“In response, social media saw a surge in talk about a run, and uninsured depositors acted quickly to flee,” Fed Vice Chairman of Supervision Michael Barr told Congress this week.
On Thursday, March 9, bank customers pulled $42 billion, according to the Federal Deposit Insurance Corporation. Regulators told Congress this week that on Friday, March 10, depositors attempted to pull an additional $100 billion — nearly all the deposits the bank had left.
During those two days, Twitter lit up with discussion over SVB’s fate. The community that the lender primarily banked — venture capitalists, start-up founders and private equity firms — includes many personalities with sizable social media presences.
As some venture capitalists privately pushed their SVB-banked businesses to pull deposits, the discourse on social media morphed into a real-time exercise of game theory as SVB customers deliberated over whether to withdraw their money. Amid SVB’s collapse, some prominent VCs warned of “DEF CON 1,” as others predicted that regional banks would “be decimated.”
David Andolfatto, a former official with the Federal Reserve Bank of St. Louis, said he is skeptical that social media sped up SVB’s failure. He referred to the famous depiction of a small-town bank run from the 1946 film “It’s a Wonderful Life.”
“People ran very quickly. Most people were around the bank locally,” said Andolfatto, now the chair of the economics department at the University of Miami. “Five steps away from where they work and live — that’s about as fast as you can get to the bank.”
Peter Conti-Brown, a professor of financial regulation at the UPenn’s Wharton business school, also cast doubt on the role of social media in the crisis, saying that SVB failed simply because “it was a bad bank.”
But Conti-Brown said technology did play a role, since digital banking makes it easier than ever to withdraw funds.
“[Silicon Valley Bank] failed with spectacular speed because the technology of bank withdrawals don’t require you to stand in line with high blood pressure to see if your withdrawal would be honored,” Conti-Brown said.
Source: | This article originally belongs to Nbcnews.com
