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    How Silicon Valley Bank’s Failure Could Have Spread Far and Wide

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    New research suggests large parts of the country remain vulnerable to widespread bank failure in the event of a run on deposits.WASHINGTON — The federal government’s rescue of two failed banks last month has drawn criticism from some lawmakers and investors, who accuse the Biden administration and the Federal Reserve of bailing out wealthy customers in California and New York and sticking bank customers in Middle America with the bill.But new data help explain why government officials declared the failures of Silicon Valley Bank and Signature Bank to be a risk to not just their customers, but also the entire financial system. The numbers suggest that a run on deposits at those two banks could have set off a cascading series of bank failures, crippling small businesses and economic activity across wide parts of the country.The analysis of geographic risks from a banking crisis, prepared at the request of The New York Times, was done by economists at Stanford University, the University of Southern California, Columbia University and Northwestern University.The results show the continuing potential for widespread damage to the entire banking system, which has seen many banks’ financial positions deteriorate as the Fed has raised interest rates to tame inflation. Those rate increases have reduced the value of some government bonds that many banks hold in their portfolios.Although the damage has so far been contained, the research shows that larger runs on banks vulnerable to rate increases could result in a significant drop in credit available to store owners, home borrowers and more. Because so many counties rely on a relatively small number of financial institutions for deposits and loans, and because so many small businesses keep their money close to home, even a modest run on vulnerable banks could effectively stifle access to credit for entire communities.That sort of credit paralysis, the researchers estimate, could afflict nearly half the counties in Missouri, Tennessee and Mississippi — and every county in Vermont, Maine and Hawaii.The analysis helps buttress the case that government officials were making based on anecdotes and preliminary data they had when they orchestrated the bank rescues during that weekend in March. As fears of a wider financial crisis mounted, the Fed, the Treasury Department and the Federal Deposit Insurance Corporation acted together to ensure depositors could have access to all their money after the banks collapsed — even if their accounts exceeded the $250,000 limit on federally insured deposits. Fed officials also announced they would offer attractive loans to banks that needed help covering depositors’ demands.The moves allowed big companies — like Roku — that kept all their money with Silicon Valley Bank to be fully protected despite the bank’s collapse. That has prompted criticism from lawmakers and analysts who said the government was effectively encouraging risky behavior by bank managers and depositors alike.Even with those moves, the analysts warn, regulators have not permanently addressed the vulnerabilities in the banking system. Those risks leave some of the most economically disadvantaged areas of the country susceptible to banking shocks ranging from a pullback in small-business lending, which may already be underway, to a new depositor run that could effectively cut off easy access to credit for people and companies in counties across the nation.Federal Reserve staff hinted at the risks of a broader banking-related hit to the American economy in minutes from the Fed’s March meeting, which was released on Wednesday. “If banking and financial conditions and their effects on macroeconomic conditions were to deteriorate more than assumed in the baseline,” staff members were reported as saying, “then the risks around the baseline would be skewed to the downside for both economic activity and inflation.”Administration and Fed officials say the actions they took to rescue depositors have stabilized the financial system — including banks that could have been threatened by a depositor run.Lael Brainard, director of President Biden’s National Economic Council, said on Wednesday that banks could learn from the “stresses that the failed banks were under” and were “shoring up their balance sheets.”Drew Angerer/Getty Images“The banking system is very sound — it’s stable,” Lael Brainard, director of President Biden’s National Economic Council, said on Wednesday at an event in Washington hosted by the media outlet Semafor. “The core of the banking system has a great deal of capital.”“What is important is that banks have now seen, bank executives have now seen, some of the stresses that the failed banks were under, and they’re shoring up their balance sheets,” she said.But the researchers behind the new study caution that it is historically difficult for banks to quickly make large changes to their financial holdings. Their data does not account for efforts smaller banks have taken in recent weeks to reduce their exposure to higher interest rates. But the researchers note smaller and regional banks face new risks in the current economic climate, including a downturn in the commercial real estate market, that could set off another run on deposits.“We have to be very careful,” said Amit Seru, an economist at Stanford Graduate School of Business and an author of the study. “These communities are still pretty vulnerable.”Biden administration officials were monitoring a long list of regional banks in the hours after Silicon Valley Bank failed on March 10. They became alarmed when data and anecdotes suggested depositors were lining up to pull money out of many of them.The costs of the rescue they engineered will ultimately be paid by other banks, through a special fee levied by the government.The moves drew criticism, particularly from conservatives. “These losses are borne by the deposit insurance fund,” Senator Bill Hagerty, Republican of Tennessee, said in a recent Banking Committee hearing on the rescues. “That fund is going to be replenished by banks across the nation that had nothing to do with the mismanagement of Silicon Valley Bank or the failure of supervision here.”Senator Josh Hawley, Republican of Missouri, wrote on Twitter that he would try to block banks from passing on the special fee to consumers. “No way MO customers are paying for a woke bailout,” he said.The researchers found Silicon Valley Bank was more exposed than most banks to the risks of a rapid increase in interest rates, which reduced the value of securities like Treasury bills that it held in its portfolios and set the stage for insolvency when depositors rushed to pull their money from the bank.But using federal regulator data from 2022, the team also found hundreds of U.S. banks had dangerous amounts of deterioration in their balance sheets over the past year as the Fed rapidly raised rates.To map the vulnerabilities of smaller banks across the country, the researchers calculated how much the Fed’s interest rate increases have reduced the value of the asset holdings for individual banks, compared with the value of its deposits. They used that data to effectively estimate the risk of a bank failing in the event of a run on its deposits, which would force bank officials to sell undervalued assets to raise money. Then they calculated the share of banks at risk of failure for every county in the country.Those banks are disproportionately located in low-income communities, areas with high shares of Black and Hispanic populations and places where few residents hold a college degree.They are also the economic backbone of some of the nation’s most conservative states: Two-thirds of the counties in Texas and four-fifths of the counties in West Virginia could have a paralyzing number of their banks go under in the event of even a medium-sized run on deposits, the researchers calculate.In counties across the country, smaller banks are crucial engines of economic activity. In 95 percent of counties, Goldman Sachs researchers recently estimated, at least 70 percent of small business lending comes from smaller and regional banks. Those banks, the Goldman researchers warned, are pulling back on lending “disproportionately” in the wake of the Silicon Valley Bank collapse.Analysts will get new indications of the degree to which banks are moving quickly to pull back on lending and building up capital when three large financial institutions report quarterly earnings on Friday: Citigroup, JPMorgan Chase and Wells Fargo.Mr. Seru of Stanford said the communities that were particularly vulnerable to both a lending slowdown and a potential regional bank run were also the ones that suffered most in the pandemic recession. He said larger financial institutions were unlikely to quickly fill any lending vacuum in those communities if smaller banks failed.Mr. Seru and his colleagues have urged the government to help address those communities’ vulnerabilities by requiring banks to raise more capital to shore up their balance sheets.“The recovery in these neighborhoods is still not there yet,” he said. “And the last thing we want is disruption there.” More

