I still remember the day my bank failed and was seized by the federal government. It was more than 30 years ago, and I was there when it happened.
Back in 1991, I was a college student in Buffalo, N.Y. After getting paid from my work-study job one Friday, I trekked downtown to Gold Dome Bank’s palatial, early-20th-century flagship branch to make a deposit. While waiting in line, federal agents shockingly marched in, announced the seizure and told customers to go home.
My bank collapsed at the height of the savings-and-loan crisis and I was a hapless customer caught in the middle of it.
After some angst and more than a little panic, I learned a rival bank would take over my institution’s downtown branch and many of its other locations, with plans to reopen them the following Monday. While I’d spend the weekend cash poor, in a few days I could deposit my check and access all my funds. Life would go on.
I thought about this while working on an Automotive News story about the recent failure of Silicon Valley Bank and how it affected automotive startups in the retail technology space.
Many entrepreneurs undoubtedly felt moments of panic when SVB crashed, considering their deposits are typically well above the $250,000 the Federal Deposit Insurance Corp. covers when banks collapse. Some startups temporarily couldn’t access their deposits, which meant they risked missing payroll or bill due dates, putting their survival at risk. But the FDIC agreed to cover all assets, and SVB is continuing under new ownership for depositors who remain.
Obviously, a bank seizure can harm startups and others with sizable deposits in ways a poor college student living nearly paycheck to paycheck will never face. Still, both situations involve a healthy dose of resiliency. I survived my experience with bank uncertainty and moved on. Startups from this crisis will presumably do the same.
At the same time, they and their brethren face far more challenges in the months ahead. Their bank’s failure and subsequent rescue by the federal government is one thing, but rising interest rates and access to future borrowing were already concerns before SVB crashed. Those issues won’t go away anytime soon.