One prevalent narrative spreading in Silicon Valley is that we are witnessing a new type of bank run — a “Twitter run” — driven by technological innovations in banking and direct messages on social media. Nervous venture capitalists encouraged their tech-startup clients to abandon their long-time, valued business partner, Silicon Valley Bank SIVB en masse, so the narrative goes.
The truth is that what happened at SVB is an old-fashioned bank run. While rumors now spread on the internet, the speed at which banks are run has mostly remained the same. Read: From SVB’s sudden collapse to Credit Suisse’s fallout: 8 charts show turbulence in financial markets This disaster scenario was only averted due to the fast actions of the Atlanta Federal Reserve Bank. The Atlanta Fed stopped this panic by sending cash the day of Citizens Bank’s failure to banks in Miami and Tampa via “currency depots.” The Deputy Governor of the Atlanta Fed pronounced that it was “prepared to send enough money to pay every depositor” of the two large remaining banks that were facing heavy withdrawals. This calmed nervous depositors and stopped the panic.
The vast majority of Chicago’s banks were saved by the local Federal Reserve Bank of Chicago and New York banks coming to their rescue. Depositor confidence was further restored when major banks published their financial conditions in local newspapers in the week following the run.
$42 Billion in 4 hours doesn’t happen without social media
Arguably, the bank run happened because of traditional media and social media though.