Behind The Scenes Of A Bank Collapse: Chaos, Panic, And The Golden Rule
“You have our money, but our employees weren’t paid. This is a nightmare!” Tweeted one Patriot Software direct deposit customer following the Silicon Valley Bank collapse. And it was a nightmare. …
“You have our money, but our employees weren’t paid. This is a nightmare!” Tweeted one Patriot Software direct deposit customer following the Silicon Valley Bank collapse.
And it was a nightmare. Not just for our customers but also for our 185 remote employees. We were just as confused and angry.
By now, we know the narrative of the SVB’s sudden collapse on Friday, March 10, 2023. Touted less than a month before as one of the best banks in America, SVB collapsed in a less than 48-hour span and was taken over by the FDIC in the middle of the workday.
But you may not have read about the sheer magnitude of work that went into navigating the second-biggest bank failure in U.S. history.
I’m the CEO of a payroll software company that used Silicon Valley Bank to process our customers’ direct deposits. No juicy breaking news—just a raw, behind-the-scenes account of what Patriot Software’s remote team, our customers, and their employees went through.
Friday, March 10
As a payroll company, you never want to have a late payroll. Imagine waking up to alerts that nobody had been paid … scary, right? That’s exactly what happened on Friday.
1. Tell Me This Isn’t Real
“Our employees reported their direct deposits weren’t in their bank accounts at 7:00 a.m. (ET). We immediately began communicating with our SVB contact to find out what the holdup was,” Jackie White, Head of Risk and Treasury at Patriot Software, recounted.
Initially, our SVB contact told us that employees didn’t get paid because the system was overwhelmed. Mike Streb, Patriot Product Manager, added some much-needed comic relief that morning when he quipped, “I have been overwhelmed since 2012, but I still get things done.”
2. The Panic Begins
As we now know, the SVB system wasn’t overwhelmed. It was crumbling at a breakneck pace. We received an email at 11:56 a.m. with one single line from our SVB point of contact with a link to the announcement that regulators had shut down SVB. Yep, that’s when and how we learned that SVB didn’t just have some delays in their processes … but that regulators had shut the bank down. An email. No calls. No explanation for our thousands of customers. That was it, one email. Unbelievable!
“We were on a Zoom call when we saw the email come through. On a shared screen, we all read the FDIC memo together. After a minute of silence, it sank in that one of the worst-case scenarios had happened: the bank was shut down,” Patriot’s Chief Product Officer, Kyle Dreger, shared. “I think we all took a few moments to let that new reality sink in, but it wasn’t long before you could feel a clear unspoken understanding that, while we had a million questions, we were going to find a way to get employees paid.”
At this point, word had spread about the SVB collapse—customers were inundating us with phone calls, emails, and chats. We braced for impact—8,100 (out of 57,000) Patriot companies nationwide had run payroll with direct deposit for March 10. They were understandably angry about the SVB collapse and wanted to know where their money was.
We had no immediate answers. This wasn’t a systems issue that we could plan for. This was a systemic banking issue that was beginning to reverberate across the American financial sector. How many banks get shut down in the middle of the day and taken over by the FDIC because of a bank run?
3. Shake It Off And Get To Work
To put it politely, I was ticked, really ticked. We’d been let down by our banking partners at SVB, which in turn caused Patriot to let down thousands of customers that rely on us to make sure their employees get paid on time.
There was no time to point fingers and complain. What good would that do at a time like this, anyway?
There was work to be done—a lot of work. We went into overdrive. We needed to:
- Come up with a plan
- Tell all Patriot employees what was happening
- Communicate with our customers
- Speak to outside specialists
- Replace SVB with new banking partners—immediately—with two (yes, two!) of the largest financial institutions in the nation
To coordinate all internal operations, Kyle Dreger set up and led an ongoing war room on Zoom with Patriot’s Executive Team and key managers.
Every Patriot employee had access to the war room—even Patriot’s President and Chief Legal Officer, Mike Wheeler, who was aboard a cruise ship to the Bahamas for his brother’s wedding and armed with limited service.
“How do we get access to over $100 million in dollars within SVB and get funds to people relying on their paychecks as fast as humanly possible?” asked Wheeler, trying to run legal and financial triage from his iPhone. “Call the lawyers, accountants, insurance, everyone; work together to get in front of the FDIC regulators—now!”