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    How AI and DNA Are Unlocking the Mysteries of Global Supply Chains

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    At a cotton gin in the San Joaquin Valley, in California, a boxy machine helps to spray a fine mist containing billions of molecules of DNA onto freshly cleaned Pima cotton.That DNA will act as a kind of minuscule bar code, nestling amid the puffy fibers as they are shuttled to factories in India. There, the cotton will be spun into yarn and woven into bedsheets, before landing on the shelves of Costco stores in the United States. At any time, Costco can test for the DNA’s presence to ensure that its American-grown cotton hasn’t been replaced with cheaper materials — like cotton from the Xinjiang region of China, which is banned in the United States because of its ties to forced labor.Amid growing concern about opacity and abuses in global supply chains, companies and government officials are increasingly turning to technologies like DNA tracking, artificial intelligence and blockchains to try to trace raw materials from the source to the store.Companies in the United States are now subject to new rules that require firms to prove their goods are made without forced labor, or face having them seized at the border. U.S. customs officials said in March that they had already detained nearly a billion dollars’ worth of shipments coming into the United States that were suspected of having some ties to Xinjiang. Products from the region have been banned since last June.Customers are also demanding proof that expensive, high-end products — like conflict-free diamonds, organic cotton, sushi-grade tuna or Manuka honey — are genuine, and produced in ethically and environmentally sustainable ways.That has forced a new reality on companies that have long relied on a tangle of global factories to source their goods. More than ever before, companies must be able to explain where their products really come from.A technician at Applied DNA Sciences testing samples to trace the raw materials.Johnny Milano for The New York TimesCotton samples that are being processed at the lab.Johnny Milano for The New York TimesThe task may seem straightforward, but it can be surprisingly tricky. That’s because the international supply chains that companies have built in recent decades to cut costs and diversify their product offerings have grown astonishingly complex. Since 2000, the value of intermediate goods used to make products that are traded internationally has tripled, driven partly by China’s booming factories.A large, multinational company may buy parts, materials or services from thousands of suppliers around the world. One of the largest such companies, Procter & Gamble, which owns brands like Tide, Crest and Pampers, has nearly 50,000 direct suppliers. Each of those suppliers may, in turn, rely on hundreds of other companies for the parts used to make its product — and so on, for many levels up the supply chain.To make a pair of jeans, for example, various companies must farm and clean cotton, spin it into thread, dye it, weave it into fabric, cut the fabric into patterns and stitch the jeans together. Other webs of companies mine, smelt or process the brass, nickel or aluminum that is crafted into the zipper, or make the chemicals that are used to manufacture synthetic indigo dye.“Supply chains are like a bowl of spaghetti,” said James McGregor, the chairman of the greater China region for APCO Worldwide, an advisory firm. “They get mixed all over. You don’t know where that stuff comes from.”Harvesting cotton in Xinjiang. Cotton from the region in China is banned in the United States because of its ties to forced labor.Getty ImagesGiven these challenges, some companies are turning to alternative methods, not all proven, to try to inspect their supply chains.Some companies — like the one that sprays the DNA mist onto cotton, Applied DNA Sciences — are using scientific processes to tag or test a physical attribute of the good itself, to figure out where it has traveled on its path from factories to consumer.Applied DNA has used its synthetic DNA tags, each just a billionth of the size of a grain of sugar, to track microcircuits produced for the Department of Defense, trace cannabis supply chains to ensure the product’s purity and even to mist robbers in Sweden who attempted to steal cash from A.T.M.s, leading to multiple arrests.MeiLin Wan, the vice president for textiles at Applied DNA, said the new regulations were creating a “tipping point for real transparency.”“There definitely is a lot more interest,” she added.The cotton industry was one of the earliest adopters of tracing technologies, in part because of previous transgressions. In the mid-2010s, Target, Walmart and Bed Bath & Beyond faced expensive product recalls or lawsuits after the “Egyptian cotton” sheets they sold turned out to have been made with cotton from elsewhere. A New York Times investigation last year documented that the “organic cotton” industry was also rife with fraud.In addition to the DNA mist it applies as a marker, Applied DNA can figure out where cotton comes from by sequencing the DNA of the cotton itself, or analyzing its isotopes, which are variations in the carbon, oxygen and hydrogen atoms in the cotton. Differences in rainfall, latitude, temperature and soil conditions mean these atoms vary slightly across regions of the world, allowing researchers to map where the cotton in a pair of socks or bath towel has come from.Other companies are turning to digital technology to map supply chains, by creating and analyzing complex databases of corporate ownership and trade.Farmers in India auction their cotton.Saumya Khandelwal for The New York TimesSome firms, for example, are using blockchain technology to create a digital token for every product that a factory produces. As that product — a can of caviar, say, or a batch of coffee — moves through the supply chain, its digital twin gets encoded with information about how it has been transported and processed, providing a transparent log for companies and consumers.Other companies are using databases or artificial intelligence to comb through vast supplier networks for distant links to banned entities, or to detect unusual trade patterns that indicate fraud — investigations that could take years to carry out without computing power.Sayari, a corporate risk intelligence provider that has developed a platform combining data from billions of public records issued globally, is one of those companies. The service is now used by U.S. customs agents as well as private companies. On a recent Tuesday, Jessica Abell, the vice president of solutions at Sayari, ran the supplier list of a major U.S. retailer through the platform and watched as dozens of tiny red flags appeared next to the names of distant companies.