SANTA CLARA — Federal officials moved to insure all deposits at failed Silicon Valley Bank, hoping to inoculate the banking system against contagion, but shares of another Bay Area regional bank plunged on Monday.
Scores of customers lined up outside the Santa Clara headquarters of the fallen Silicon Valley Bank on Monday to await the opening of the financial firm’s doors. Officials began to allow customers into the bank at 10 a.m. Dozens of customers were in line for hours before getting inside.
One of those bank clients is Platina Systems, a San Jose-based software firm that’s been a customer of Silicon Valley Bank since 2014.
“We didn’t know what was going to happen, so I decided to come here in person,” said Meichi Lai, vice president of finance with Platina Systems. “I tried to get into the bank’s online system, but it put me into an infinite loop and kept kicking me out.”
Platina is under time pressure because the tech startup is due to issue the next round of paychecks to its employees by Thursday.
“We’re really trying to get this done as soon as possible,” Lai said. “We didn’t know what was going to happen.”
Bank officials told Platina Systems that wire transfer requests at the bank were backed up and being delayed, according to Lai.
Bob, a San Jose resident who asked that his last name wasn’t used, said the bank hadn’t lost any of his money. Bob, whose expertise is in financial services, said the bank was able to meet his requirements. He endured an anxious few days after he heard on Friday that the bank had collapsed and was seized by the FDIC.
“Oh yeah, I was worried,” Bob said after leaving the bank Monday. “After I heard about it Friday, I was worried most of the weekend.”
The move to protect Silicon Valley Bank depositors arose over fears that tech startups might be forced to shut down or furlough employees due to a cash squeeze if their uninsured deposits weren’t available to tap for their ongoing operations — andas well as to ward off runs against other banks with a high percentage of uninsured deposits.
The U.S. Treasury Department, the Federal Reserve Bank and the Federal Deposit Insurance Corp. teamed up to lead the quest against a banking system contagion in the wake of the collapse and takeover by the FDIC of the insolvent Silicon Valley Bank.
“The FDIC today transferred all deposits — both insured and uninsured — and substantially all assets of the former Silicon Valley Bank to a newly created, full-service FDIC-operated ‘bridge bank’ in an action designed to protect all depositors of Silicon Valley Bank,” the FDIC announced Monday.
Signs quickly emerged on Monday, however, that Wall Street and big investors were skeptical about the federal actions in the case of Santa Clara-based Silicon Valley Bank.
San Francisco-based First Republic Bank’s shares nosedived Monday and plunged about 62% to close at $31.21, a scary drop of $50.55 in a single day.
Like Silicon Valley Bank, First Republic is a regional bank with a considerable number of wealthy depositors.
Investors became queasy about First Republic Bank after the bank announced Sunday that the FDIC and JPMorgan Chase (Chase Bank) had teamed up to provide access to $70 billion in funds through an array of sources.
“I’m confident,” said Joe O’Neal, a customer with First Republic Bank. “They said they got a loan from Chase Bank but they didn’t really need it, they’re more than capitalized for this.” His deposits are below the $250,000 FDIC insurance threshold and are fully insured.
New York City-based Signature Bank joined Silicon Valley Bank in a collapse and was taken over by the FDIC during the weekend.
In a fresh sign of skepticism over small banks, federal officials failed to round up a buyer for Silicon Valley Bank despite an hours-long auction on Sunday.
Bob said that he believes top executives at Silicon Valley Bank should face consequences for the blunders that allowed the bank to collapse and be forced into an FDIC takeover.
“The officers of the company should have something done to them,” Bob said in an interview Monday.
On Feb. 27, Chief Executive Officer Greg Becker sold $3.6 million of stock in Silicon Valley Bank, an insider trade that occurred less than two weeks before the bank’s problems began to surface publicly.
Plus, an unknown number of bank employees received their annual bonuses on Friday, just ahead of the takeover of the bank.
“They were entrusted with people’s money,” Bob said of the bank’s executives and officials. “They didn’t take their responsibility seriously. They made decisions that hurt the bank and hurt the people. They need to be punished. If that happens once, this might not happen again.”
Staff writer Aldo Toledo contributed to this report
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