In the hours after some of Silicon Valley Bank’s biggest customers started pulling out their money, a WhatsApp group of startup founders who are immigrants of color ballooned to more than 1,000 members. Questions flowed as the bank’s financial status worsened. Some desperately sought advice: Could they open an account at a larger bank without a Social Security Number? Others questioned whether they had to physically be at a bank to open an account, because they're visiting parents overseas. One clear theme emerged: a deep concern about the broader impact on startups led by people of color. While Wall Street struggles to contain the banking crisis after the swift demise of SVB — the nation's 16th largest bank and the biggest to fail since the 2008 financial meltdown — industry experts predict it could become even harder for people of color to secure funding or a financial home supporting their startups. SVB had opened its doors to such entrepreneurs, offering opportunities to form crucial relationships in the technology and financial communities that had been out of reach within larger financial institutions. But smaller players have fewer means of surviving a collapse, reflecting the perilous journey minority entrepreneurs face while attempting to navigate industries historically rife with racism. “All these folks that have very special circumstances based on their identity, it’s not something that they can just change about themselves and that makes them unbankable by the top four (large banks),” said Asya Bradley, a board member of numerous startups who has watched the WhatsApp group grapple with SVB's demise. Bradley said some investors have implored startups to switch to larger financial institutions to stymie future financial risks, but that's not an easy transition. “The reason why we’re going to regional and community banks is because these (large) banks don’t want our business,” Bradley said. Banking expert Aaron Klein, a senior fellow in Economic Studies at the Brookings Institution, said SVB’s collapse could exacerbate racial disparities. “That’s going to be more challenging for people who don’t fit the traditional credit box, including minorities,” Klein said. "A financial system that prefers the existing holders of wealth will perpetuate the legacy of past discrimination.” Tiffany Dufu was gutted when she couldn’t access her SVB account and, in turn, could not pay her employees. Read more: One of Silicon Valley's top banks fails; assets are seized Dufu raised $5 million as CEO of The Cru, a New York-based career coaching platform and community for women. It was a rare feat for businesses founded by Black women, which get less than 1% of the billions of dollars in venture capital funding doled out yearly to startups. She banked with SVB because it was known for its close ties to the tech community and investors. “In order to have raised that money, I pitched nearly 200 investors over the past few years,” said Dufu, who has since regained access to her funds and moved to Bank of America. “It’s very hard to put yourself out there and time after time — you get told this isn’t a good fit. So, the money in the bank account was very precious.” A February Crunchbase News analysis determined funding for Black-founded startups slowed by more than 50% last year after they received a record $5.1 billion in venture capital in 2021. Overall venture funding dropped from about $337 billion to roughly $214 billion, while Black founders were hit disproportionately hard, dropping to just $2.3 billion, or 1.1% of the total. Entrepreneur Amy Hilliard, a professor at the University of Chicago Booth School of Business, knows how difficult it is to secure financing. It took three years to secure a loan for her cake manufacturing company, and she had to sell her home to get it started. Banking is based on relationships and when a bank like SVB goes under, “those relationships go away, too,” said Hilliard, who is African American. Some conservative critics asserted SVB's commitment to diversity, equity and inclusion were to blame, but banking experts say those claims were false. The bank slid into insolvency because its larger customers pulled deposits rather than borrow at higher interest rates and the bank's balance sheets were overexposed, forcing it to sell bonds at a loss to cover the withdrawals. “If we’re focused on climate or communities of color or racial equity, that has nothing to do with what happened with Silicon Valley Bank,” said Valerie Red-Horse Mohl, co-founder of Known Holdings, a Black, Indigenous, Asian American-founded investment banking platform focused on the sustainable growth of minority-managed funds. Red-Horse Mohl — who has raised, structured and managed over $3 billion in capital for tribal nations — said most larger banks are led by white men and majority-white boards, and “even when they do DEI programs, it’s not a really deep sort of shifting of capital.” Smaller financial institutions, however, have worked to build relationships with people of color. “We cannot lose our regional and community banks," she said. "It would be a travesty.” Historically, smaller and minority-owned banks have addressed funding gaps that larger banks ignored or even created, following exclusionary laws and policies as they turned away customers because of the color of their skin. But the ripple effects from SVB's collapse are being felt among these banks as well, said Nicole Elam, president and CEO of the National Bankers Association, a 96-year-old trade association representing more than 175 minority-owned banks. Some have seen customers withdraw funds and move to larger banks out of fear, even though most minority-owned banks have a more traditional customer base, with secured loans and minimal risky investments, she said. “You’re seeing customer flight of folks that we’ve been serving for a long time,” Elam said. “How many people may not come to us for a mortgage or small business loan or to do their banking business because they now have in their mind that they need to bank with a bank that is too big to fail? That's the first impact of eroding public trust.” Black-owned banks have been hit the hardest as the industry consolidates. Most don't have as much capital to withstand economic downturns. At its peak, there were 134. Today, there are only 21. But change is on the way. Within the last three years, the federal government, private sector and philanthropic community have invested heavily in minority-run depository institutions. “In response to this national conversation around racial equity, people are really seeing minority banks are key to wealth creation and key to helping to close the wealth gap," Elam said. Bradley also is an angel investor, providing seed money for a number of entrepreneurs, and is seeing new opportunities as people network in the WhatsApp group to help each other remain afloat and grow. “I'm really so hopeful,” Bradley said. “Even in the downfall of SVB, it has managed to form this incredible community of folks that are trying to help each other to succeed. They're saying, 'SVB was here for us, now we're going to be here for each other.'”

