Why The Silicon Valley Bank Crash Matters to TJ Students

On March 10 2023, The Silicon Valley Bank (SVB), which has become the biggest bank in respects to start-up tech companies, suffered a monetary collapse. This collapse resulted in SVB becoming the second biggest U.S. Lender to fail since the widespread financial crisis of 2008. Although this may have been an isolated event, it could have caused an immense ripple through not just the American economy but the global economy as well if not dealt with correctly. Many were struck suddenly by the collapse not knowing exactly what it was and how to deal with it which could make the problem even worse.

The reason this bank crashed was because the bank didn’t have enough cash to pay the depositors so the regulators of the bank closed it down. This is due to the bank losing 1.8 billion dollars due to them selling stocks that dropped massively. When this happened many depositors pulled their money which then caused the bank to lose massive amounts of cash to pay the depositors they did have tied into the bank. This caused all of the depositors to SVB to lose all of the money they invested into the bank. Luckily the government stepped in to eradicate the issue and made sure all of the depositors were compensated for their losses. If the issue progressed, it could have led to many depositors from banks all over the country prematurely withdrawing their money in fear of losing all of their money that they deposited. If not stopped this could have led to an event on the scale of “The Great Depression” if not worse. 

With a major banking crisis like this it’s important that the community knows and is aware that these events happen and everyone’s reactions. With this in mind, I interviewed history teachers Mr. Miller and Mr. Atwell on how they treated the bank crisis. When Mr. Miller was asked if he was initially worried by the news he explained that, “Personally I wasn’t because I didn’t have any money in the bank but I was worried that maybe this could  kick off a large scale event.” When Mr. Atwell was asked the same question he responded similarly with, “ Yes because I was afraid that it would personally affect the local banks and the interest rates they’d then offer.” When the teachers were asked if they’ve lived through or experienced such an event prior they both responded with the bank crash in 2008. For context, it was extremely similar to the most recent one except this time multiple banks went under by selling stocks for less than they acquired them for. Inevitably these banks were once again bailed out by the government however it still caused a widespread market crash that was felt throughout the nation.

It’s important that these events are spread without misinformation to spread awareness to these types of events. These types of collapses could affect everyone so it’s necessary to assess these situations from a full perspective. With the mix of virtual and physical currency, these events are only going to increase and become increasingly more common. Although this bank collapse did not intensify, it’s important to notice when these things occur to act accordingly and not panic.