{"id":2282,"date":"2023-03-14T10:02:45","date_gmt":"2023-03-14T15:02:45","guid":{"rendered":"https:\/\/embarrdowns.com\/silicon-valley-bank-collapse-what-does-this-mean-for-the-tech-sector\/"},"modified":"2023-03-14T10:02:46","modified_gmt":"2023-03-14T15:02:46","slug":"silicon-valley-bank-collapse-what-does-this-mean-for-the-tech-sector","status":"publish","type":"post","link":"https:\/\/embarrdowns.com\/silicon-valley-bank-collapse-what-does-this-mean-for-the-tech-sector\/","title":{"rendered":"Silicon Valley Bank Collapse: What Does this Mean for the Tech Sector?"},"content":{"rendered":"

The collapse of the Silicon Valley Bank (SVB) has been the largest bank failure in the US since the 2008 financial crisis.[0]<\/a><\/sup> On Friday, March 8, the Federal Deposit Insurance Corporation (FDIC) shut down the California-based bank due to a catastrophic bank run.[1]<\/a><\/sup> SVB was the \u201cfinancial partner of the innovation economy\u201d and serviced \u201cnearly half” of all venture-backed US start-ups, including companies big and small, from Roku to D.C. based Compass Coffee.[2]<\/a><\/sup><\/p>\n

SVB was particularly flexible about lending tech startups money, often without the need of free cash flow or much in the way of assets, making it a preferred bank for many tech startups.[3]<\/a><\/sup> The bank had more than $200 billion in assets when it failed, which is far less than other large US banks, such as JPMorgan Chase\u2019s $3.31 trillion.[4]<\/a><\/sup><\/p>\n

The bank\u2019s original intention was to park the large sums of money from tech businesses in the form of ultra-safe US Treasury and mortgage bonds, which take years to mature but are relatively safe investments. However, when interest rates rose, the bank\u2019s investments were put in jeopardy.<\/p>\n

SVB was also criticized for its focus on diversity initiatives, which some argued took away from their core mission.[5]<\/a><\/sup> Florida Governor and presumptive presidential candidate Ron DeSantis also blamed the bank\u2019s diversity programs as a factor in their failure, saying \u201cI think that really diverted from them focusing on their core mission.\u201d[2]<\/a><\/sup><\/p>\n

The Biden administration has approved an extraordinary intervention, stating all depositors at the failed Silicon Valley Bank would have access to all their money.[6]<\/a><\/sup> The Dodd-Frank regulations that SVB fought against might have helped identify the bank\u2019s pitfalls earlier, and it remains to be seen how this will affect the tech sector moving forward.[7]<\/a><\/sup><\/p>\n

The FDIC said that it would protect all depositors at the two failed banks, not just smaller, insured, depositors.[8]<\/a><\/sup> The Federal Reserve and the Treasury Department also said that banks facing similar situations\u2014having to sell Treasury securities to meet deposits\u2014could instead borrow from the Fed using the Treasury securities as collateral.[8]<\/a><\/sup><\/p>\n

So, is this a bailout?[6]<\/a><\/sup> Technically no, as the FDIC is protecting depositors\u2019 money, but it is an extraordinary intervention.<\/p>\n

0. <\/span>“Bernie Sanders blames Trump-era policy for Silicon Valley Bank run” Business Insider, 13 Mar. 2023, https:\/\/www.businessinsider.com\/silicon-valley-bank-bernie-sanders-donald-trump-blame-2023-3<\/a><\/a><\/p>\n

1. <\/span>“There\u2019s a deeper story to Silicon Valley Bank\u2019s failure. What can we learn from it?” The Guardian, 13 Mar. 2023, https:\/\/www.theguardian.com\/commentisfree\/2023\/mar\/13\/svb-collapse-2008-financial-crisis<\/a><\/a><\/p>\n

2. <\/span>“Opinion | The Boys Who Cried \u2018Woke!\u2019” The New York Times, 14 Mar. 2023, https:\/\/www.nytimes.com\/2023\/03\/14\/opinion\/silicon-valley-bank-republicans-woke.html<\/a><\/a><\/p>\n

3. <\/span>“Despite rescue, Seattle startups and banks face SVB blowback” The Seattle Times, 14 Mar. 2023, https:\/\/www.seattletimes.com\/business\/despite-rescue-seattle-startups-and-banks-face-svb-blowback\/<\/a><\/a><\/p>\n

4. <\/span>“What is Silicon Valley Bank? The bank\u2019s collapse, explained.” Vox.com, 12 Mar. 2023, https:\/\/www.vox.com\/technology\/23634433\/silicon-valley-bank-collapse-silvergate-first-republic-fdic<\/a><\/a><\/p>\n

5. <\/span>“Republicans Have Found a Culprit for SVB\u2019s Collapse” The Atlantic, 13 Mar. 2023, https:\/\/www.theatlantic.com\/ideas\/archive\/2023\/03\/republicans-svb-collapse-wokeness-esg-dei\/673378\/<\/a><\/a><\/p>\n

6. <\/span>“Signature Bank’s collapse could deal a blow to cryptocurrency industry” The Washington Post, 13 Mar. 2023, https:\/\/www.washingtonpost.com\/technology\/2023\/03\/13\/signature-bank-collapse-crypto\/<\/a><\/a><\/p>\n

7. <\/span>“Trump-era banking law paved way for Silicon Valley Bank\u2019s collapse” Vox.com, 13 Mar. 2023, https:\/\/www.vox.com\/business-and-finance\/2023\/3\/13\/23638655\/silicon-valley-bank-trump-fdic-banking-law<\/a><\/a><\/p>\n