After the sudden collapse of Silicon Valley Bank, California Democratic Rep. Maxine Waters started furiously working the phones to find out what was going on with the failed lender — and what would happen to its panicked depositors. Waters, former chair of the House Financial Services Committee, had her doubts that another bank would step up as a savior and buy the defunct institution. “Banks don’t just wake up and say: ‘Oh, there’s a problem with another significant bank and they’ve collapsed. Let’s just take it over,’’’ she said. So began a frenetic weekend of nonstop briefings with regulators, lawmakers, administration officials and President Joe Biden himself about how to handle the demise of the nation's 16th-biggest bank and a go-to financial institution for tech entrepreneurs. At the core of the problem was tens of billions of dollars — including money companies needed to meet payrolls — sitting in Silicon Valley Bank accounts that were not protected by federal deposit insurance that only goes up to $250,000. Also Read: To avert a banking crisis, HSBC to take over UK arm of failed Silicon Valley Bank Something needed to be done, federal officials agreed, before Asian stock markets opened Sunday evening and other banks faced the potential for waves of panicked withdrawals Monday morning. “We were racing against the clock,” said Bharat Ramamurti, deputy director of the National Economic Council. Waters was right to be skeptical about a sale being closed on the fly. The bank’s size — $210 billion in assets — and complexity made it difficult to quickly wrap up a deal. Federal Deposit Insurance Corp. officials told Republican senators Monday that they received offers for the bank over the weekend but didn’t have time to close; they said they could put Silicon Valley Bank up for auction again, according to a person familiar with the conversation who requested anonymity to discuss a private call. Also Read: Asian shares mostly sink on jitters after US bank failure But another plan was coming together. On Sunday, Waters was on the phone with Federal Reserve Chair Jerome Powell, who briefed her on how it would work. The Fed was creating a new emergency program that allowed it to lend directly to banks so they could cover withdrawals without having to sell off assets to raise cash. The idea was to reassure depositors and prevent bank runs at other institutions. By Sunday night, the Treasury Department, the Fed and the FDIC said the federal government would protect all deposits — even those that exceeded the FDIC’s $250,000 limit. “It’s miraculous, really,’’ Waters said, calling it "an example of what working together and what government can do with the right people in charge.’’ The praise was not unanimous. In the call Monday with officials from the FDIC and the Treasury Department, Republican senators expressed concern that millionaire Silicon Valley depositors were being rescued — and the cost might be passed onto community banks in their home states in the form of higher assessments for federal deposit insurance, according to the person familiar with the discussion. The trouble started last Wednesday when Silicon Valley Bank said it needed to raise $2.25 billion to shore up its finances after suffering big losses on its bond portfolio, which had plunged in value as the Federal Reserve raised interest rates. On Thursday, depositors rushed to pull their money out. An old-fashioned bank run was underway. At a House Ways and Means committee hearing on Friday morning, Treasury Secretary Janet Yellen said her agency was “monitoring very carefully” developments related to the bank. “When banks experience financial losses, it is and should be a matter of concern,” she told lawmakers. Biden was briefed about the situation on Friday morning, according to a White House official who spoke on condition of anonymity to discuss private conversations. Then he celebrated an unexpectedly strong February jobs report, met with the leader of the European Union and jetted off to Wilmington, Delaware, to mark his grandson’s 17th birthday. His weekend would soon be consumed with phone and video calls focused on preventing a nationwide banking crisis. Regulators were so concerned, they didn't even wait until the close of business on Friday — the usual practice — to shut the bank down; they closed the doors during working hours. It was the second-biggest bank failure in U.S. history and trickier than most: An astonishing 94% of Silicon Valley Bank's deposits — including large cash holdings by tech startups — were uninsured by the FDIC. As administration officials and regulators worked through the weekend, Biden expressed concern about small businesses and their employees who relied on accounts that were now in jeopardy, the White House official said. There were also fears, the official said, that if Silicon Valley Bank depositors lost money, others would lose faith in the banking system and rush to withdraw money on Monday, causing a cascading crisis. Massachusetts Democratic Rep. Jake Auchincloss’ phone had started lighting up even before the weekend. Silicon Valley Bank had eight branches and offices in his home state, and word of its failure was traveling fast on social media. “The panic within Massachusetts industry and nonprofit sectors became acute within a matter of hours,’’ Auchincloss said. “My phone started just exploding.’’ Silicon Valley Bank wouldn't be the only bank to collapse. By Sunday evening, federal officials announced that New York-based Signature Bank, a major lender to New York landlords, had also failed and was being seized. The government's plan to cover deposits over $250,000 ended up applying to Signature's customers as well. In a statement Sunday, Biden said, "The American people and American businesses can have confidence that their bank deposits will be there when they need them.'' On Monday, Powell announced that the Fed would review its supervision of Silicon Valley Bank to understand what went wrong. The review will be conducted by Michael Barr, the Fed vice chair who oversees bank oversight, and be released May 1. Now Biden and lawmakers are calling for legislative changes to tighten financial rules on regional banks, perhaps restoring parts of the Dodd-Frank law that tightened bank regulation after the 2008-2009 financial crisis but were rolled back five years ago. Waters said it might be time to raise deposit insurance thresholds. "We can't just say this is an emergency and forget about it,'' she said.

Governments in the UK and U.S. took extraordinary steps to stop a potential banking crisis after the historic failure of Silicon Valley Bank, even as another major bank was shut down. The UK Treasury and the Bank of England “facilitated the sale″ of Silicon Valley Bank UK to HSBC, ensuring the security of 6.7 billion pounds ($8.1 billion) of deposits. British officials worked throughout the weekend to find a buyer for the UK subsidiary of the California-based bank, whose collapse was the second-largest bank failure in history. “This morning, the government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC,″ Treasury chief Jeremy Hunt said in a tweet. “Deposits will be protected, with no taxpayer support. I said yesterday that we would look after our tech sector, and we have worked urgently to deliver that promise.” HSBC said it will acquire Silicon Valley Bank UK Ltd for one pound. U.S. regulators also worked all weekend to try to find a buyer for the bank. Those efforts appeared to have failed Sunday. But U.S. officials assured all depositors at the failed institution that they could access all their money quickly, The announcement came amid fears that the factors that caused the Santa Clara, California-based bank to fail could spread. In a sign of how fast the financial bleeding was occurring, regulators announced that New York-based Signature Bank had also failed and was being seized on Sunday. At more than $110 billion in assets, Signature Bank is the third-largest bank failure in U.S. history. The near-financial crisis that U.S. regulators had to intervene to prevent left Asian markets jittery as trading began Monday. Japan’s benchmark Nikkei 225 sank 1.6% in morning trading, Australia’s S&P/ASX 200 lost 0.3% and South Korea’s Kospi shed 0.4%. But Hong Kong’s Hang Seng rose 1.4% and the Shanghai Composite increased 0.3%. In an effort to shore up confidence in the banking system, the Treasury Department, Federal Reserve and FDIC said Sunday that all Silicon Valley Bank clients would be protected and able to access their money. They also announced steps that are intended to protect the bank’s customers and prevent additional bank runs. “This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the agencies said in a joint statement. Under the plan, depositors at Silicon Valley Bank and Signature Bank, including those whose holdings exceed the $250,000 insurance limit, will be able to access their money on Monday. Also Sunday, another beleaguered bank, First Republic Bank, announced that it had bolstered its financial health by gaining access to funding from the Fed and JPMorgan Chase. In a separate announcement, the Fed late Sunday announced an expansive emergency lending program that’s intended to prevent a wave of bank runs that would threaten the stability of the banking system and the economy as a whole. Fed officials characterized the program as akin to what central banks have done for decades: Lend freely to the banking system so that customers would be confident that they