus Peters-Jackson is an 8th grade scholar at Friendship Woodridge International School.