4. Communication Is Key
We prioritized finding real-time solutions and over-communicating what we knew to customers nationwide.
We communicated with over 2,000 business owners via call, email, and online chat. To reach tens of thousands of customers, we established a communications page, sent emails, wrote press releases, and posted on social media.
“We were swamped to the point where our phone lines were at capacity, giving customers the incorrect impression that we had shut off our phones. To keep up, we engaged co-workers company-wide to hop on phones to assist in taking calls from frantic customers,” shared Julie Solon, Customer Care Manager. “The entire team remained calm, cool, and collected, working very hard to keep up with the constant updates to pass along to our customers. I am very proud of the team for all their efforts to keep customers informed, all while working remotely. We needed to take a few mental health breaks during the event.”
Saturday, March 11, and Sunday, March 12
I went into the weekend with a pit in my stomach. As a business owner, I can tell you: The number one rule of owning a business is always pay your employees. Not only had I not been able to do that on Friday, but the SVB collapse also prevented our customers’ 46,500 employees from getting paid.
We knew our customers’ money was protected. Still, we had no idea when we’d get access to those funds or be able to deposit them in employees’ bank accounts without immediate outside intervention.
1. Grassroots Marketing
We did everything possible to create results over the weekend when all banks were closed. Our goal was simple: Encourage the government to release payroll dollars immediately when banks reopened Monday morning.
To do this, Wheeler had been connecting with current and former Silicon Valley Bank bankers who collectively suggested we launch a grassroots marketing campaign.
Late Saturday night, I wrote an Open Letter to Our Government, calling upon our government and lawmakers to step in. A small group of talented writers hashed out a Twitter thread to increase our reach.
2. National Attention
We launched our campaign first thing Sunday morning, which started gaining traction throughout the day. Ultimately, it hit Senators and truly helped show the heart behind helping the everyday working folks who had no investment say in the downfall of SVB.
U.S. Senator Sherrod Brown, the Chairman of Senate Banking, personally called and thanked me for my Open Letter to Our Government. He said that he discussed our letter with Federal Reserve Secretary Janet Yellen, FDIC Chairman Martin Gruenberg, Federal Reserve Chairman Jerome Powell, and other leaders. He thanked Patriot for highlighting how many thousands of American small businesses were impacted by the abrupt closure of Silicon Valley Bank. Way to go, Senator Brown!
By the end of the day Sunday, the Treasury, Federal Reserve, and FDIC had taken action to assure depositors that their money would be fully insured and accessible on Monday morning.
This was huge! But we weren’t done yet.
Monday, March 13
On Monday, we were armed with answers and prepared for a busy day of customer communication.
Still, we had to temper expectations—although depositors would have access to their money, we had to wait for SVB’s direct deposit systems to regain functionality. That didn’t happen until Tuesday.
Tuesday, March 14
The time had come to get 46,000+ employees paid. With SVB’s systems back up and running, they could finally process Friday’s direct deposits.
When employers called us to tell us their employees nationwide received their direct deposit, there was a lot of joy and relief at Patriot.
“Ultimately, I don’t think I took a single deep breath until Tuesday when we saw paychecks start hitting pockets,” Kyle Dreger shared.
The Golden Rule Leads The Way To Success
I credit our success to one thing—The Golden Rule, a core tenet of Patriot’s brand that says we treat others how we want to be treated and genuinely care about our customers.
Sure, we were exhausted. But we put our customers and their employees first. Dreger, who balanced his round-the-clock work with being a dad to three young kids under five—including a newborn daughter—shared, “There were moments where I’d be on a Zoom meeting at 11 p.m. slowly bouncing my newborn to sleep. And you just did it, you know? Because somewhere, there was some other parent with kids who didn’t get their paycheck. My wife and I were lucky; not getting paid was stressful, but we had food in the fridge. I know that’s not the case for many people, and while the physical stamina wasn’t always there, the motivation was.”
And we were thrilled when reassured employers nationwide came out in droves to commend our customer-first mindset.
One Facebook comment read, “I just want to say that Patriot rocks! This whole thing could have been so much worse; your timely response, frequent updates, and handling of this whole thing have been amazing! Thank you!!! I hope your staff gets a well-deserved break soon, I am sure they earned it!”