“We’re flagging not only the Chinese companies that are in Xinjiang, but then we’re also automatically exploring their commercial networks and flagging the companies that are directly connected to it,” Ms. Abell said. It is up to the companies to decide what, if anything, to do about their exposure.Studies have found that most companies have surprisingly little visibility into the upper reaches of their supply chains, because they lack either the resources or the incentives to investigate. In a 2022 survey by McKinsey & Company, 45 percent of respondents said they had no visibility at all into their supply chain beyond their immediate suppliers.But staying in the dark is no longer feasible for companies, particularly those in the United States, after the congressionally imposed ban on importing products from Xinjiang — where 100,000 ethnic minorities are presumed by the U.S. government to be working in conditions of forced labor — went into effect last year.Uyghur workers at a garment factory in the Xinjiang region of China in 2019.Gilles Sabrie for The New York TimesXinjiang’s links to certain products are already well known. Experts have estimated that roughly one in five cotton garments sold globally contains cotton or yarn from Xinjiang. The region is also responsible for more than 40 percent of the world’s polysilicon, which is used in solar panels, and a quarter of its tomato paste.But other industries, like cars, vinyl flooring and aluminum, also appear to have connections to suppliers in the region and are coming under more scrutiny from regulators.Having a full picture of their supply chains can offer companies other benefits, like helping them recall faulty products or reduce costs. The information is increasingly needed to estimate how much carbon dioxide is actually emitted in the production of a good, or to satisfy other government rules that require products to be sourced from particular places — such as the Biden administration’s new rules on electric vehicle tax credits.Executives at these technology companies say they envision a future, perhaps within the next decade, in which most supply chains are fully traceable, an outgrowth of both tougher government regulations and the wider adoption of technologies.“It’s eminently doable,” said Leonardo Bonanni, the chief executive of Sourcemap, which has helped companies like the chocolate maker Mars map out their supply chains. “If you want access to the U.S. market for your goods, it’s a small price to pay, frankly.”Others express skepticism about the limitations of these technologies, including their cost. While Applied DNA’s technology, for example, adds only 5 to 7 cents to the price of a finished piece of apparel, that may be significant for retailers competing on thin margins.And some express concerns about accuracy, including, for example, databases that may flag companies incorrectly. Investigators still need to be on the ground locally, they say, speaking with workers and remaining alert for signs of forced or child labor that may not show up in digital records.Justin Dillon, the chief executive of FRDM, a nonprofit organization dedicated to ending forced labor, said there was “a lot of angst, a lot of confusion” among companies trying to satisfy the government’s new requirements.Importers are “looking for boxes to check,” he said. “And transparency in supply chains is as much an art as it is a science. It’s kind of never done.” More

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    How a Trump-Era Rollback Mattered for Silicon Valley Bank’s Demise

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    An under-the-radar change to the way regional banks are supervised may have helped the bank’s rapidly growing risks to go unresolved.WASHINGTON — Silicon Valley Bank was growing steadily in 2018 and 2019 — and supervisors at its primary overseer, the Federal Reserve Bank of San Francisco, were preparing it for a stricter oversight group, one in which specialists from around the Fed system would vet its risks and point out weak spots.But a decision from officials in Washington halted that move.The Federal Reserve Board — which sets the Fed’s standards for banking regulation — was in the process of putting into effect a bipartisan 2018 law that aimed to make regulation less onerous for small and midsize banks. As the board did that, Randal K. Quarles, the Trump-appointed vice chair for supervision, and his colleagues also chose to recalibrate how banks were supervised in line with the new requirements.As a result, Silicon Valley Bank’s move to the more rigorous oversight group would be delayed. The bank would previously have advanced to the Large and Foreign Bank Organization group after its assets had averaged more than $50 billion for a year; now, that shift would not come until it consistently averaged more than $100 billion in assets.The change proved fateful. Silicon Valley Bank did not fully move to the stronger oversight group until late 2021. Its assets had nearly doubled over the course of that year, to about $200 billion, by the time it came under more intense supervision.By that point, many of the issues that would cause its demise had already begun festering. Those included a customer base heavily dependent on the success of the technology industry, an unusually large share of deposits above the $250,000 limit that the government insures in the event of a bank collapse and an executive team that paid little attention to risk management.Those weak spots appear to have gone unresolved when Silicon Valley Bank was being overseen the way that small and regional banks are: by a small team of supervisors who were in some cases generalists.When the bank finally entered more sophisticated supervision for big banks in late 2021, putting it under the purview of a bigger team of specialist bank overseers with input from around the Fed system, it was immediately issued six citations. Those flagged various problems, including how it was managing its ability to raise cash quickly in times of trouble. By the next summer, its management was rated deficient, and by early 2023, intense scrutiny of the bank had stretched to the Fed’s highest reaches.Big questions remain about why supervisors didn’t do more to ensure that shortcomings were addressed once they became alarmed enough to begin issuing citations. The Fed is conducting an internal investigation of what happened, with results expected on May 1.Michael Barr, the Fed’s vice chair for supervision, told lawmakers this week that by the time Silicon Valley Bank came under intense oversight and problems were fully recognized, “in a sense, it was already very late in the process.”Shuran Huang for The New York TimesBut the picture that is emerging is one in which a slow reaction in 2022 was not the sole problem: Silicon Valley Bank’s difficulties also appear to have come to the fore too late to fix them easily, in part because of the Trump-era rollbacks. By deciding to move banks into large-bank oversight much later, Mr. Quarles and his colleagues had created a system that treated even sizable and rapidly ballooning banks with a light touch when it came to how aggressively they were monitored.That has caught the attention of officials from the Fed and the White House as they sort through the fallout left by Silicon Valley Bank’s collapse on March 10 and ask what lessons should be learned.“The way the Federal Reserve’s regulation set up the structure for approach to supervision treated firms in the $50 to $100 billion range with lower levels of requirements,” Michael Barr, the Fed’s vice chair for supervision, told lawmakers this week. By the time Silicon Valley Bank’s problems were fully recognized, he said, “in a sense, it was already very late in the process.”About five people were supervising Silicon Valley Bank in the years before its move up to big-bank oversight, according to a person familiar with the matter. The bank was subject to quarterly reviews, and its overseers could choose to put it through horizontal reviews — thorough check-ins that test for a particular weakness by comparing a bank with firms of similar size. But those would not have been a standard part of its oversight, based on the way the Fed runs supervision for small and regional banks.As the bank grew and moved up to large-bank oversight, the size of the supervisory team dedicated to it swelled. By the time it failed, about 20 people were working on Silicon Valley Bank’s supervision, Mr. Barr said this week. It had been put through horizontal reviews, which had flagged serious risks.But such warnings often take time to translate into action. Although the bank’s overseers started pointing out big issues in late 2021, banks typically get leeway to fix problems before they are penalized.