In an email to supporters, California Congresswoman and US Senate candidate Katie Porter provided a helpful explainer on the Silicon Valley Bank situation:

---------

As a consumer protection attorney who has spent my career taking on Wall Street, I wanted to help break down what’s happening with Silicon Valley Bank.

Silicon Valley Bank is a well established bank that has been really important in lending to technology companies. During the pandemic, the bank grew rapidly in size. As banks do, it turned around and invested that money. But they were investing in U.S. treasury bonds, which take years to reach their full value.

The problem for Silicon Valley Bank? Interest rates have gone up, so venture capitalists are moving their money now to get more bang for their buck. And as of Friday, Silicon Valley Bank didn't have enough liquid cash (i.e. capital) to return people’s deposits—leading to its collapse.

There are some real oversight questions about why the bank wasn’t prepared, but the blame isn’t all on them. Congress played a real role in this debacle.

After the 2008 financial crisis, Congress passed legislation to require banks to hold onto more liquid cash. This thicker cushion lowered the risk for consumers—but it wasn’t ideal for the banks, which want to invest as much as possible to earn more profit.

Wall Street has been working to reverse these consumer protections ever since. When Trump was elected in 2017, a group of Senators pushed to allow medium-sized banks, like Silicon Valley Bank, to hold onto less liquid cash. I wasn’t yet in Congress, but I sounded the alarm that this was a dangerous move that put people’s money at risk. But in the end, Congress—in a bipartisan vote—caved to Wall Street and loosened our nation’s banking laws.

I have no problem standing up to Wall Street, so I’m writing legislation to reverse that risky law. I’m also working with state officials to make sure businesses and employees who depend on Silicon Valley Bank can still pay their bills.

I wanted to send this summary because I know how scary bank closures can be. When I was growing up in Iowa, the small-town bank closed on a Friday afternoon, and everybody in the community was worried about how they were going to get their deposits out or make payroll—the same concerns we're having today.

That experience is part of what inspired me to study bankruptcy law under my then-professor Elizabeth Warren. I saw how Wall Street wielded political power to rig the rules against working people, and how they rarely took responsibility for their own (frequent) mistakes. After the 2008 financial crash, I was appointed to be California’s Independent Monitor over the Big Banks. My job was to make sure California families, who were cheated by the five biggest Wall Street banks, received the compensation a new settlement entitled them to. I held the banks’ feet to the fire, and forced them to pay Californians billions.

Now more than ever, California needs a warrior in the Senate who has the courage and experience to stand up to Wall Street.

I’ll follow up as we learn more,

Katie Porter