The Friday closure of Silicon Valley Bank in Santa Clara, California, put the jobs of both the bank’s and depositors’ workers at risk, threatening the livelihoods of more than 100,000 jobs, according to Y Combinator, a startup accelerator. But action by the federal government Sunday to fully protect all depositors likely staved off part of those losses.
In a petition Saturday addressed to federal financial leaders, Y Combinator CEO and President Garry Tan asked the government to make the small business depositors at Silicon Valley Bank whole “in order to prevent further shock waves through the economy that could lead to financial crisis and layoffs of more than 100,000 workers.” The petition was co-signed by more than 5,000 CEOs and founders, including leaders at Dropbox, Calm and Spire Health, who represented more than 400,000 employees, Y Combinator said.
“In the Y Combinator community, one-third of startups with exposure to SVB used SVB as their sole bank account. As a result, they will fail to have the cash to run payroll in the next 30 days,” Tan wrote. “By that measure, we can estimate that payroll-related furlough or shutdown will impact more than 10,000 small businesses and startups.”
On Monday, the FDIC transferred both insured and uninsured deposits from Silicon Valley Bank to a bridge bank, Silicon Valley Bank, N.A. The concern had been that the FDIC typically only insures deposits of less than $250,000. But the systemic risk exception granted Sunday ensures all depositors will be protected. The government said it would similarly protect the deposits of Signature Bank in New York, New York, which was closed Sunday. The closings of Silicon Valley Bank and Signature Bank are the second-largest and third-largest bank failures in U.S. history.
Meanwhile, workers at Silicon Valley Bank will help run the bank while the FDIC looks for a buyer, said LaJuan Williams-Young, FDIC spokesperson.
“We are not commenting on employee retention,” Williams-Young said.
Reuters reported that the FDIC on Friday offered employees of Silicon Valley Bank 45 days of work at 1.5 times their salary. The FDIC declined to share the letter to employees with HR Dive.