“One of the defining features of supervision is that it is an iterative process,” said Kathryn Judge, a financial regulation expert at Columbia Law School.The Fed’s response to the problems at Silicon Valley Bank seemed to be halting even after it recognized risks. Surprisingly, the firm was given a satisfactory liquidity rating in early 2022, after regulators had begun flagging problems, Mr. Barr acknowledged this week. Several people familiar with how supervising operates found that unusual.“We’re trying to understand how that is consistent with the other material,” Mr. Barr said this week. “The question is, why wasn’t that escalated and why wasn’t further action taken?”Yet the high liquidity rating could also tie back to the bank’s delayed move to the large bank supervision group. Bank supervisors sometimes treat a bank more gently during its first year of tougher oversight, one person said, as it adjusts to more onerous regulator attention.There was also turmoil in the San Francisco Fed’s supervisory ranks around the time that Silicon Valley Bank’s risks were growing.Aaron Wojack for The New York TimesThere was also turmoil in the San Francisco Fed’s supervisory ranks around the time that Silicon Valley Bank’s risks were growing. Mary Daly, the president of the reserve bank, had called a meeting in 2019 with a number of the bank supervisory group’s leaders to insist that they work on improving employee satisfaction scores, according to people with knowledge of the event. The meeting was previously reported by Bloomberg.Of all the San Francisco Fed employees, bank supervisors had the lowest satisfaction ratings, with employees reporting that they might face retribution if they spoke out or had different opinions, according to one person.Several supervision officials departed in the following years, retiring or leaving for other reasons. As a result, relatively new managers were at the wheel as Silicon Valley Bank’s risks grew and became clearer.It’s hard to assess whether supervisors in San Francisco — and staff members at the Fed board, who would have been involved in rating Silicon Valley Bank — were unusually slow to respond to the bank’s problems given the secrecy surrounding bank oversight, Ms. Judge said.“We don’t have a baseline,” she said.Even as the Fed tries to understand why problems were not addressed more promptly, the fact that Silicon Valley Bank remained under less rigorous oversight that may not have tested for its specific weaknesses until relatively late in the game is increasingly in focus.“The Federal Reserve system of supervision and regulation is based on a tailored approach,” Mr. Barr said this week. “That framework, which really focuses on asset size, is not sensitive to the kinds of problems we saw here with respect to rapid growth and a concentrated business model.”Plus, the 2018 law and the Fed’s implementation of it probably affected Silicon Valley Bank’s oversight in other ways. The Fed would probably have begun administering full stress tests on the bank earlier without the changes, and the bank might have had to shore up its ability to raise money in a pinch to comply with the “liquidity coverage ratio,” some research has suggested.The White House called on Thursday for regulators to consider reinstating stronger rules for banks with assets of $100 billion to $250 billion. And the Fed is both re-examining the size cutoffs for stricter bank oversight and working on ways to test for “novel” risks that may not tie back cleanly to size, Mr. Barr said this week.But Mr. Quarles, who carried out the tailoring of the 2018 bank rule, has insisted that the bank’s collapse was not the result of changes that the law required or that he chose to make. Even the simplest rung of supervision should have caught the obvious problems that killed Silicon Valley Bank, he said, including a lack of protection against rising interest rates.“It was the simplest risk imaginable,” he said in interview. More

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    SVB Hearing Takeaways: Bank Failures Spur a Blame Game, But Few Solutions

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    Federal regulators faced more than two hours of intense questioning from lawmakers on Tuesday about what caused the failures of Silicon Valley Bank and Signature Bank, the red flags that went unheeded and the steps that must be taken to avoid future collapses that could rattle the United States financial system.There was bipartisan concern about the state of the nation’s banks that in many cases blurred the usual party lines, where Democrats want more strict oversight and Republicans call for looser regulations. But there was also a substantial amount of buck-passing and finger pointing as the officials from the Federal Reserve, the Federal Deposit Insurance Corporation and the Treasury Department sought to make sense of the second largest bank failure in American history.The hearing — featuring Michael S. Barr, the Federal Reserve’s vice chair for supervision, Martin Gruenberg, chair of the Federal Deposit Insurance Corporation and Nellie Liang, the Treasury’s under secretary for domestic finance — marked the beginning of what will be an extended inquiry by Congress and the regulators themselves into what went wrong.Regulators blamed the banks.From the outset, the regulators made clear what they believed to be the primary reason that Silicon Valley Bank failed: It was poorly managed and allowed risks to build up to the point that the bank collapsed.Mr. Barr said in his testimony that “SVB’s failure is a textbook case of mismanagement.” He added that Fed officials flagged problems to the bank as far back as November 2021, but the bank failed to deal with them.Punishment for executives is on the table.Lawmakers remained intent on ensuring that the executives of the banks are punished if they did anything improper leading up to the failures. They also expressed particular concern about last minute stock sales by Silicon Valley Bank officials.Regulators said that they were limited in their power to claw back compensation but that they can impose financial and other penalties if their continuing investigation finds wrongdoing.Regulators blamed Silicon Valley Bank’s collapse on poor management during more than two hours of questioning, Kenny Holston/The New York TimesThe Fed could have done more.The Federal Reserve is under particular scrutiny regarding when it knew that things were amiss at SVB.Even though Fed supervisors had flagged weaknesses at SVB as far back as 2021, Mr. Barr said he first learned of SVB’s problems last month — suggesting it took a long time for concerns to be escalated to the Fed board and its vice chair of supervision.Mr. Barr said that the Federal Reserve officials will be discussing any potential missed warning signs in their internal review and that “we expect to be held accountable.”Regulators say they need more authority.All three regulators said that they believed that financial regulations needed to be tightened following the recent stress in the banking sector.Mr. Barr pointed to Federal Reserve regulations, which were enacted during the Trump administration in 2019, that exempted Silicon Valley Bank from being stress tested and suggested that those need to be revisited.Some Democrats on the committee emphasized the notion that deregulation left agencies without the tools they needed to address issues at smaller banks.What’s next?The House Financial Services Committee will hold its own hearing on Wednesday, and question the same officials.Reviews by the F.D.I.C. and the Fed are expected to be completed by May 1 and members of the Senate committee from both parties suggested they’d be interested in hearing from regulators after those inquiries are concluded.There is also an ongoing debate about raising the bank deposit insurance cap from $250,000 and imposing stiffer penalties on executives at banks that fail.Lawmakers have also asked the Government Accountability Office to study the effectiveness of the bank supervisory regime and make recommendations for changes. But it’s not clear whether any suggested changes would have enough bipartisan support to overcome a divided Congress. More

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    How Far Can Regulators Go to Protect Uninsured Deposits?

