In a mad rush, Mass. customers are pulling money out of the failed Silicon Valley bank
More than two dozen customers queued outside Silicon Valley Bank’s Wellesley office on Monday, waiting hours to withdraw their funds from the failing institution after regulators pledged to make all funds available.
Vanessa Calderón-Rosado was among them. She is the executive director of IBA Boston, a nonprofit organization that helps people with affordable housing and other services. She said she waited in line for two hours but was successful.
“We were able to withdraw all the money we had in our account with them,” she said. “That was a great relief.”
The California-based bank with five branches in Massachusetts was shut down by regulators on Friday, sending shockwaves through the financial world. On Sunday night, the US Treasury Department and other federal agencies announced they would give customers access to all of their money, not just the FDIC insurance amount.
The emerging picture of those who faced the bank’s collapse is broader than their reputation in the tech sector. The $209 billion bank, the second-largest to go bust in U.S. history, had a much wider reach, thanks in large part to its 2021 acquisition of Boston Private Bank & Trust Co. That deal brought in relationships with small ones community development groups, corporations, nonprofit social service organizations, and a long list of charter schools.
“For the past 72 hours, there has been so much focus on the technology sector,” said Kimberly Lyle, chief executive of Dorchester Bay Economic Development Corp., an affordable housing developer. “The reality is that Silicon Valley Bank borrowed money for California housing projects in Massachusetts.”
She said the bank also made grants to small community organizations that relied on that support.
Like other nonprofit executives contacted by WBUR, Lyle said her group’s relationship began with Boston Private Bank. While customers like her are relieved that federal agencies have stepped in to get customers healthy, they’re also worried about the future.
“Bank failures are rarely isolated cases. It tends to be an infectious thing. So I think people want to make sure they don’t have uninsured deposits anywhere.”
Kevin Murray, interim executive director of the Massachusetts Association of Community Development Corporations, said his group held a virtual meeting Monday morning to address the concerns of its 63 members, which include housing and community service nonprofits. Several couldn’t attend, he said, because they were working to get their money out of Silicon Valley Bank and transfer it elsewhere.
“A bank failure is rarely a one-off,” Murray said. “It tends to be a contagious thing. So I think people want to make sure they don’t have uninsured deposits anywhere.”
Together, the members have millions of dollars in business with Silicon Valley Bank. And they’re just a fraction of the many nonprofits impacted by the collapse of a bank best known for serving high-tech startups and venture capitalists.
Many groups scrutinize where they keep their funds and make sure they spread their money across a number of banks, as accounts are only insured up to $250,000.
Owen Stearns, executive director of Excel Academy Charter School, which runs four schools in East Boston, Chelsea and Rhode Island, said the group was lucky not to have all of its money locked up in Silicon Valley Bank. But it was still scary. On Monday, he and his associates worked to transfer about $1 million to other institutions.
At least a dozen charter schools in the area are working with Silicon Valley Bank, according to a spokesman for the Massachusetts Charter Public School Association. In addition to fixed deposit accounts, many have home loans and other lines of credit with the bank.
Some schools were in dire straits over the weekend, Stearns said, concerned about payroll before the FBI stepped in to guarantee access to funds.
Stearns said the schools are consulting their attorneys to understand the terms of their loans and whether they will be protected if regulators successfully find a buyer for the bank.
“We’re on a very steep learning curve right now,” Stearns said. “We are doing our best to get smarter, diversify and put money into safer instruments. You know, at the end of the day, children are affected by all of this – how this money flows and whether we have access to it.”
Jacqueline Reis, a spokeswoman for the state’s Department of Primary and Secondary Education, said in a statement that staff had been in contact with charter schools since Friday.
“As of this writing, it looks like they will get the federal funding before problems arise, but we continue to reach out to the schools in case of difficulties,” she said.
President Biden made public statements Monday trying to calm the waters after three banks collapsed for a week, including one in California and one in New York. And some Massachusetts institutions emailed customers, reassuring them that the banking system remained sound.
But concerns about bank safety had certainly crept into the minds of many businesspeople in the Boston area by Monday. A big fear is that the bank buying the failed bank will get even bigger and won’t be the trusted lender they had in Boston Private.
Many customers are still anxiously waiting to receive all of their cash. Jonathan Levine, chief executive of Folia Materials, a Bedford-based startup, said he couldn’t access the Silicon Valley Bank app Monday or access the account through the website.
“I’m not panicking, but if they haven’t figured out something about the administration in two days, I’ll start to worry,” he said.