The largest bank run in history
Silicon Valley Bank's customers withdrew $42 billion from their accounts on Thursday. That's $4.2 billion an hour, or more than $1 million per second for ten hours straight.
Why it matters: To put that in context, the previous largest bank run in modern U.S. history took place at Washington Mutual bank in 2008, and totaled $16.7 billion over the course of 10 days. That's a mere trickle in comparison to what was seen at SVB.
The big picture: Almost none of SVB's deposits, by value, were FDIC insured — its customers were overwhelmingly corporations with much more than $250,000 in the bank.
- Until 2012, an obscure Fed program called the Transaction Account Guarantee Program insured such corporate accounts, but that expired when the global financial crisis was deemed to be over.
Between the lines: Silicon Valley is a small, tight-knight place. Most of SVB's customers are just one degree of separation away from a small group of venture capitalists who started making it clear on Thursday that they thought pulling cash from SVB was a smart and prudent move.
- By Friday morning, it was clear that the VCs' friends and clients had listened. The amount of cash left in SVB's coffers, per California's department of financial innovation and protection, was negative, to the tune of $958 million. SVB itself was insolvent.
The bottom line: No bank can withstand that kind of outflow in a single day — especially when a similar-sized outflow was all but certain the following day. That's why SVB is now a ward of the state, desperately hoping to find a buyer before Monday.