{"id":1414,"date":"2023-04-28T12:35:21","date_gmt":"2023-04-28T16:35:21","guid":{"rendered":"https:\/\/ifintechworld.com\/banking\/federal-reserve-says-social-media-partially-at-fault-for-silicon-valley-banks-failure\/"},"modified":"2023-04-28T12:35:22","modified_gmt":"2023-04-28T16:35:22","slug":"federal-reserve-says-social-media-partially-at-fault-for-silicon-valley-banks-failure","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=1414","title":{"rendered":"Federal Reserve Says Social Media Partially At Fault For Silicon Valley Bank\u2019s Failure"},"content":{"rendered":"
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Topline<\/h2>\n

In its report on March\u2019s failure of Silicon Valley Bank released Friday, the Federal Reserve pointed a finger at social media\u2019s influence on the crisis \u2013 and admitted it did not do enough to cool the situation.<\/p>\n

Key Facts<\/h2>\n
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The 114-page report listed social media-fueled panic as one of the chief factors behind the second-largest bank failure in U.S. history, primarily blaming the collapse on poor risk management at the bank and too loose supervision from Fed supervisors.<\/p>\n<\/p><\/div>\n

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The early March run on Silicon Valley Bank \u201cquickly accelerated as social networks, media and other ties reinforced a run dynamic that played out at remarkable pace,\u201d the Fed said.<\/p>\n<\/p><\/div>\n

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Also fueling the rapidly spreading panic was the bank\u2019s highly \u201cconcentrated network of venture capital investors and technology firms\u201d who accounted for most of the institution\u2019s deposits, withdrawing their money \u201cin a coordinated manner with unprecedented speed.\u201d<\/p>\n<\/p><\/div>\n

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Still, it was primarily a \u201ctextbook case of mismanagement\u201d among Silicon Valley Bank\u2019s top executives and a failure by the Fed to \u201ctake forceful enough action\u201d before the run on deposits as the bank\u2019s cracks grew apparent, Michael Barr, the Fed\u2019s top official in charge of banking regulation, said in a letter accompanying the report.<\/p>\n

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The report asserted that had the bank regulation requirements that were rolled back in 2018 still been in place, they \u201cwould likely have bolstered the resilience of Silicon Valley Bank,\u201d possibly indicating tighter regulations on institutions may be on the way.<\/p>\n<\/p><\/div>\n<\/div>\n

Crucial Quote<\/h2>\n

\u201cThe fact that the FDIC stepped in and closed SVB down in the middle of the day is a clear indication of how scary it was,\u201d Moody\u2019s Analytics chief economist Mark Zandi told Forbes<\/em> earlier this week, referring to Silicon Valley Bank\u2019s midday failure on Friday, March 10. Regulators \u201cfelt they had no choice\u201d but to shut down the country\u2019s 16th-largest bank \u201cbecause deposits were fleeing so quickly,\u201d Zandi added.<\/p>\n

Key Background<\/h2>\n

New York-based Signature Bank failed two days after California\u2019s Silicon Valley Bank, becoming the third-largest bank to ever fail in U.S. history. After Signature Bank\u2019s closure, the federal government guaranteed depositors above the Federal Deposit Insurance Corporation\u2019s $250,000 limit in an effort to limit the spillover effects of the crisis on the broader economy. North Carolina-headquarted First Citizens acquired most of Silicon Valley Bank\u2019s assets late last month; shares of First Citizens are up more than 70% since the deal went public.<\/p>\n

What To Watch For<\/h2>\n

Fellow Golden State bank First Republic appears to be on the brink of joining Silicon Valley Bank in failure, with its stock down some 80% this week after the bank revealed it lost 40% of its deposits during the first three months of 2023. Federal officials are scrambling to save First Republic, according to Financial Times<\/em> and Reuters reports. First Republic would overtake Silicon Valley Bank as the second-largest Americanbank failure ever.<\/p>\n

<\/h2>\n

Silicon Valley Bank\u2019s Abrupt Closure Leaves Venture Capitalists And Founders Scrambling (Forbes<\/em>)<\/p>\n

Senate Banking Hearing: Officials Blame Management At Failed Banks, Tout Regional Banks As Economic \u2018Strength\u2019 (Forbes<\/em>)<\/p>\n

Federal Agencies In \u2018Urgent\u2019 Talks About Possible First Republic Bank Rescue, Report Says (Forbes<\/em>)<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Topline In its report on March\u2019s failure of Silicon Valley Bank released Friday, the Federal Reserve pointed a finger at social media\u2019s influence on the crisis \u2013 and admitted it did not do enough to cool the situation. 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