Startup founders scrambled to get their funds out of Silicon Valley Bank after its collapse.

The federal government is bailing out Silicon Valley Bank’s customers.
But it’s not a repeat of the 2008 financial crisis, when the government stepped in to support the US banking system.
The US should be able to avoid a repeat of the Great Recession.

The US government is bailing out a bank’s customers — but that doesn’t mean another Great Recession is imminent. 

On Sunday, the US Treasury, Federal Reserve Board, and the Financial Deposit Insurance Corporation announced they would “fully protect” all depositors with funds in Silicon Valley Bank. The news came after the institution was shut down last Friday, and experts raised concerns that inaction could spur wider turmoil in the banking industry.

In recent days, many have drawn comparisons to the 2008 financial crisis, when the federal government doled out roughly $200 billion to hundreds of banks to support the US banking system. The size of SVB’s bank failure has only been surpassed once in American history — by Washington Mutual when it collapsed in 2008. 

The ’08 crisis laid the groundwork for the Great Recession — when millions of Americans lost their jobs and the unemployment rate peaked at nearly 10%. But today’s landscape is very different than a decade-and-a-half ago. 

While the banking industry might not be out of the woods just yet, there’s a good chance it — along with the broader US economy — will be just fine. Here are four reasons why. 

The US has stricter banking regulations today

After the 2008 crisis, US banks were strapped with stricter regulations to help ensure the industry would avoid a similar fallout in the future. This included raising capital requirements, which was intended to ensure banks had adequate reserve levels during times of crisis. Rules were also put in place to make sure institutions had well-diversified revenue streams. 

A bank of SVB’s size was not subject to the same level of regulations — in part due to a law passed during the Trump administration — which some, like Sen. Bernie Sanders, have blamed for the bank’s collapse. 

However, these regulations still apply to roughly the twelve biggest US banks — those that have at least $250 billion in assets — and should help make a 2008-style failure …read more

Source:: Business Insider


Relax, SVB’s implosion is nothing like the 2008 financial crisis, and the economy will be fine

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