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The collapse of Silicon Valley Bank: A one-off calamity, or sign of more trouble for California?

Original post made on Mar 13, 2023

Silicon Valley Bank's failure is a sign of weakness in the tech industry, and that could spell trouble for the state of California.

Read the full story here Web Link posted Monday, March 13, 2023, 9:03 AM

Comments (4)

Posted by Dave Ross
a resident of Portola Valley: Brookside Park
on Mar 13, 2023 at 6:16 pm

Dave Ross is a registered user.

How ironic. SVB and its VC buddies successfully lobbied the Trump administration in 2018 to relax Dodd-Frank rules and oversight for banks with less than $250B in assets. "Too restrictive, will divert money from innovative startups, blah, blah, blah." Then SVB management makes the brain-dead decision to park the majority of its deposits in long-term bonds with poor liquidity and fixed returns. Brain dead because they knew that their customer base consists largely of cash-hungry startups and VCs who could pull out large amounts of cash at any time, and all at the same time in the event of tech market instability.

Last week when SVB didn't pull the trigger on available funding to bridge their cash shortfall, Theil & his ilk instructed their start-up ventures to immediately pull their funds from SVB - creating a massive ($42B) run. But not all got their cash out in time, so those VC folks were at risk of losing investments. The solution? Why not demand a federal intervention? "Sure, we're all libertarians over here, but when it's our money on the line, we love socialism!" As the saying goes, "profits should be privatized, and losses should be socialized."

This failure is not about rising interest rates. We've had a year's notice that rates were going up, and even financial non-geniuses could see the problem of a pending liquidity crisis. The silver lining in this is that it will be hard (I hope) for these folks to object to Biden's plan to restore prudent regulation of mid-sized banks. And it is a warning about the kind of crash that will result from the US defaulting on its debt.

Posted by Menlo Voter.
a resident of Menlo Park: other
on Mar 14, 2023 at 7:44 am

Menlo Voter. is a registered user.

Well said Dave. Unfortunately, the Republicans will fight tooth and nail any increase in oversight coming from the Biden administration. Can't have a Democrat do the right thing can they? Party before country. As usual.

Posted by Thoughtful
a resident of Atherton: other
on Mar 14, 2023 at 11:13 am

Thoughtful is a registered user.

Barney Frank is on the board of the other bank that collapsed (Signature) and lobbied for relaxation of the rules on their behalf.

SVB didn't really do anything "wrong" here. Investing cash in treasuries? That's hardly a reckless move.

We need to get inflation under control (= government spending).

Posted by Peter Carpenter
a resident of Menlo Park: Park Forest
on Mar 14, 2023 at 11:47 am

Peter Carpenter is a registered user.

"Investing cash in treasuries? That's hardly a reckless move."

It is if your customers can't wait ten years to get their cash out for day to day uses.

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