On September 17, 2008, the Financial Times reporter John Authers decided to run to the bank. In his Citi account was a recently deposited check from the sale of his London apartment. If the big banks melted down, which felt like a distinct possibility among his Wall Street sources, he would lose most of his money, because the federal deposit-insurance limit at the time was $100,000. He wanted to transfer half the balance to the Chase branch next door, just in case.

When Authers arrived at Citi, he found “a long queue, all well-dressed Wall Streeters,” all clearly spooked by the crisis, all waiting to move money around. Chase was packed with bankers too. Authers had walked into a big story—but he didn’t share it with readers for 10 years. The column he eventually published, titled “In a Crisis, Sometimes You Don’t Tell the Whole Story,” was, he wrote this week, “the most negatively received column I’ve ever written.”

I found myself rereading Authers’s column on Monday, after a bank run doomed Silicon Valley Bank and long lines were seen outside at least one other regional bank. Television crews have been deploying to local branches in search of worried depositors. Reporters and editors have been making split-second decisions about what to say, and what not to say, while the wider banking sector is stressed. Some financial pundits are choosing their words very carefully while on air and on Twitter. “It is easy for any of us to cause a [bank] run at this very moment,” Jim Cramer said on CNBC Monday morning. I could hear the self-awareness in his voice as he discussed banks like First Republic, which saw its stock fall 62 percent on Monday.

But for every cautious commentator, there is a panicky Twitter thread and a reckless talking head. When a Fox & Friends co-host said, “It’s time to be honest with the American people,” Ainsley Earhardt blurted out, “We need to go to our banks and take our money out.”

Most media outlets have higher standards than Fox & Friends. But ethical deliberations about how to cover a financial emergency are mostly confined to college classrooms and journalism blogs. When a piece of information can be precious, profitable, and dangerous, all at the same time, what should members of the media do with it?

The Information’s founder and CEO, Jessica Lessin, faced a version of that quandary after Silicon Valley Bank disclosed nearly $2 billion in losses and announced plans to shore up its balance sheet after the markets closed on Wednesday. Venture capitalists reacted with concern right away in text chains and Slack channels; Lessin told me she picked up on “nervousness” from sources Wednesday night.

But The Information, a 10-year-old tech publication with subscribers throughout Silicon Valley, did not report on the anxious chatter right away. Its first reference to the bank’s trouble came in a Thursday morning email newsletter, and the headline was about the bank’s stock plunging in after-hours trading, with no mention of the VC alarm bells. Lessin said this was intentional: “‘Talk’ isn’t nearly as newsworthy as ‘action,’” she told me. She directed her team, she said, “to start reporting on concrete reactions—what were founders actually doing, and what the bank was doing and saying.”

By midday on the West Coast, the team had reportable answers. The six-bylined story began this way: “Silicon Valley Bank CEO Greg Becker on Thursday told top venture capitalists in Silicon Valley to ‘stay calm’ amid concerns around a capital crunch that wiped nearly $10 billion off the bank’s market valuation.” The Information’s scoop was soon matched by other news outlets, but there was much more to learn. “As we were getting word of companies pulling their money,” Lessin said, “we were making sure to ask questions like ‘How much?’ and other specifics, as there was a difference between hedging, bailing, etc.”

By the time Lessin took me to dinner during SXSW in Austin on Saturday, she looked like many of the other founders at the conference who’d barely slept for several days. Silicon Valley Bank was The Information’s bank, so Lessin was part of the bank run she’d been covering. By Thursday night, most of the company’s money was transferred out, and Lessin spent the next few days setting up new accounts and processes. I asked her on Monday if this felt like a conflict of interest, because her company was affected by the story it covered—a fact not disclosed to readers in that first scoop, but made clear by The Information in its subsequent coverage. Lessin acknowledged the tension, and said she’d simultaneously tried “to serve readers (especially with so much on the line) and serve my employees by wisely managing our business and trying to keep things as smooth as possible for them during unprecedented times.”

Not everyone was a fan of the aggressive reporting that put the extent of the bank’s problems on the public record. “As a business owner,” Rafat Ali, the CEO of the travel-news site Skift, tweeted on Thursday, “the real-time reporting on SVB is NOT helpful at all, only increasing panic.” Lessin replied by emphasizing the need for caution, but then posed the question “Is it fair to NOT report facts around the situation and let that info be known only to insiders?”

