The Federal Deposit Insurance Corporation this week rejected pleas to enforce $11 billion in community investments – and protect affordable housing projects – that the failed Silicon Valley Bank had pledged in 2021.

In response to questions from San Jose Inside about the fate of SVB community investments, a spokesman for the FDIC said simply, “Those pledges ended with the failure of the bank.”

The March 27 purchase by First Citizens Bancshares of “all of the assets and liabilities” of Silicon Valley Bridge Bank – created by the FDIC in the wake of the collapse of the Santa Clara-based Silicon Valley Bank three weeks ago – did not include an agreement signed by SVB as part of its merger with Boston Private Bank.

The failures of SVB and New York’s Signature Bank this month triggered the worst banking crisis in the U.S. since 2008. The new revelations of the impact of the SVB failure on numerous development projects such as affordable housing construction, new small business loans and charitable organizations are likely to send aftershocks through communities in Silicon Valley and beyond.

The California Reinvestment Coalition on March 24 delivered a petition signed by more than 20,000 people urging the FDIC to “enforce Silicon Valley Bank’s existing $11 billion community benefits agreement should it be sold to new owners.”

The First Citizens deal only included deposits and loans, which represent the bank’s primary source of revenue. It did not include SVB's community reinvestment agreement or a nearly $90 billion securities portfolio.

The FDIC this week said it had retained Blackrock Inc. to sell the securities portfolios of SVB and Signature Bank.

The California Reinvestment Coalition said the now-defunct agreement “facilitated the construction of critically-needed affordable housing projects in the Bay Area, which are now in jeopardy of significant delays and loss of funding.”

“In the immediate aftermath of SVB’s failure, federal regulators missed an opportunity to show the American public that they work in their best interest, and not in the interests of banks,” said Paulina Gonzalez-Brito, CRC chief executive officer. She said in a March 24 statement that honoring the 2021 agreement  “would be a signal to vulnerable communities that regulatory agencies care about equality.”

“We don’t understand why measures haven’t been taken to protect communities, particularly those communities made up of low- to moderate-income people and Black, Indigenous and people of color,” said Gonzalez-Brito. This is yet another example of how these communities are left behind while banks and the wealthiest groups receive bailouts.”

Kevin Stein, CRC chief of legal and strategy, added: “Taking emergency measures to protect all deposits provides an additional benefit to SVB and its successor, and this added benefit should come with additional responsibility and obligations to the public.”

California community groups expressed concerns over the potential loss of SVB investments at a March 17 town hall meeting. The CRC had called for regulators to halt all bank merger activity until current bank merger rules were updated to protect consumers and communities.

SVB had agreed as part of its merger with Boston Private Bank to a five-year, $11 billion investment plan, with $9 billion specifically for California, that included:

• $4 billion in small business loans of $1 million or less
• $4 billion in CRA community development loans and investments
• $1 billion in residential mortgages to low- and moderate-income borrowers;
• $60 million in charitable contributions
• $10 million to establish an affordable home mortgage program

  The documents:
  Purchase agreement, SVB by First Citizens
  Community-Benefits-Plan Silicon Valley Bank 2021