As with all things in finance, everything, everywhere, all at once—banks are all connected in the grand multiverse of ones and zeroes. Including when there is a major bank run, one of the largest in history, in fact.
Yes, we are talking about Silicon Valley Bank, the once mighty go-to bank for entrepreneurs seeking funding for their newest gadget or A-I tool.
This time around, we are diving into one of our very own, which is now under investigation and has shuttered its doors due to government seizure from the SEC, amongst other federal agencies.
Why Did the Feds Come for Signature Bank?
Simply put, a regulatory takeover of the New York-based bank was intended to send a message to U.S. banks to stay away from the cryptocurrency business.
Let’s back up a bit and talk about the major players in this financial crypto crime drama.
Frank, a Democrat who served in Congress from 1981 until 2013, coauthored the Dodd-Frank act that boosted government oversight of banks following the 2008 financial crisis.
He was a director at Signature Bank until the New York Division of Financial Services took it over Sunday and gave control of it to the FDIC, the federal agency that insures bank deposits until the bank can be sold.
Was Shuttering Signature Really Necessary?
Frank said the bank’s former operators have no recourse. But he said he expects some vindication when Signature is sold eventually.
“I believe they’re going to get a very good price,” Frank said, “proof that it was not a bank problem.”
Signature’s takeover came two days after regulators seized California-based Silicon Valley Bank. Both followed a rush of withdrawals from the banks, which catered to technology businesses.
New York Gov. Kathy Hochul described the takeover as a way to avert a bigger crisis that could have affected more banks.
“Our view was to make sure that the entire banking community here in New York was stable, that we can project calm,” Hochul said in a news conference Monday.
Signature, which was founded more than two decades ago, has about 40 offices across the U.S. and says it focuses on banking for privately owned businesses, their owners, and senior managers.
The bank said it was the first FDIC-insured bank to launch a blockchain-based digital payments platform. As worries mounted about Silicon Valley Bank last week, Signature put out a statement seeking to reassure clients and investors that it was stable.
The statement included a reminder that despite its efforts to cater to cryptocurrency holders, it
“does not invest in, does not trade, does not hold, does not custody and does not lend against or make loans collateralized by digital assets.”
Was This Because of Silicon Valley Bank?
But by Friday, there were more withdrawals, which Frank said were “based solely on the contagion from SVB.” He said the situation had stabilized by the time Sunday that New York regulators took it over.
The bank had more than $110 billion in assets, making it the third-largest banking failure in U.S. history.
Unlike Frank, Hochul did not point to cryptocurrency as a factor in the bank’s shuttering over the weekend. She said withdrawals were continuing, making the action necessary.
And the state regulator went even further, saying Signature wasn’t a crypto bank.