California Regulators have closed down Silicon Valley Bank to protect insured depositors the State Department of Financial Protection and Innovation says ensure depositors will have full access to their deposits no later than Monday morning svb Financial Group parent company of Silicon Valley Bank reported earlier today it is looking for a seller.
Investors have been pulling money out of a bank which resulted in its stock tumbly the FDIC now taking over the Bank closed by Regulators banking experts say svb's issues are unique to the bank this is not indicative of wider problems within the banking industry big banks have significant cash reserves but those stocks are down anyway so much so such.
Secretary of the Treasury Jenny yella and his weighing in on this she met with the fed the FDIC and the OCC leadership today to discuss svb treasury says yell and quote Express full confidence in banking regular leaders to take appropriate actions in response and noted that the banking systems remain resilient uh so let's bring in a.
Friend of the program Zane Jaffer Tech investor and analyst he's been following this story very closely today Zane thanks so much for being with us um and correct me if I'm wrong is it safe to say this took many by surprise today including you maybe okay this is the 2008 moment for the startup ecosystem and it's the second.
Largest financial um situation we've seen it was a surprise um You probably have you know we started seeing the news yesterday and the News was really poorly timed and I think that's part of the reason we're in this situation now we're talking about an announcement day a day after silvergate.
Collapsed Silicon Valley Bank announced this and when you say to the public Don't Panic what do you think the public are going to do what do you think startups are going to do they're not going to take the risk they're going to do a run on the bank and that's what we've seen unfold so in some ways are you surprised when someone that you look.
Up to in the banking ecosystem that you entrust with your money says Don't Panic are you surprised if people panic probably not but I'm shocked at the scale of the impact here and um the uncertainty that Now lies forwards yeah it seems like some uh like Janet Yellen though are um you know urging caution saying uh the underlying.
System remains strong but Silicon Valley Bank it was the nation's 16th largest bank to your point uh this was the second biggest bank failure since Washington Mutual went under back in 2008 we all remember that but what does this do uh you were kind of alluding to some of these concerns with the startup Community itself is this going to Spook.
Investors are they going to want to invest in the startup game as much as they have been after this fiasco if you want to see where things are going to go with svb you've got to look at where they've come from and they've got a 40-year legacy of supporting startups I founded a startup back in the day when I was an immigrant and I came.
To the US svb had my back we only had so little cash in our bank and svb came to us and gave us Adventure debt loan which allowed us to keep growing raising more and more money eventually the company sold for 780 million dollars but that type of outcome that type of help isn't possible if saver like SBB isn't there for startups and this is a very sad.
Moment for many people in the startup ecosystem because svb has been there for us many Founders also know svb has banked them when no one else is willing to bank them they're there as a helper of people that have a liquid stock and they've spoiled a lot of Founders you know they used to take uh people to Lady Gaga concerts and they had a nice box at.
The Warriors Stadium in San Francisco they really understood how to work with startups and with them no longer around I do get concerned about what the future looks like for the early stage ecosystem and what it currently looks like for poor startups that have their money stuck in svb okay but you know Zayn and correct me if I'm wrong was the writing.
On the wall for this failure because uh just as of late this was a bank that was ranked in Forbes as a good bank to do business with many you know people who watch the industry very closely uh we're saying to buy svb stock as of late so I'm struck by how quick this all was precipitated okay you could say the writing is on the.
Wall but that's only now when the fog is clearing and we have the benefit of looking in hindsight there were some poor treasury management and risk management issues made at the bank the fact that they I mean look they grew very fast they've quadrupled in such a short period with so much froth in the Venture ecosystem flowing to Silicon.
Valley Bank they had to put that money to work somewhere their mistake came down to the fact that they put too much money in long duration treasury bonds and mortgage-backed securities and anyone that knows basic economics knows if you don't ladder carefully if you have all your money tied up in long duration Securities guess what happens.
When interest rates increase the prices of such Securities drop very significantly especially if they're long duration so that was the issue and hear you but the writing might be on the banks that are in the same predicament some banks have the luxury of not having to Mark to Market their long-term portfolio of treasuries and.
Bonds and what we're seeing unfold here is svb trying to be conservative trying to take the lead and say to people look we sold some of our portfolio of uh long-term Securities at a loss we're a little bit concerned about the fact that the startup ecosystem is under stress and deposits are decreasing so we're going to go and do a primary offering.
And sell some of our stock and that's when contagion spread it was a series of things I don't think we'll be having this conversation if they had done a better job with communication maybe timed a little bit better but they have to silvergate collapses seriously that's the worst timing possible wow according to the Associated Press they said.
Shortly before noon Eastern the FDIC announced it was shuttering the bank apparently in situations like this it's customary for the FDIC uh to wait till close a business before announcing any such actions so we can uh you know read that for what it is I want to put up this tweet from Fox Business is Charlie gasparino because now the question is.
Are there sellers out there who maybe can salvage the bank and take it over um he's reporting JP Morgan is said to be uninterested in buying sbv Financial given its experience with bear Stearns back in the day and so he's reporting on this do you think that's where it goes from here is it going to get bought fed has to.
So job is to ensure the stability of our financial system if all of these uninsured deposits and the creditors are not made whole we are going to lose our trust in the banking system if we lose trust in the banking system guess who's next a whole series of regional Banks you're going to have Banks like First Republic and.
Smaller banks that people are going to do another run on the bank and I don't think the FED wants to see this happen and you might look at the headlines and see okay so svb seems like the FDIC has stepped in and is helping people with insured deposits break that down for a second did you know that svb has 97 of its uh deposits are not insured they are.
Far above the 250 000 FDIC limit so svb um is one of the one of the banks that has uh you know a lot of exposure but people are going to be looking under the curtains at many other Banks unless the FED steps in or unless there's a white knight and savior now I know many of the senior Executives and even some founders of other Banks they are having a real.
Blast right now their website struggling to cope with the demand is people are desperately trying to get money out across to them if you are a major bank and you're looking at svb uh do you really want to go in underneath this chaos and try to buy these accounts when people are calling your phone non-stop trying to transfer money to you.
Hmm all right just lastly though Zane what if you're uh uh what if you do business with the bank what if you had deposits in the bank uh you know what are you thinking right now I have startups that I've invested in our VC fund has invested in that are in this predicament they weren't able to pull money out fast enough and they are.
Clueless as to what's happening we've been assured at least as far as that 250 000 ago the FDIC is there and on Monday we'll be able to withdraw the money however what happens with all the rest of the funding uh we don't know that might be a long way there's concerns that creditors might not be made whole and in the interim what's that's.
Happening these Founders they don't know how they're going to make payroll there are certain mergers and acquisition deals on pause right now term sheets are being pulled right now and if this continues you're going to have a whole sway of the tech industry which by the way svb says 50 of startups bank with them these startups if they don't make.
Payroll if they can't be a going concern you're going to see a contagion effect and then we will start to see Mass layers in the tech ecosystem which we haven't seen yet on this scale all right uh kind of dire predictions there saying Jaffer as always we appreciate your insight into these major headlines and we'll talk again have a good weekend.
3 thoughts on “Silicon Valley Bank shut down, second-absolute top bank collapse in U.S. history | LiveNOW from FOX”
😳..HSBC has a excessive proportion of uninsured, and to boot they provided out SVB fallout..😬..It is cherish 1-1=0..🤫..
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