The FDIC insures deposits of up to $250,000, but it didn’t help Silicon Valley Bank avoid collapse. Part of the reason is that many depositors had well over the insurance deposit limit amount invested at the bank. They rushed to move funds as perception of risk increased. That meant that deposit insurance didn’t help much to prevent a bank run.
However, the unique way that Silicon Valley Bank operated may have introduced risks too, as did the recent sell-off in government bonds as the Fed raised rates aggressively, hurting the bank’s investments.
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