In the aftermath of the collapse of Silicon Valley Bank, San Jose Mayor Matt Mahan is blasting the federal government’s approach to the crisis — calling it “weak” and “half-hearted.”
U.S. Treasury Secretary Janet Yellen said during a Sunday morning broadcast of Face the Nation that the government could not commit to guaranteeing the deposits of customers of the defunct bank — or even confirm when they might have access to their funds. She only said it’s “something we’re working to try to resolve.” But later in the day Sunday, FDIC officials announced all depositors would be fully protected and have access to their money by Monday morning.
After the announcement, Mahan said on social media the “slow response from Washington” is concerning and indicative of the federal government’s misunderstanding of Silicon Valley’s startup ecosystem, which serves as an engine of innovation for the country.
Thanks to the Fed Govt for finally stepping up and doing the right thing to ensure employees get paid this week. Clearly a lot of scrutiny needed re: role of regulators and bank execs, but the slow response from Washington is very concerning.
— Mayor Matt Mahan (@MattMahanSJ) March 12, 2023
Mahan said swift action is critical as hundreds of thousands of employees are counting on paychecks from companies and payroll providers that banked with SVB.
“The secretary’s approach is weak, half-hearted and wrong,” Mahan said in a statement earlier Sunday. “We don’t have time to wait for a white knight to swoop in and acquire the bank. Half of Silicon Valley’s startups are at risk of missing payroll in the days ahead if the FDIC doesn’t guarantee and give immediate access to their deposits.”
The Biden administration also confirmed that all depositors at the failed bank would have access to their money by Monday morning. The bank’s failure is the second largest in U.S. history and SVB reportedly held $209 billion in assets at the time of its collapse. Financial regulators closed the bank Friday, shortly after the bank had announced it was looking to raise more than $2 billion after suffering a $1.8 billion loss on asset sales.
CNBC reported Friday morning that the efforts to raise capital had failed and a potential sale of the troubled bank could be looming. A bank run triggered by uncertainty about the bank’s solvency — an overflow of customers rapidly withdrawing funds — led to its demise. The crisis has effectively suspended operations at thousands of companies.
SVB was a major bank for tech companies, startups and venture-backed companies. It had 17 branches in California and Massachusetts.
Mahan said the federal government must immediately restore confidence and ensure account holders can access their money Monday morning. This is not “a bailout for billionaires,” Mahan stressed, saying that SVB executives and shareholders should be held accountable for their mistakes.
“But the thousands of startups that drive America’s economic competitiveness should not be further punished for the failures of federal regulators and bank executives,” the mayor added. “This is a classic liquidity crisis. The government can stop this madness today and reimburse itself over time as it sells off the bank’s assets.”
Silicon Valley Congressman Ro Khanna has led efforts all weekend to pressure the government to act. He also appeared on the Face the Nation program Sunday. He pressured Yellen to give all account holders access to their funds — even those above $250,000 which is the cutoff for insurance protection.
Khanna said he believes U.S. banking is secure and there isn’t a systemic risk. Tech workers are, however, being urged to pull their money from regional banks in the aftermath of SVB’s closure.
“Here’s what I’m hearing from people in my constituency, they are getting notes to pull out of regional banks, and all of this will be consolidated in the top four banks,” Khanna said Sunday. “We don’t want that as a nation, especially if you’re progressive. The other thing is the payroll companies that are involved, some of them have 400,000 folks. They’re not going to be able to meet payroll, if they don’t have access to the deposits.”
The congressman tweeted over the weekend that the “best case scenario” is a buyer for the former SVB, allowing depositors to be made whole and keeping workers on the job.
Khanna and Mahan both said SVB executives, such as CEO Greg Becker, should be held accountable for selling millions of dollars in stocks immediately before the bank’s collapse.
That money should be “clawed back” and returned to depositors, they said.
Congresswoman Anna Eshoo applauded the FDIC’s announcement to protect SVB’s depositors without impacting taxpayers.
“I am beyond relieved that tomorrow morning thousands of small businesses will be able to pay their employees and continue their vital work advancing American innovation and biotechnology research,” she said.
The Federal Reserve said Sunday it would make additional funding available to ensure banks can meet the needs of depositors.
“This action should halt similar potential bank runs,” Eshoo added. “This positive outcome proves the resiliency of the U.S. banking system, thanks in part to the safeguards made after the financial crisis.”
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