What happened
Shares of Amazon.com (AMZN 0.01%) rose on Monday after the U.S. government took drastic action to avert a banking crisis. Investors seemed to take confidence that, in particular, many tech companies who buy services from Amazon Web Services will continue to be able to do so now that the government has agreed to make sure no depositors in Silicon Valley Bank lose money. As of 1:23 p.m. ET, Amazon's stock price was up roughly 2%.
So what
The shocking collapse of SVB Financial Group's (SIVB.Q) Silicon Valley Bank late last week sent shock waves through both the financial and tech industries. Silicon Valley Bank was a major provider of loans and other banking services to the venture capital industry and countless tech start-ups The bank was closed by the state of California on Friday and the FDIC was named its receiver.
Many companies in the tech and VC fields feared that Silicon Valley Bank's failure would prevent them from accessing the cash they need to fund their operations. Investors, in turn, worried that many start-ups could be forced to slow their expansion or even shut down completely.
Fortunately, banking regulators stepped in to protect depositors and ensure they could access their funds at Silicon Valley Bank starting Monday. "Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system," Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, and FDIC Chairman Martin Gruenberg said in a joint statement on Sunday.
Now what
The news was welcomed by Amazon's shareholders. Had regulators not acted to safeguard depositors, the tech industry would have suffered a painful blow.
Many start-ups rely on Amazon Web Services (AWS) for their cloud computing needs. If a significant number of these businesses were forced to pull back on their growth investments, AWS' growth likely would have slowed. But that worrisome situation now seems to have been avoided, and Amazon's investors are breathing sighs of relief.
