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  • A rough week for the banking industry.

  • The collapse of Silicon Valley Bank.

  • The second biggest bank collapse in US history.

  • The Silicon Valley Bank collapsed on March 10th, after a run-on deposit doomed the tech-focused lender's plans to raise fresh capital.

  • This prompted US regulators to step in with emergency measures, including seizing another bank three days later, in a bid to ease fears that depositors might pull their money from other lenders.

  • WSJ banking reporter Rachel Ensign explains how this crisis unfolded and what could happen next.

  • During the pandemic, Silicon Valley Bank had gotten all of these deposits; their deposits tripled.

  • It was a huge, huge, huge influx.

  • And they did what banks dothey took some of their deposits and made loans.

  • But they also invested a lot of them in securities, which are pretty safe.

  • Some issues had been bubbling under the surface at Silicon Valley Bank since the Federal Reserve started raising rates.

  • When rates rose, the bonds fell in value.

  • It's not a big problem for you, unless you have to go and sell the bonds.

  • But deposits started leaving the bank faster than they anticipated, and they had to sell their bonds and take a very big loss.

  • The bank made an announcement on Wednesday night that it needed to raise capital and was planning to do that the next day.

  • The investors completely freaked out, sold off the stock, and then, a bank round started, where people tried to withdraw 42 billion dollars in deposits just in that one day.

  • And by Friday morning, it was seized by regulators.

  • The regulators have responded in a way that they're hoping stems the panic.

  • The Fed said we're going to be offering this lending facility that's a backstop.

  • We're gonna be ensuring all of the deposits, effectively, of this bank that failed.

  • The collapse matters because it could have broader economic effects.

  • There was the risk that this panic would spread to other parts of the banking system.

  • We saw some really significant news with some other banks that investors were most concerned about last week.

  • Most notable Signature Bank; a New York-based bank was also seized on Sunday night.

  • It is the third largest bank failure in US history.

  • And First Republic put out a statement saying they've gotten some extra money from the Federal Reserve and, also, from J.P. Morgan.

  • They're hoping that that reassures their investors and their depositors.

  • The key thing to watch for is: Is the panic over?

  • That's the big question.

  • Do people stop pulling their money out?

  • Do investors and customers, kind ofare they reassured in the way that the government would like them to be?

A rough week for the banking industry.

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