In 2008, Authers could have dispatched a photographer to his Citi branch. “We did not do this,” he wrote. “Such a story on the FT’s front page might have been enough to push the system over the edge. Our readers went unwarned, and the system went without that final prod into panic.”

Authers, now at Bloomberg, remains confident that he made the right choice. He found himself musing on Monday about how much has changed since 2008. “Junior financial journalists have it drilled into them that you have to be very, very careful never to seem to predict a bank run—it’s just possible you will end up taking the blame for causing one,” he wrote in his Bloomberg newsletter. “But one of the critical changes since 2008 is that the monopoly that established media enjoyed over financial information has now disappeared.”

Indeed, now that virtually everyone is a member of the media, thanks to social networking, does it even matter how journalists behave if investors can tweet themselves into a panic?

The answer is still yes. In fact, the ease with which rumors can now spread might make good reporting more valuable than ever.

When I asked Bill Grueskin, formerly a deputy managing editor at The Wall Street Journal, about the factors that newsrooms should consider when reporting on a bank crisis, he said that “the main thing for reporters to do is to report the news—as accurately and quickly as they can—and avoid exaggerating or minimizing risks of the fallout from their stories.”

If I’d had a cameraphone at that Citi branch in September 2008, I would have wanted to take a photo. But in a financial crisis, journalists should be the verification layer for consumers, helping their audience separate their fears from the facts by reporting what they actually know. And as the panic passes, journalism becomes a crucial tool of accountability and reform.

“Reporters who can provide historical context—explaining why 2023 is not 2008, and why SVB is not Lehman—perform a tremendous public service,” Grueskin said. “As do those who can dissect what regulatory or legislative changes enabled this collapse, and what would be required—politically as well as legislatively—to prevent a similar one from happening anytime soon.”

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Last Friday, California regulators shut down Silicon Valley Bank—a prominent lender for start-ups and venture-capital firms—marking the largest American bank failure since the 2008 financial crisis. Two days later, the cryptocurrency-focused, New York–based Signature Bank was also seized by regulators. What happens next for the U.S. economy remains to be seen. But what is becoming apparent is that the promise of Silicon Valley is beginning to lose its luster.

First, here are three new stories from The Atlantic:

The next stage of COVID is starting now. Why Republicans are blaming the bank collapse on wokeness The age of American naval dominance is over.

A House of Cards

The story of Silicon Valley Bank coincides with the rise of the start-up—and possibly with its fall, at least insofar as the start-up has existed in the 21st-century public imagination.

Founded in 1983, the bank targeted a particular cohort of borrowers—“start-ups, technology firms, and wealthy individuals,” as my colleague Annie Lowrey puts it. By lending to a number of start-ups whose ventures found success, SVB became one of the 20 largest banks in the country. But in the longer term, the bank became vulnerable to its own lack of diversification.

Annie writes:

SVB’s clientele is heavily concentrated in the tech industry, which boomed during the pandemic. That led to a dramatic increase in SVB’s books … Normally, banks take such deposits and lend them out, charging borrowers different interest rates depending on their creditworthiness. But relatively few firms and individuals were seeking such bank loans in the Bay Area at the time, because the whole ecosystem was so flush with cash.

What happened next? “SVB parked the money in perfectly safe government-issued or government-backed long-term securities … [and] failed to hedge against the risk that those bonds might lose value as interest rates went up,” Annie explains. And thanks to Federal Reserve interest hikes aimed at curbing inflation, this “is exactly what happened.” When a sizable share of account holders wanted to withdraw their funds from the bank, SVB was forced to sell its bonds at a loss to come up with the cash. The scheme didn’t pan out.

Yesterday evening, the Treasury Department announced that the Federal Deposit Insurance Corporation will tap its deposit-insurance fund to repay account holders at both SVB and Signature Bank, in New York. Account holders will not, in other words, be left in the lurch—nor will taxpayers have to foot the bill for their banking misfortunes.