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    A decision by federal regulators to ensure that depositors at Silicon Valley Bank and Signature Bank did not lose money regardless of how much they had in their accounts, has aroused populist anger as well as questions of what government agencies can and cannot do to protect uninsured accounts.Under current law, the government insures bank deposits only up to $250,000. Any increase in that limit would require congressional authorization. But regulators can protect deposits over that amount, like they did at Silicon Valley Bank and Signature Bank, if they determine that the banks’ failures pose a systemic risk.They can also request approval from Congress to temporarily raise the cap or eliminate it altogether, though some lawmakers have already expressed unwillingness to do so.Janet L. Yellen, the Treasury secretary, suggested last week that regulators were ready to make uninsured depositors at other banks whole if necessary and “if smaller institutions suffer deposit runs that pose the risk of contagion.”Amid widespread bank failures in the Great Depression, Congress created the Federal Deposit Insurance Corporation in 1933 to insure deposits under $2,500. It has increased that limit over the years, recently lifting it to $250,000 from $100,000 for IRAs in 2006 and for checking accounts in 2008. The Dodd-Frank Act of 2010 made the increase permanent.In the wake of the 2008 financial crisis, the F.D.I.C. evoked the systemic risk exception to create a program that guaranteed new debt issued by banks for three years and insured all deposits if they did not bear interest (typically, accounts used by businesses for payroll).The decision to grant the exception was reached “after three days of intense negotiation,” according to an account of the episode by the F.D.I.C.’s historian, and had to be approved by the Treasury secretary in consultation with the president and two-thirds of the boards of both the F.D.I.C. and the Federal Reserve.But regulators no longer have the ability to create such a program unilaterally, as the Dodd-Frank Act eliminated the F.D.I.C.’s authority to temporarily insure accounts with more assets than the statutory limit. Under that law, the agency can only do so if it is the receiver of a failed bank or if it has approval from Congress.“Congress was so concerned with moral hazard and ‘bailouts’ that it seemed to limit the receipt of F.D.I.C. assistance to the imposition of an F.D.I.C. receivership, unless Congress specifically approved a subsequent F.D.I.C. alternative,” said Jeffrey N. Gordon, a law professor at Columbia University and expert on financial regulation.During the coronavirus pandemic, Congress in 2020 temporarily lifted the deposit limit on noninterest bearing accounts. But in congressional testimony last week, Ms. Yellen said her agency was not seeking to lift the cap altogether and insure all deposits over $250,000. Rather, she said, regulators would seek the systemic risk exception for failed banks through a “case-by-case determination.”Others, though, have pushed for more sweeping coverage. Some lawmakers are considering temporarily increasing the deposit cap while others have proposed eliminating it altogether.The Dodd-Frank Act provides a fast-track process for such requests, allowing the Congress to expedite approval by adopting a joint resolution. Sheila Blair, the former president of the F.D.I.C. during the financial crisis, recently urged Congress to initiate the procedure.“We want people to make payroll. We want people to be able to pay their businesses and others to pay their bills. So I think that is one area where unlimited coverage, at least on a temporary basis, makes a lot of sense,” she said in a Washington Post event last week.News reports have also suggested that regulators are looking at other mechanisms of acting without Congress, specifically by tapping into the Exchange Stabilization Fund. The Treasury secretary has broad authority to use the emergency reserve, which was created in 1934 to stabilize the value of the dollar but has been used over the years for a host of other purposes.Mr. Gordon noted that using the exchange fund alone would not work to protect uninsured deposits, given that it is “paltry compared to the Deposit Insurance Fund and unlike the D.I.F. has no mechanism for replenishment.” But he said it would be possible to use the fund as a backstop in a program operated by the Federal Reserve that lends against bank assets.“What this means is that banks would have an easy way to raise cash to pay off all deposits,” he said. More

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    Silicon Valley Bank’s Risks Went Deep. Congress Wants to Know Why.

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    Lapses at the bank will be a focus as a top Federal Reserve official testifies to House and Senate committees this week.WASHINGTON — The nation’s top financial regulators will face a grilling from lawmakers on Tuesday over the collapse of Silicon Valley Bank as they push to understand why the firm was allowed to grow so rapidly and build up so much risk that it failed, requiring a government rescue for depositors and sending shock waves across global markets.Michael S. Barr, the Federal Reserve’s vice chair for supervision, will testify before the Senate Banking Committee on Tuesday alongside Martin Gruenberg, chair of the Federal Deposit Insurance Corporation, and Nellie Liang, the Treasury’s under secretary for domestic finance. The same officials are set to testify before the House Financial Services Committee on Wednesday.Lawmakers are expected to focus on what went wrong. The picture that has emerged so far is of a bank that grew ravenously and ran itself more like a start-up than a 40-year-old lender. The bank took in a large share of big — and uninsured — depositors even as it used its assets to double down on a bet that interest rates would stay low.Instead, the Fed raised rates sharply to slow rapid inflation, reducing the market value of Silicon Valley Bank’s large holdings of longer-term bonds and making them less attractive as new securities offered higher returns. When SVB sold some of its holdings to shore up its balance sheet, it incurred big losses.That spooked its customers, many of whom had deposits far above the $250,000 limit on what the government would guarantee in the event the bank failed. They raced to pull their money out, and the bank collapsed on March 10.The question is why supervisors at the Fed failed to stop the bank from making dangerous mistakes that seem obvious in hindsight. And the answer is important: If the Fed missed the problems because of widespread flaws in the ways banks are overseen and regulated, it could mean other weak spots in the industry are slipping through the cracks.Here is a rundown of what is already known, and where lawmakers could push for firmer answers this week.As Silicon Valley Bank grew, the Fed found problems.Silicon Valley Bank went to just above $115 billion in assets at the end of 2020 from $71 billion at the end of 2019. That growth catapulted it to a new level of oversight at the Fed by late 2021 — into the purview the Large and Foreign Banking Organization group.That group includes a mix of staff members from the Fed’s regional reserve banks and its Board of Governors in Washington. Banks that are large enough to fall under its remit get more scrutiny than smaller organizations.Silicon Valley Bank would most likely have moved to that more onerous oversight rung at least a couple of years earlier had it not been for a watering-down of rules that the Fed carried out under Randal K. Quarles, who was its supervisory vice chair during the Trump administration.By the time the bank had come under intense scrutiny, problems had already started: Fed officials found big issues in their first sweeping review.Supervisors promptly issued