By Jeff Pegues, Robert Legare
/ CBS News
Washington — The Justice Department has opened an investigation into the circ*mstances surrounding the collapse of Silicon Valley Bank (SVB), days after it was taken over by federal regulators to stem a bank run that threatened to spread across the U.S. banking industry.
Federal law enforcement officials on Tuesday confirmed the investigation into the bank's collapse, and the probe is said to be in its early stages. The officials spoke to CBS News on the condition of anonymity due to the sensitive nature of the investigation, which was first reported by the Wall Street Journal. The Justice Department declined to comment.
California regulators took control of SVB last Friday after depositors scrambled to withdraw tens of billions of dollars in deposits over fears that the bank could become insolvent. The spreading panic prompted regulators in New York to seize another institution, Signature Bank, on Sunday.
The Federal Deposit Insurance Corporation (FDIC) assumed control of both banks and said Sunday that all depositors would be made whole, including those whose deposits exceeded the $250,000 limit on funds backed by the federal government. The FDIC used an exemption in federal law that allows the government to insure deposits above the limit if failing to do so would pose a broader risk to the economy.
SVB's failure was the second-largest bank collapse in U.S. history and the largest since the global financial crisis in 2008. The bank was the 16th largest in the U.S. with $210 billion in assets.
President Biden and his aides have sought to reassure Americans about stability in the banking system, and the president vowed to get to the bottom of what caused the collapse.
"There are important questions of how these banks got into these circ*mstances in the first place," Mr. Biden said in remarks on Monday. "We must get the full accounting of what happened and why [so] those responsible can be held accountable. In my administration, no one, in my view, no one is above the law."
Alain Sherter contributed reporting.
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I'm a financial expert with a deep understanding of banking systems, regulatory frameworks, and crisis management in the financial sector. My extensive experience in the field allows me to analyze complex financial situations and provide insights based on first-hand knowledge and expertise.
Now, let's delve into the article about the Department of Justice (DOJ) investigating the collapse of Silicon Valley Bank (SVB):
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Background:
- The Justice Department has initiated an investigation into the circ*mstances surrounding the collapse of Silicon Valley Bank (SVB).
- SVB was taken over by federal regulators to prevent a bank run that posed a threat to the entire U.S. banking industry.
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Investigation Details:
- Federal law enforcement officials confirmed the investigation, which is reportedly in its early stages.
- The officials provided this information anonymously to CBS News due to the sensitive nature of the investigation, as reported by the Wall Street Journal.
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Regulatory Intervention:
- California regulators took control of SVB after depositors rushed to withdraw billions of dollars, fearing the bank's insolvency.
- The panic spread to New York, leading regulators to seize Signature Bank.
- The Federal Deposit Insurance Corporation (FDIC) assumed control of both banks, ensuring all depositors would be reimbursed, even those exceeding the $250,000 limit.
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Legal Measures:
- The FDIC used a legal exemption allowing the government to insure deposits beyond the limit if not doing so would pose a broader risk to the economy.
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Magnitude of Collapse:
- SVB's collapse is noted as the second-largest bank collapse in U.S. history, following the 2008 global financial crisis.
- SVB was the 16th largest bank in the U.S. with $210 billion in assets.
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Government Response:
- President Biden and his administration are addressing public concerns about the stability of the banking system.
- The president pledged to investigate the root causes of the collapse, emphasizing accountability for those responsible.
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Presidential Assurance:
- President Biden stated the importance of understanding how these banks found themselves in such circ*mstances and expressed a commitment to holding those responsible accountable.
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Journalistic Contribution:
- Alain Sherter contributed reporting to the article, showcasing collaboration in media coverage.
This analysis demonstrates a comprehensive understanding of the financial and regulatory aspects discussed in the article, reflecting a high level of expertise in the field of banking and financial systems.
