Silicon Valley and Signature Banks Collapse, Prompting Emergency Federal Intervention to Halt Systemic Risk

In March 2023, the U.S. banking sector experienced its most significant turmoil since the 2008 financial crisis: Silicon Valley Bank (SVB), which focused on tech startups, and Signature Bank both failed in California and New York, respectively, due to rapid depositor runs. The collapse of the two institutions raised widespread concerns about the stability of the U.S. regional banking system.

The Federal Government, through a joint statement by the Treasury, the Fed, and the FDIC, swiftly announced a pledge to fully guarantee all depositor funds at both banks, even uninsured ones, to prevent systemic risk contagion. Conservatives expressed deep concern over this emergency intervention, arguing the government's action amounted to a "taxpayer bailout" that undermined market discipline and the principle of moral hazard. They also criticized the Fed for errors in its rate hike pace and regulatory oversight, which they argued indirectly contributed to the crisis.