But, as the writer Will Gottsegen points out in The Atlantic, even if tech has “probably averted a mass start-up wipeout,” the fiasco has revealed the cracks in the industry—or, perhaps, made those liabilities all the more difficult to ignore. Gottsegen writes:

It wasn’t so long ago that a job in Big Tech was among the most secure, lucrative, perk-filled options for ambitious young strivers. The past year has revealed instability, as tech giants have shed more than 100,000 jobs. But the bank collapse is applying pressure across all corners of the industry, suggesting that tech is far from being an indomitable force; very little about it feels as certain as it did even a few years ago. Silicon Valley may still see itself as the ultimate expression of American business, a factory of world-changing innovation, but in 2023, it just looks like a house of cards.

Silicon Valley isn’t over. But, as Gottsegen sees it, the collapse of SVB has dampened the “frisson of possibility” that lured untold aspiring tech entrepreneurs and investors into the fray:

The panic from venture capitalists around the bank’s fall reveals that there’s little recourse when these sorts of failures occur. Sam Altman, the CEO of OpenAI, proposed that investors just start sending out money, no questions asked. “Today is a good day to offer emergency cash to your startups that need it for payroll or whatever. no docs, no terms, just send money,” reads a tweet from midday Friday. Here was the head of the industry’s hottest company, rumored to have a $29 billion valuation, soberly proposing handouts as a way of preventing further contagion. Silicon Valley’s overlords were once so certain of their superiority and independence that some actually rallied behind a proposal to secede from the continental United States; is the message now that we’re all in this together?

Whatever the message, SVB’s woes lay bare a tech industry as fragile as any other. Ideas, innovation, and even hefty sums of VC cash aren’t fail-safe. The mirage, it seems, has dissolved.

Related:

Silicon Valley was unstoppable. Now it’s just a house of cards. Silicon Valley Bank’s failure is now everyone’s problem

Today’s News

President Joe Biden announced that managers at SVB, and any other banking institutions seized by the Federal Deposit Insurance Corporation, will be replaced. A powerful storm system is expected to bring heavy rain, snow, and strong winds to states across the Northeast beginning tonight and continuing into Wednesday morning. Chinese President Xi Jinping plans to meet with Vladimir Putin in Moscow as early as next week, Reuters and The Wall Street Journal report.

Evening Read

(Kevin Winter / Getty)

The Most Surprising Performance of the Oscars

By Spencer Kornhaber

All storytelling requires artifice, but last night’s Academy Awards highlighted that movies tend to involve more industrial processing than American cheese. The Best Picture nominees included far-from-realistic spectacles portraying CGI blue people, dimension-hopping laundromat owners, and Tom Cruise flying at Mach 10. The mega-studios Disney and Warner Bros. enjoyed infomercial-like tributes, reminders that Hollywood is a business. Jimmy Kimmel, the ceremony’s host, kept forcing jokes about last year’s infamous slap and the so-called crisis team that was on hand this year to prevent a repeat.

But the best pageantry still makes space for unpredictability—and last night, another artistic medium, music, helped greatly in that effort. Take, for example, the composer M. M. Keeravani. He delivered an acceptance speech for Best Original Song—for “Naatu Naatu” from the Indian blockbuster RRR—that was, itself, a song. “There was only one wish on my mind,” Keeravani crooned to the tune of The Carpenters’s “Top of the World,” inspiring laughter in the audience. “RRR has to win / pride of every Indian / and must put me on the top of the world!”

Read the full article.

More From The Atlantic

The Supreme Court just keeps deciding it should be even more powerful. David Frum: The Iraq War reconsidered

Culture Break

(Allyson Riggs / A24)

Read. I Have Some Questions for You, a new novel by Rebecca Makkai that probes the line between justice and revenge.

Watch. Everything Everywhere All at Once, the “mind-bending journey” that won seven awards at last night’s Oscars ceremony (and prompted two of the evening’s most affecting speeches).

Play our daily crossword.

P.S.

Before Steve Jobs, Mark Zuckerberg, and Elon Musk, there was Leland Stanford. In 1876, Stanford bought a 650-acre farm in California’s Santa Clara County, where he applied industrial methods to horse breeding. He named the area after a tall nearby tree: Palo Alto.

Stanford’s story is recounted in Palo Alto: A History of California, Capitalism, and the World, a new history of Silicon Valley by the journalist Malcolm Harris. You can read an excerpt in The Atlantic here.

— Kelli

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