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When Silicon Valley Bank failed this month, I got a text from a friend. She said she just learned her employer had its money in that bank. Good luck making payroll. Everything worked out. The government made the depositors whole, as they say. But for about three days, people didn't know. And a lot of tech startups in particular thought they had lost everything. NPR's Planet Money has put together an account of the second-largest bank failure in U.S. history. Here's Kenny Malone.
KENNY MALONE, BYLINE: Iba Masood is CEO of a startup called Tara.AI.
IBA MASOOD: Yeah. Let me open it up.
MALONE: On Thursday, March 9, she got this Facebook message from a friend.
MASOOD: 12:44 p.m. Hope you don't have your money in SVB, might be illiquid.
MALONE: SVB, Silicon Valley Bank, where it seemed the entire tech industry kept its money.
MASOOD: And the only words that keep running through my mind are bank run.
MALONE: A bank run. Banks don't keep all our money on hand. They invest some of it. And that's fine unless everybody panics, runs to the bank and demands their money back at the same time.
MASOOD: I immediately ping on Slack, urgent, urgent. And then we start trying to wire.
MALONE: Wire money out of Silicon Valley Bank. And as panic spread, people tried to pull at least $42 billion from the bank. It collapsed, and the U.S. government took control on March 10. Jordan Husney is CEO of a startup called Parabol.
JORDAN HUSNEY: And I remember we felt like, oh, God - we're screwed.
MALONE: The FDIC only insures up to $250,000 in a bank account. Jordan's company, lots of companies, had way more than that. And so Jordan records a video for his employees, unsure if his company's money is gone forever.
(SOUNDBITE OF ARCHIVED RECORDING)
HUSNEY: Good morning, everybody. I'll post a link to the press release if you hadn't caught it from Silicon Valley Bank. But the U.S. regulators actually...
MALONE: You sound rough in that video, man.
HUSNEY: It is one of the worst videos that a CEO can record for people that have given you their blood, sweat and tears, which is, we don't know how it happened, but we just ran out of money. I don't know what this means.
ISA WATSON: My biggest concern first was for my employees.
MALONE: Isa Watson's company, Squad, had more than $1 million frozen at Silicon Valley Bank. She remembers trying to figure out how she's going to pay her seven employees.
WATSON: And so I literally went to my J.P. Morgan 401(k) and pulled up my balance because that was kind of my backup plan.
MALONE: I mean, how quickly would that zero out your entire retirement?
WATSON: Like, in one month.
MALONE: You hear those stories about an airplane that nosedives for a brief period of time, and everybody on board thinks, this is it. This is the end. Well, this is what happened to an entire industry. And that plane leveled out on Sunday, March 12 at 6:15 p.m., when the government announced that the FDIC would, in fact, fully cover every deposit at Silicon Valley Bank.
WATSON: Once they made that announcement and I saw it in writing, whew, honey, I could breathe again.
MALONE: But that 72 hours when she thought she'd lost everything gave Isa some time to reflect.
WATSON: One of the things that I learned is the power of the echo chamber and kind of telephone effect in my industry. It's homogenous. The power of that was intense.
MALONE: For a small, fledgling company, it seems like the least risky thing in the world. Put your money where everyone else in the industry puts it. But all that did was create a new, bigger kind of risk.
Kenny Malone, NPR News.
(SOUNDBITE OF MOKHOV'S "EMOTION REFLECTION") Transcript provided by NPR, Copyright NPR.