five facts
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For the past week, government officials and banks have been working furiously to contain the fallout of the Silicon Valley Bank crisis, which has some worried about ripple effects that could impact the banking industry and the economy at large. Here are Five Facts about this historic bank failure and its aftermath.
1. Silicon Valley Bank failed after a run on deposits left it short of cash.
The collapse of Silicon Valley Bank was due to a number of factors, including an overinvestment in U.S. Treasury bonds that devalued as interest rates rose, a large number of tech-focused customers whose deposits were over the $250,000 limit insured by the FDIC, and mobile banking technologies that let customers withdraw their money almost instantaneously. These factors set the stage for a textbook run on the bank that Silicon Valley Bank could not manage on its own.
2. The Silicon Valley Bank collapse is the second-largest bank failure in U.S. history.
Measured by the total amount in assets held by the bank, Silicon Valley Bank is the second-largest bank failure in the history of the country, with the bank holding $209 billion in assets, making it the nation’s 16th-largest bank at the time of collapse.
3. Other regional banks have faced trouble in recent days.
Following the collapse of Silicon Valley Bank, New York-based Signature Bank also failed, while a consortium of major banks like JP Morgan Chase have invested $30 billion bailing out the struggling First Republic Bank. Nationwide, there are roughly 10,000 regional banks and credit unions in operation according to POLITICO.
4. Treasury Secretary Janet Yellen assured lawmakers Thursday that the U.S. banking system remains sound.
Secretary Yellen’s comments before the Senate Finance Committee suggest that the Biden administration is confident that their unorthodox plan to allow the Federal Deposit Insurance Corporation to guarantee the deposits of all customers at Silicon Valley Bank and Signature Bank – despite the fact that 94% of deposits in Silicon Valley Bank were not insured by the FDIC – will keep the fallout from spreading further.
5. Some leading financial executives and banking experts warn that more banks could fail.
In his annual letter to shareholders published this week, BlackRock CEO Larry Fink warned that numerous other regional banks could gradually collapse over a period of time, similar to the savings and loan crisis, where 32% of all savings and loan associations in the United States failed between 1986 and 1995. Likewise, former FDIC head William Isaac said he was certain there would be more bank collapses to come: “There’s going to be more. How many more? I don’t know. How big? I don’t know. Seems to me to be a lot like the 1980s.”
This past weekend, U.S. Rep. Tony Gonzales (R-TX) was formally censured by the Texas Republican Party. Party censure can have a significant impact on a politician’s future prospects for reelection, and it’s not a mechanism deployed lightly. However, in recent years, censuring has become much more common.
Here are Five Facts about Gonzales’ censure and the rise of party censures nationwide.
1. Texas Republicans cited Gonzales’ policy positions as reason for censure.
In the 57-5 vote to censure Gonzales, Texas GOP officials listed a number of areas where Gonzales had broken with party ranks, including his support for bipartisan bills to improve gun safety and protect same-sex and interracial marriage, his opposition to a conservative border security bill, and his vote against the Republican House rules package.
2. Texas GOP censure rules allow the party to withhold financial support for censured members.
Under Gonzales’ censure, the Texas GOP will not provide any financial support for his reelection campaign through the primary election, and in fact will actively discourage Gonzales from running to keep his seat in 2024.
3. 2021 saw a sharp increase in the number of party censures.
Party censures sharply rose in 2021, particularly as state Republican parties targeted members of Congress seen as opposing Donald Trump. However, that year the Arizona Republican Party also censured Gov. Doug Ducey for simply supporting COVID social distancing measures.
4. Both parties have censured politicians in recent years.
While state Republican parties have been responsible for the majority of censures in recent years, Democratic parties have also begun issuing more censures. Notably the Arizona Democratic Party censured U.S. Sen. Kyrsten Sinema (I-AZ) for her support of the filibuster, a move that precipitated Sinema leaving the party and becoming an independent.
5. Censures can be issued at any level of government.
High-profile censures of members of Congress get most of the headlines, but parties are demanding greater loyalty from members at all levels of government. The Ohio Republican Party censured 22 state lawmakers who backed a moderate Democrat for speaker of the House over a more extreme Republican. And in Pennsylvania, the Erie County Democratic Party censured a county official for supporting Republican proposals.