six citations — called matters requiring attention or matters requiring immediate attention — that amounted to a warning that SVB was doing a faulty job of managing its ability to raise cash in a pinch if needed.It is not clear precisely what those citations said, because the Fed has not released them. By the time the bank went through a full supervisory review in 2022, supervisors were seeing glimmers of progress on the issues, a person familiar with the matter said.Michael S. Barr, the Federal Reserve’s vice chair for supervision, is scheduled to testify at the hearings.Alex Wong/Getty ImagesSilicon Valley Bank was given a ‘satisfactory’ rating despite its issues.Perhaps in part because of that progress, SVB’s liquidity — its ability to come up with money quickly in the face of trouble — was rated satisfactory last year.Around that time, bank management was intensifying its bet that rates would stop climbing. SVB had been maintaining protection against rising rates on a sliver of its bond portfolio — but began to drop even those in early 2022, booking millions in profits by selling off the protection. According to a company presentation, SVB was newly focused on a scenario in which borrowing costs fell.That was a bad call. The Fed raised interest rates at the fastest pace since the 1980s last year as it tried to control rapid inflation — and Silicon Valley Bank was suddenly staring down huge losses.The bank’s demise set off cascading concerns.By mid-2022, Fed supervisors had focused a skeptical eye on SVB’s management, and it was barred from growing by buying other institutions. But by the time Fed officials had reviewed the bank’s liquidity fully again in 2023, its problems had turned crippling.SVB had been borrowing heavily from the Federal Home Loan Bank of San Francisco for months to raise cash. On March 8, the bank announced that it would need to raise capital after selling its bond portfolio at a loss.On March 9, customers tried to pull $42 billion from SVB in one day — the fastest bank run in history — and it had to scramble to tap the Fed’s backup funding source, the discount window. What loans it could get in exchange for its assets were not enough. On March 10, it failed.That only started the problems for the broader banking system. Uninsured depositors at other banks began to nervously eye their own institutions. On March 12 — a Sunday evening — regulators announced that they were closing another firm, Signature Bank.To forestall a nationwide bank run, regulators said they would make sure even the failed banks’ big depositors were paid back in full, and the Fed opened a new program to help banks get cash in a pinch.But that did not immediately stem the bleeding: Fed data showed that bank deposits fell by $98 billion to $17.5 trillion in the week that ended March 15, the biggest decline in nearly a year. But even those numbers hid a trend playing out under the surface: People moved their money away from smaller banks to banking giants that they thought were less likely to fail.Deposits at small banks dropped by $120 billion, while those at the 25 largest banks shot up by about $67 billion. Government officials have said those flows have abated.As customers and investors began to probe for weak spots in the financial system, other banks found themselves in tumult — including Credit Suisse in Switzerland, which was taken over, and First Republic, which took a capital injection from other banks.Lawmakers from both parties want answers.“It is concerning that Federal Reserve staff did not intervene in a timely manner and use the powerful supervisory and enforcement tools available to prevent the firm’s failure and subsequent market uncertainty,” Republicans on the House Financial Services Committee wrote in a letter released Friday.Senator Rick Scott, Republican of Florida, and Senator Elizabeth Warren, Democrat of Massachusetts, have introduced legislation to require a presidentially appointed and Senate-confirmed inspector general at the Fed and the Consumer Financial Protection Bureau. The Fed already has an internal watchdog, but this one would be appointed by the president.Recent bank failures “serve as a clear reminder that banks cannot be left to supervise themselves,” Ms. Warren warned. She has also pushed for an inspector general review of what went wrong with Silicon Valley Bank.Congress wants to know whom to blame.Much of the focus in recent weeks has been on who at the Fed is to blame. Mr. Barr started in his role midway through 2022, so he has mostly been left out of the finger-pointing.Some have pointed to Mary C. Daly, president of the Federal Reserve Bank of San Francisco. Presidents of regional Fed banks typically do not play a leading role in bank oversight, though they can flag gaping problems to the Federal Reserve Board in extreme cases.Others have pointed to Mr. Barr’s predecessor, Mr. Quarles, who left his supervisory vice chair post in October 2021. Mr. Quarles helped to roll back regulations, and people familiar with his time at the Fed have said his tone when it came to supervision — which he thought should be more transparent and predictable — led many bank overseers to take a less strict approach.And some critics have suggested that Jerome H. Powell, the Fed chair, helped to enable the problems by voting for Mr. Quarles’s deregulatory changes in 2018 and 2019.An internal Fed review of what went awry is set for release on May 1. And the central bank has expressed an openness to an outside inquiry.“It’s 100 percent certainty that there will be independent investigations and outside investigations and all that,” Mr. Powell said at news conference last week. “Of course we welcome that.” More

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    Fed Vice Chair Calls Silicon Valley Bank a ‘Textbook Case of Mismanagement’

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    The Federal Reserve’s top bank cop blamed Silicon Valley Bank’s leaders, while previewing the cental bank’s review of its faulty oversight.WASHINGTON — The Federal Reserve’s vice chair for supervision blamed Silicon Valley Bank’s demise on poor internal management and excessive risk-taking and detailed the steps that Fed supervisors took to address the snowballing problems that ultimately killed the company, according to prepared remarks ahead of a congressional hearing on Tuesday.The vice chair, Michael Barr, who will appear at a Senate Banking Committee hearing along with other regulators, also acknowledged in his written testimony that bank supervision and regulation might need to change in the wake of the collapse.Silicon Valley Bank’s collapse this month sent shock-waves across the global banking system, prompting many depositors to pull their cash out of regional and smaller banks over concerns they could lose their money. The tumult prompted a sweeping response from the government, which pledged to make sure that even big and uninsured depositors at Silicon Valley Bank and another failed bank — Signature — were paid back. The Fed itself set up an emergency lending program to help banks who needed to raise cash in a pinch.But as the upheaval shows tentative signs of calming, lawmakers are demanding to know what went wrong.Mr. Barr will testify alongside Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation, and Nellie Liang, the Treasury’s under secretary for domestic finance.Mr. Gruenberg suggested in his prepared remarks, which were also released on Monday afternoon, that the F.D.I.C. would review both its oversight of Signature bank and the suitability of America’s deposit insurance system — including coverage levels, which now cap at $250,000 — in the wake of the debacle. The F.D.I.C. will release the results of its review by May 1.Silicon Valley Bank’s collapse sent shock-waves across the global banking system, prompting many depositors to pull their cash out of regional and smaller banks.Ian C. Bates for The New York TimesThe Fed was Silicon Valley Bank’s primary regulator, and it too was reviewing why it had failed to stop risks that were in plain sight. Silicon Valley Bank had grown rapidly. Its depositors were heavily concentrated in the volatile technology industry. Many of them had more than $250,000 in their accounts, meaning that their deposits were past the federal insurance limit and that they were more prone to run at the first sign of trouble. The bank’s leaders had made a bad bet that interest rates would stabilize or fall, and the bank faced big losses when rates instead rose in 2022.Mr. Barr was expected to face questions about why those glaring issues had not been stopped — and he laid out an early defense in his speech text.