What regulators did was to create almost unlimited deposit insurance at the nation’s banks.
Option #1: Concoct a creative rescue for the bank’s numerous depositors with accounts exceeding the $250,000 insurance cap. It’s a group that includes some of the nation’s cutting-edge companies and wealthiest individuals.
So legally speaking, Silicon Valley Bank depositors with more than $250,000 there were in trouble. They were initially warned after the bank was closed by regulators that their funds could be tied up for months in a bank liquidation. Silicon Valley Bank’s uninsured sums were eye-opening. Streaming device maker Roku had $487 million. The bookkeeping service provider Bill Holdings had $300 million. Online gaming’s Roblox had roughly $150 million.
Go back to the 1980s, when the nation’s mortgage-making savings and loans were allowed to linger near death for far too long. It was a regulatory bet that time and deregulation would cure losses. The brokerage’s failure didn’t directly cause the global financial crisis. But the Lehman fallout complicated the monetary mess that become the Great Recession.
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