By Akerele Christabel 5:52 pm PST

Two of the United States’ biggest banks, each propping up a critical part of the economy, have fallen to the decline of the financial system. Silvergate, the cryptocurrency capital of the nation and The Silicon Valley Bank (SIVB), the bank for tech startups and investors are the victims of the most recent crisis.

This has marked a black week for the United States banking system as the events of the 2008 financial meltdown threaten to rear their ugly heads again 15 years later.

The 2008 financial crisis in America began with the collapse of the US housing market. This was due to a combination of factors, including rising interest rates, lax lending standards, and over-leveraging by homeowners and investors.

The collapse had a ripple effect, leading to the collapse of major financial institutions, such as Lehman Brothers and AIG, and the subsequent credit crisis. This caused a sharp drop in consumer spending, decreased investment in businesses, and ultimately resulted in the Great Recession.

The effects of the financial crisis were far-reaching and long-lasting. The US economy suffered a severe contraction, with an estimated 8.7 million jobs lost between December 2007 and June 2009. Home values plummeted, leaving many homeowners underwater on their mortgages. Banks and other financial institutions tightened lending standards, making it harder for individuals and businesses to borrow money.

The crisis also had an impact on global financial markets, as investors pulled their money out of US stocks, bonds, and other markets. It took years for the US economy to recover from the financial crisis, and many people still face economic hardship as a result.

The US seems to be going in the same miserable direction this year, starting with the collapse of these two heavyweights in the banking industry. The suddenness of the whole affair has made it all the more frightening. On Wednesday, the Silicon Valley Bank was a thriving institution seeking to raise some funds. 48 hours later, it now gasps for air under the biggest bank failure since 2008.

On Friday, March 10, the Federal Deposit Insurance Corporation announced their takeover of the failed bank that once lended to Silicon Valley investors.

“Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver,” the federal agency said in a news release.

“All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds.”

As the backbone of the Silicon Valley technological industry, the SVB has been of immense value to investors by providing specialized financial services, industry expertise, financial management etc.

SVB’s problems began when the Federal Reserves increased its interest rates as a measure of curbing a looming economic meltdown. This forced the bank to resort to a capital raise because the increased interest rate hurt the value of their investments, especially bonds. With many startups withdrawing their deposits from the bank, SVB had to sell bonds at way below the normal price. This meant a fatal loss for the bank.

In a last-ditch attempt, it tried to raise $2.25 billion to cover the loss, but that also failed.

Two days earlier, Silvergate met the same fate as SVB. The company decided on Wednesday, March 8, to “wind down operations and voluntarily liquidate the bank.”

It also said: “In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of bank operations and a voluntary liquidation of the bank is the best path forward.”

“The bank’s wind down and liquidation plan includes full repayment of all deposits. The Company is also considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets.”

Silvergate was the bank patronized by the big crypto guys as traditional banks refused to dip their fingers into such a high risk business. However, with FTX and Alameda, both crypto giants, going bankrupt, Silvergate fell from $11.8 billion to $3.8 billion in digital assets between September 30, 2022 and December 31 of the same year.

As shocking as the downfall of these banking giants might sound, some experts believe that this is only the birth pangs of something more terrifying.

“The U.S. banking system is on the verge of a much bigger collapse than 2008,” said economist Peter Schiff, known for his dire predictions.

“Banks own long-term paper at extremely low interest rates. They can’t compete with short-term Treasuries. Mass withdrawals from depositors seeking higher yields will result in a wave of bank failures.”

With Silicon Valley Bank and Silvergate knocked out cold, the question now is “Who is next?”