“SVB’s failure is a textbook case of mismanagement,” he said, while adding that the “failure demands a thorough review of what happened, including the Federal Reserve’s oversight of the bank.”He noted that Fed supervisors spotted a range of problems in late 2021 and throughout 2022, even rating the bank’s management as deficient, which barred it from growing by acquiring other companies. And he said that supervisors told board officials in mid-February that they were actively engaged with SVB on its interest rate risk.“As it turned out, the full extent of the bank’s vulnerability was not apparent until the unexpected bank run on March 9,” Mr. Barr added. “In our review, we are focusing on whether the Federal Reserve’s supervision was appropriate for the rapid growth and vulnerabilities of the bank.”Yet Mr. Barr was also likely to face questions — especially from Democrats — about whether changes to Fed regulation and supervision in recent years could have paved the way for the implosion. Congress passed a law that made midsize bank oversight less onerous in 2018, and Mr. Barr’s predecessor, Randal K. Quarles, an appointee of President Donald J. Trump, had carried out and in some cases built upon those changes in 2019.Mr. Barr, a Biden appointee, started in his role in mid-2022. He has been carrying out what the Fed calls a “holistic review” of bank capital standards, but that has yet to be completed.And questions could arise about issues that Mr. Barr did not address in his remarks. For instance, while he pointed out that supervisors were aware of risks at Silicon Valley Bank, he did not note that the group of Fed Board staff members and supervisors overseeing the bank gave it a satisfactory rating when it came to liquidity in 2022 — even after a range of problems, including some with liquidity risk management, had already been flagged.Mr. Barr did suggest that the Fed’s internal review, which he is leading and is set to conclude by May 1, was assessing whether supervisors could “distinguish risks that pose a material threat to a bank’s safety and soundness” and whether “supervisors have the tools to mitigate threats.”But that may be too little to satisfy lawmakers, many of whom are calling for an independent review of what went wrong. Several had sent letters to the Fed requesting a thorough release of materials related to how Silicon Valley Bank was overseen.Ms. Liang said in prepared remarks that the Biden administration was closely monitoring the banking sector and the broader financial system for signs of weakness and defended the handling of the bank failures.“These actions have helped to stabilize deposits throughout the country and provided depositors with confidence that their funds are safe,” she said.Echoing remarks made by Treasury Secretary Janet L. Yellen last week, Ms. Liang indicated that the Biden administration was prepared to take additional actions.“They are tools we would use again if warranted to ensure that Americans’ deposits are safe,” she said.Mr. Gruenberg suggested that the widespread problems caused by the failure of two banks that were not considered systemic under existing regulatory rules indicated that regulators needed to pay more attention to banks of their size.“Given the financial stability risks caused by the two failed banks, the methods for planning and carrying out a resolution of banks with assets of $100 billion or more also merit special attention,” he said.He said the F.D.I.C. had already begun investigating how senior leaders at both banks contributed to losses through bad management, adding, in what seemed like a roundabout reference to President Biden’s call for new legislation on clawbacks from failed bank executives’ stock sales, that the regulator had the power to hold individual executives accountable.Mr. Gruenberg also seemed to nod to community bank lobbyists’ recent protesting of having to pay for making uninsured depositors at Signature and Silicon Valley Bank whole by participating in a special assessment by the F.D.I.C. to replenish the deposit insurance fund.“The law provides the F.D.I.C. authority, in implementing the assessment, to consider ‘the types of entities that benefit from any action taken or assistance provided,’” Mr. Gruenberg said. 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    Powell and Yellen Suggest Need to Review Regulations After Bank Failures

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    Proposals for more scrutiny of the financial sector are meeting resistance from industry and Congress.WASHINGTON — Two of the nation’s top economic policymakers on Wednesday said they were focused on determining how the failure of Silicon Valley Bank had happened and suggested changes to federal regulation and oversight might be needed to prevent future runs on American banks.The discussion of stricter oversight by Jerome H. Powell, the Federal Reserve chair, and Treasury Secretary Janet L. Yellen came as lawmakers, the financial industry and investors are working to figure out why Silicon Valley Bank and Signature Bank failed and as policymakers try to ensure other firms don’t suffer the same fate.At a news conference following the Fed’s announcement that it would raise interest rates by a quarter percentage point, Mr. Powell said he was focused on the question of what had gone wrong at Silicon Valley Bank, which was overseen by the Federal Reserve Bank of San Francisco.The Fed has initiated an internal review into the supervision and regulation of Silicon Valley Bank, with the central bank’s vice chair for supervision, Michael S. Barr, leading the probe. Asked at the news conference whether he would support an independent examination — one not conducted by the Fed — Mr. Powell said he would welcome more scrutiny.“There’s 100 percent certainty that there will be outside investigations,” he said.Mr. Powell criticized bank executives, who he said had “failed badly,” but also conceded that Fed supervisors had not been effective at preventing the bank from sliding into insolvency. He said he expected the central bank’s own report to outline concrete steps to avoid a repeat of the crisis.“Clearly we do need to strengthen supervision and regulation,” Mr. Powell said. “And I assume that there’ll be recommendations coming out of the report, and I plan on supporting them and supporting their implementation.”Ms. Yellen echoed his comments at a Senate hearing on Wednesday afternoon, saying policymakers needed to take a hard look at the troubles plaguing the banking industry, including what led to the downfalls of Silicon Valley Bank, on March 10, and Signature Bank, which was seized by regulators on March 12.