Banking's bad day: Collapse of Silicon Valley Bank

Federal banking officials have released their finding on the crash of Silicon Valley Bank on a day another once booming bank hangs on by a thread. A bad day for banking just got worse with news fo a fourth failure.

In 2023, so far, there have been three U.S. bank failures: Silicon Valley Bank, Signature Bank, and Silvergate Bank.

Reuters is now reporting that a fourth: First Republic Bank, whose stock is now down 86%, will be taken over by federal regulators Friday night.

The usual practice for bank regulators is to wait for the bank to lose on a Friday night. They immediately move in, take it over and have to open on Monday morning for business with a minimal disruption. That will be a terrible disappointment for most of its customers. 

"I hate to see it go and I'm really concerned about a lot of the staff that's in there. What's gonna happen? I mean, you should see, there is a line of people in there," said First Republic Bank customer Richard Dennin. 

"Every time you walk in, there's always a smile. If you have a question or problem. You can call somebody. You don't find that in banks these days and so, it would be sad to see this bank go," said customer Ken Hayward.

Former Golden Gate University Business School Dean and investment banker Terry Connelly says the scathing 114-page report, the Federal Reserve blames Silicon Valley Bank's collapse on many bad actors. The Fed says bank executives, managers and board members, who were already sitting on 31 federal citations, failed to deal with them and make growth a higher priority than obvious risks.

Unlike other banks, 95% of SVB's deposits were well over the federal insurance limit and concentrated in a single industry that made it vulnerable to customer panics. How would Dean Connelly grade them? "I would give them a grade that wouldn't pass the course; curve or no curve," said Connelly.

But, the report also blames Uncle Sam's relaxed regulations for medium-sized banks as well as federal regulators who poorly enforced regulations or turned a blind eye to them. "It's like the regulators kind of pulled them over to the curb for speeding, but then let them off with a warning," said Connelly.

The report concludes that once again, bank regulations must be tightened up which even opposing parties in Congress must approve.