could access their accounts whenever needed. The lending facility will allow banks that need to raise cash to pay depositors to borrow that money from the Fed, rather than having to sell Treasuries and other securities to raise the money. Silicon Valley Bank had been forced to dump some of its Treasuries at at a loss to fund its customers’ withdrawals. Under the Fed’s new program, banks can post those securities as collateral and borrow from the emergency facility. The Treasury has set aside $25 billion to offset any losses incurred under the Fed’s emergency lending facility. Fed officials said, however, that they do not expect to have to use any of that money, given that the securities posted as collateral have a very low risk of default. Analysts said the Fed’s program should be enough to calm financial markets on Monday. “Monday will surely be a stressful day for many in the regional banking sector, but today’s action dramatically reduces the risk of further contagion,” economists at Jefferies, an investment bank, said in a research note. Though Sunday’s steps marked the most extensive government intervention in the banking system since the 2008 financial crisis, its actions are relatively limited compared with what was done 15 years ago. The two failed banks themselves have not been rescued, and taxpayer money has not been provided to the banks. President Joe Biden said Sunday evening as he boarded Air Force One back to Washington that he would speak about the bank situation on Monday. In a statement, Biden also said he was “firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.” Regulators had to rush to close Silicon Valley Bank, a financial institution with more than $200 billion in assets, on Friday when it experienced a traditional run on the bank where depositors rushed to withdraw their funds all at once. It is the second-largest bank failure in U.S. history, behind only the 2008 failure of Washington Mutual. Some prominent Silicon Valley executives feared that if Washington didn’t rescue the failed bank, customers would make runs on other financial institutions in the coming days. Stock prices plunged over the last few days at other banks that cater to technology companies, including First Republic Bank and PacWest Bank. Among the bank’s customers are a range of companies from California’s wine industry, where many wineries rely on Silicon Valley Bank for loans, and technology startups devoted to combating climate change. Sunrun, which sells and leases solar energy systems, had less than $80 million of cash deposits with Silicon Valley. Stitchfix, the clothing retail website, disclosed recently that it had a credit line of up to $100 million with Silicon Valley Bank and other lenders.Tiffany Dufu, founder and CEO of The Cru, a New York-based career coaching platform and community for women, posted a video Sunday on LinkedIn from an airport bathroom, saying the bank crisis was testing her resiliency. Given that her money was tied up at Silicon Valley Bank, she had to pay her employees out of her personal bank account. With two teenagers to support who will be heading to college, she said she was relieved to hear that the government’s intent is to make depositors whole. “Small businesses and early-stage startups don’t have a lot of access to leverage in a situation like this, and we’re often in a very vulnerable position, particularly when we have to fight so hard to get the wires into your bank account to begin with, particularly for me, as a Black female founder,” Dufu told The Associated Press. Silicon Valley Bank began its slide into insolvency when its customers, largely technology companies that needed cash as they struggled to get financing, started withdrawing their deposits. The bank had to sell bonds at a loss to cover the withdrawals, leading to the largest failure of a U.S. financial institution since the height of the financial crisis. Treasury Secretary Janet Yellen pointed to rising interest rates, which have been increased by the Federal Reserve to combat inflation, as the core problem for Silicon Valley Bank. Many of its assets, such as bonds or mortgage-backed securities, lost market value as rates climbed. Sheila Bair, who was chairwoman of the FDIC during the 2008 financial crisis, recalled that with nearly all the bank failures then, “we sold a failed bank to a healthy bank. And usually, the healthy acquirer would also cover the uninsured because they wanted the franchise value of those large depositors so optimally, that’s the best outcome.” But with Silicon Valley Bank, she told NBC’s “Meet the Press,” “this was a liquidity failure, it was a bank run, so they didn’t have time to prepare to market the bank. So they’re having to do that now, and playing catch-up.”