“I absolutely think that it’s appropriate to conduct a very thorough review of what factors were responsible for the failure of these banks,” she said. “Certainly we should be reconsidering what we need to shore up regulation to prevent this.”Ms. Yellen said she supports legislation that would penalize executives whose actions lead to bank failures and restore rules that were rolled back during the Trump administration that gave the Financial Stability Oversight Council more power to scrutinize nonbank financial institutions.Economic policymakers are trying to figure out why Silicon Valley Bank failed and to ensure other firms don’t suffer the same fate.Ulysses Ortega for The New York TimesMs. Yellen also said that because bank runs “may more readily happen now,” it might make sense to update stress test models and bank liquidity requirements with new assumptions about how quickly deposits could flee. Mr. Powell also addressed the speed of the outflows of funds from Silicon Valley Bank, which was hastened by social media and the ease of moving money with smartphones, suggesting that new rules are needed to keep up with advances in technology.For the time being, Ms. Yellen said she was focused on using existing tools to restore confidence in the banking system.The Biden administration likely has little choice because of mounting resistance to new financial regulations within Congress and the banking industry. That opposition was clear on Wednesday as lawmakers and executives gathered at an American Bankers Association conference in Washington.Although there was widespread support for uncovering the roots of the current turmoil, influential lawmakers expressed a desire for caution in considering new curbs on the financial sector.“I think it’s too early to know whether or not new legislation will be necessary,” said Representative Patrick T. McHenry of North Carolina, the Republican chairman of the House Financial Services committee.Mr. McHenry warned that proposed increases to the Federal Deposit Insurance Corporation deposit insurance limit could lead to unintended consequences and “moral hazard,” and said that “firms need to be able to fail.”“If you have a hammer, the world looks like a nail,” Mr. McHenry said of the desire to impose more onerous regulations on banks.The banking industry, which has welcomed the government’s support of the sector this month, also urged lawmakers not to respond with more scrutiny.“We should not rush to make changes when we still do not fully know what happened and why,” Rob Nichols, chief executive of the American Bankers Association, said on Wednesday.But Senator Sherrod Brown of Ohio, the Democratic chairman of the Senate Banking Committee, said the failures of Silicon Valley Bank and Signature Bank this month had shaken the nation’s trust in the banking system. He vowed to hold the executives of those banks accountable and press regulators to review what went wrong.Mr. Brown also called for legislation to “strengthen guardrails” and urged the bank lobbyists not to stand in the way.Representative Patrick T. McHenry warned that proposed increases to the Federal Deposit Insurance Corporation $250,000 deposit insurance limit could have unintended consequences.Sarah Silbiger for The New York TimesPresident Biden has decried rollbacks in financial regulation passed by Republicans and Democrats under his predecessor, President Donald J. Trump. But he has thus far offered only a small set of concrete proposals for new legislation or executive action to stabilize the financial system in its current turmoil.Last week, Mr. Biden called for Congress to strengthen regulators’ ability to penalize executives of failed banks. His proposals would allow regulators to claw back compensation that executives of medium-sized banks received before their institutions went under, broadening a penalty that currently applies only to executives of large banks. They also would lower the legal threshold that regulators need to clear in order to ban those executives from working in other parts of the financial system.Administration officials are privately debating what else, if anything, Mr. Biden might ask Congress to do — or announce his administration will do unilaterally — to shore up the banking system.Karine Jean-Pierre, the White House press secretary, repeatedly dodged questions from reporters this week about any new proposals Mr. Biden was considering. “We don’t want to let Congress off the hook,” she said on Tuesday. “We want Congress to continue to — to certainly — to take action. And so, we’re going to call on them to do just that.”Mr. Biden has given just one speech on bank regulation since his administration joined the Fed in announcing a rescue plan for Silicon Valley Bank depositors earlier this month. He last addressed the issue on March 17, in a brief exchange with reporters before boarding Marine One at the White House.In that exchange, Mr. Biden was asked: “Are you confident the bank crisis has calmed down?”He replied: “Yes.”Lawmakers pressed Ms. Yellen on whether the administration supported proposals that some members of Congress have offered to make bank customers, whose deposits are only federally guaranteed up to $250,000, feel more confident that their money is safe.Ms. Yellen demurred when asked about proposals to raise the Federal Deposit Insurance Corporation’s cap on deposit insurance. Referring to recent moves to protect bank depositors, Ms. Yellen said during a speech at the A.B.A. gathering on Tuesday that “similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”The Biden administration appears to have limited legal authority to unilaterally lift the deposit insurance cap, but financial sector analysts have speculated that the Treasury Department is studying whether it could utilize its Exchange Stabilization Fund, a pot of more than $200 billion of emergency money, to back bank deposits.“All she needs is approval from the president to tap into that basket,” Henrietta Treyz, director of economic policy research at Veda Partners, said of Ms. Yellen. “There are no other alternatives; there’s no chance of a bill passing Congress.”Ms. Yellen said on Wednesday that she was not considering such a move but rather would make case-by-case determinations of whether any banks facing runs pose a “systemic risk” to the economy.“I have not considered or discussed anything to do with blanket insurance or guarantees of all deposits,” Ms. Yellen said, adding that any changes to the deposit insurance limit would require legislation from Congress.Invoking the systemic-risk exception again would require approval from both the Fed and the F.D.I.C. At least one policymaker at the F.D.I.C. is skeptical that the exception should be applied to smaller banks, a person familiar with the situation said, which suggests that achieving consensus on such a move may not be a foregone conclusion.Uncertainty over any government plans to help further backstop banks loom large for the number of regional banks that have seen massive outflows of deposits and are exploring various ways to shore up their balance sheets. Both buyers and sellers are wary of striking a deal without full clarity on concessions the government might offer, two people familiar with the negotiations said.These include First Republic and Pacific Western Bank, which earlier Wednesday said, after tapping billions from an investment firm and the Federal Reserve, it was holding off on raising new capital in part because of depressed shares. Pacific Western has seen deposits fall 20 percent since the start of the year, while First Republic has lost nearly half.It is also unclear what concessions the F.D.I.C will offer as part of its efforts to sell the former Silicon Valley Bank. At least one bank, North Carolina-based First Citizens, has put forward an offer to buy that business, a person briefed on the matter said. The agency is now in the process of soliciting offers for various parts of SVB’s business including Silicon Valley Private Bank, an asset management firm, to discern whether it is more lucrative to sell the bank in pieces or as a whole.“We’ll need to wait and see what the bids are and what the least cost is to the deposit insurance fund,” said Julianne Breitbeil, a spokeswoman for the F.D.I.C, regarding any potential concessions the government plans to offer.The agency expects to issue an update on the sale process this weekend, Ms. Breitbeil said. More