$13 Billion In Silicon Valley Bank Bailout Money Went To Just 10 Accounts

Federal Deposit Insurance Corporation Chairman Martin Gruenberg has disclosed that they provided insurance for as much as $13.3 billion in uninsured funds for the top 10 account holders at Silicon Valley Bank, which has since collapsed. Majority of the accounts at the Silicon Valley Bank exceeded the $250,000 threshold backed by FDIC, which prompted them to secure all accounts to avoid bank runs. In total, $18 billion from the Deposit Insurance Fund was used to guarantee accounts at the defunct bank, while another $1.6 billion was used for accounts at Signature Bank that also failed after depositors withdrew their balances. 74% of the funds used to assist the customers of Silicon Valley Bank were used to back deposits for only 10 accounts.

Gruenberg mentioned that the financial system is still solid despite the past weeks’ volatility. Some banks, however, are seeing higher levels of withdrawals. Banks have observed some corporate depositors moving some of their deposits to diversify their exposures and increase their deposit insurance coverage. General trends suggest that the largest banks are benefiting with increasing deposits held in custody or on deposit – this poses concern regarding possible increased consolidation in the banking sector. To address these concerns, Treasury Secretary Janet Yellen said measures similar to the ones that saved Silicon Valley Bank customers might be taken if smaller institutions suffer deposit runs that threaten the whole system. Some investors interpreted her comments as a guarantee of all deposits, but she later clarified that she has not discussed or considered anything related to blanket insurance or guarantees of all deposits.

The bond portfolio sold by Silicon Valley Bank suffered a significant drop in value due to Federal Reserve actions to hike interest rates. Following the economic downturn caused by the pandemic, monetary stimulus measures were previously instituted to boost the economy, but now with their rollback, assets in the banking system are now $2 trillion lower than their book value.

Reports show that many large companies had huge amounts of their cash assets with Silicon Valley Bank. Roku had $487 million in their balance, while BlockFi had $227 million in funds and SunRun had $80 million in deposits. Ownership of large accounts by these kinds of companies was one of the factors that led to the overall failure of the bank.