It was called Silicon Valley Bank, but its collapse is causing shockwaves around the world. From winemakers in California to startups across the Atlantic Ocean, companies are scrambling to figure out how to manage their finances after their bank suddenly shut down Friday. The meltdown means distress not only for businesses but also for all their workers whose paychecks may get tied up in the chaos. California Gov. Gavin Newsom said Saturday that he's talking with the White House to help "stabilize the situation as quickly as possible, to protect jobs, people's livelihoods, and the entire innovation ecosystem that has served as a tent pole for our economy.” U.S. customers with less than $250,000 in the bank can count on insurance provided by the Federal Deposit Insurance Corp. Regulators are trying to find a buyer for the bank in hopes customers with more than that can be made whole. Also Read: A major bank failed. Here’s why it’s not 2008 again That includes customers like Circle, a big player in the cryptocurrency industry. It said it has about $3.3 billion of the roughly $40 billion in reserves for its USDC coin at SVB. That caused USD Coin’s value, which tries to stay firmly at $1, to briefly plunge below 87 cents Saturday. It later rose back above 97 cents, according to CoinDesk. Across the Atlantic, startup companies woke up Saturday to find SVB’s U.K. business will stop making payments or accepting deposits. The Bank of England said late Friday that it will put Silicon Valley Bank UK in its insolvency procedure, which will pay out eligible depositors up to 170,000 British pounds ($204,544) for joint accounts “as quickly as possible.” “We know that there are a large number of startups and investors in the ecosystem who have significant exposure to SVB UK and will be very concerned,” Dom Hallas, executive director of Coadec, which represents British startups, said on Twitter. He cited “concern and panic.” The Bank of England said SVB UK’s assets would be sold to pay creditors. It’s not just startups feeling the pain. The bank’s collapse is having an effect on another important California industry: fine wines. It’s been an influential lender to vineyards since the 1990s. “This is a huge disappointment,” said winemaker Jasmine Hirsch, the general manager of Hirsch Vineyards in California’s Sonoma County. Hirsch said she expects her business will be fine. But she's worried about the broader effects for smaller vintners looking for lines of credit to plant new vines. “They really understand the wine business,” Hirsch said. “The disappearance of this bank, as one of the most important lenders, is absolutely going to have an effect on the wine industry, especially in an environment where interest rates have gone up.” In Seattle, Shelf Engine CEO Stefan Kalb found himself immersed in emergency meetings devoted to figuring how to meet payroll instead of focusing on his startup company's business of helping grocers manage their food orders. “It’s been a brutal day. We literally have every single penny in Silicon Valley Bank,” Kalb said Friday, pegging the deposit amount that’s now tied up at millions of dollars. He is filing a claim for the $250,000 limit, but that won’t be enough to keep paying Shelf Engine’s 40 employees for long. That could force him into a decision about whether to begin furloughing employees until the mess is cleaned up. “I’m just hoping the bank gets sold during the weekend,” Kalb said. Tara Fung, co-founder and CEO of tech startup Co:Create that helps launch digital loyalty and rewards programs, said her firm uses multiple banks besides Silicon Valley Bank so was able switch over its payroll and vendor payments to another bank Friday. Fung said her firm chose the bank as a partner because it is the “gold standard for tech firms and banking partnerships,” and she was upset that some people seemed to be gloating about its failure and unfairly tying it to doubts about cryptocurrency ventures. San Francisco-based employee performance management company Confirm.com was among the Silicon Valley Bank depositors that rushed to pull their money out before regulators seized the bank. Co-founder David Murray credits an email from one of Confirm’s venture capital investors, which urged the company to withdraw its funds “immediately,” citing signs of a run on the bank. Such actions accelerated the flight of cash, which led to the bank's collapse. “I think a lot of founders were sharing the logic that, you know, there’s no downside to pulling up the money to be safe,” Murray said. “And so we all did that, hence the bank run.” The U.S. government needs to act more quickly to stanch further damage, said Martín Varsavsky, an Argentinian entrepreneur who has investments across the tech industry and Silicon Valley. One of his companies, Overture Life, which employs about 50 people, had some $1.5 million in deposits in the financially embattled bank but can rely on other holdings elsewhere to meet payroll. But other companies have high percentages of their cash in Silicon Valley Bank, and they need access to more than the amount protected by the FDIC. “If the government allows people to take at least half of the money they have in Silicon Valley Bank next week, I think everything will be fine," Varsavsky said Saturday. “But if they stick to the $250,000, it will be an absolute disaster in which so many companies won’t be able to meet payroll.” Andrew Alexander, a calculus teacher at a private San Francisco high school that uses Silicon Valley Bank, wasn’t overly worried. His next paycheck isn't scheduled for another two weeks, and he's confident many of the issues can be resolved by then. But he worries for friends whose livelihoods are more deeply intertwined with the tech industry and Silicon Valley. “I have a lot of friends in the startup world who are just like terrified,” Alexander said, “and I really feel for them. It’s pretty scary for them.”