8. <\/span>“Silicon Valley Bank: Who’s to Blame?” City Journal, 13 Mar. 2023, https:\/\/www.city-journal.org\/silicon-valley-bank-who-is-to-blame<\/a><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The collapse of the Silicon Valley Bank (SVB) has been the largest bank failure in the US since the 2008 financial crisis.[0]<\/a><\/sup> On Friday, March 8, the Federal Deposit Insurance Corporation (FDIC) shut down the California-based bank due to a catastrophic bank run.[1]<\/a><\/sup> SVB was the \u201cfinancial partner of the innovation economy\u201d and serviced \u201cnearly half” of all venture-backed US start-ups, including companies big and small, from Roku to D.C. based Compass Coffee.[2]<\/a><\/sup><\/p>\n

SVB was particularly flexible about lending tech startups money, often without the need of free cash flow or much in the way of assets, making it a preferred bank for many tech startups.[3]<\/a><\/sup> The bank had more than $200 billion in assets when it failed, which is far less than other large US banks, such as JPMorgan Chase\u2019s $3.31 trillion.[4]<\/a><\/sup><\/p>\n

The bank\u2019s original intention was to park the large sums of money from tech businesses in the form of ultra-safe US Treasury and mortgage bonds, which take years to mature but are relatively safe investments. However, when interest rates rose, the bank\u2019s investments were put in jeopardy.<\/p>\n

SVB was also criticized for its focus on diversity initiatives, which some argued took away from their core mission.[5]<\/a><\/sup> Florida Governor and presumptive presidential candidate Ron DeSantis also blamed the bank\u2019s diversity programs as a factor in their failure, saying \u201cI think that really diverted from them focusing on their core mission.\u201d[2]<\/a><\/sup><\/p>\n

The Biden administration has approved an extraordinary intervention, stating all depositors at the failed Silicon Valley Bank would have access to all their money.[6]<\/a><\/sup> The Dodd-Frank regulations that SVB fought against might have helped identify the bank\u2019s pitfalls earlier, and it remains to be seen how this will affect the tech sector moving forward.[7]<\/a><\/sup><\/p>\n

The FDIC said that it would protect all depositors at the two failed banks, not just smaller, insured, depositors.[8]<\/a><\/sup> The Federal Reserve and the Treasury Department also said that banks facing similar situations\u2014having to sell Treasury securities to meet deposits\u2014could instead borrow from the Fed using the Treasury securities as collateral.[8]<\/a><\/sup><\/p>\n

So, is this a bailout?[6]<\/a><\/sup> Technically no, as the FDIC is protecting depositors\u2019 money, but it is an extraordinary intervention.<\/p>\n

0. <\/span>“Bernie Sanders blames Trump-era policy for Silicon Valley Bank run” Business Insider, 13 Mar. 2023, https:\/\/www.businessinsider.com\/silicon-valley-bank-bernie-sanders-donald-trump-blame-2023-3<\/a><\/a><\/p>\n

1. <\/span>“There\u2019s a deeper story to Silicon Valley Bank\u2019s failure. What can we learn from it?” The Guardian, 13 Mar. 2023, https:\/\/www.theguardian.com\/commentisfree\/2023\/mar\/13\/svb-collapse-2008-financial-crisis<\/a><\/a><\/p>\n

2. <\/span>“Opinion | The Boys Who Cried \u2018Woke!\u2019” The New York Times, 14 Mar. 2023, https:\/\/www.nytimes.com\/2023\/03\/14\/opinion\/silicon-valley-bank-republicans-woke.html<\/a><\/a><\/p>\n

3. <\/span>“Despite rescue, Seattle startups and banks face SVB blowback” The Seattle Times, 14 Mar. 2023, https:\/\/www.seattletimes.com\/business\/despite-rescue-seattle-startups-and-banks-face-svb-blowback\/<\/a><\/a><\/p>\n

4. <\/span>“What is Silicon Valley Bank? The bank\u2019s collapse, explained.” Vox.com, 12 Mar. 2023, https:\/\/www.vox.com\/technology\/23634433\/silicon-valley-bank-collapse-silvergate-first-republic-fdic<\/a><\/a><\/p>\n

5. <\/span>“Republicans Have Found a Culprit for SVB\u2019s Collapse” The Atlantic, 13 Mar. 2023, https:\/\/www.theatlantic.com\/ideas\/archive\/2023\/03\/republicans-svb-collapse-wokeness-esg-dei\/673378\/<\/a><\/a><\/p>\n

6. <\/span>“Signature Bank’s collapse could deal a blow to cryptocurrency industry” The Washington Post, 13 Mar. 2023, https:\/\/www.washingtonpost.com\/technology\/2023\/03\/13\/signature-bank-collapse-crypto\/<\/a><\/a><\/p>\n

7. <\/span>“Trump-era banking law paved way for Silicon Valley Bank\u2019s collapse” Vox.com, 13 Mar. 2023, https:\/\/www.vox.com\/business-and-finance\/2023\/3\/13\/23638655\/silicon-valley-bank-trump-fdic-banking-law<\/a><\/a><\/p>\n

8. <\/span>“Silicon Valley Bank: Who’s to Blame?” City Journal, 13 Mar. 2023, https:\/\/www.city-journal.org\/silicon-valley-bank-who-is-to-blame<\/a><\/a><\/p>\n","protected":false},"author":3,"featured_media":2281,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[],"_links":{"self":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/2282"}],"collection":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/comments?post=2282"}],"version-history":[{"count":0,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/2282\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media\/2281"}],"wp:attachment":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media?parent=2282"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/categories?post=2282"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/tags?post=2282"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}