Silicon Valley Bank: Money in failed US bank is safe – US government

I’ve been speaking to people with money stuck in SVB over the weekend.

One founder told me had been constantly refreshing his online banking page, hoping it might work.

Another said he was confident the government would step in, but admitted he might have lost about around 40% of the company’s cash overnight.

This statement, then, has been welcomed by depositors. But there are those that will raise eyebrows at this move.

SVB mainly banked start-ups and venture capitalists in Silicon Valley – the tech elite. And those Silicon Valley elites tend to have more than a streak of libertarianism to their politics: the boilerplate view is that government is slow and too big.

Critics argue that it’s with great irony that it’s the government who has stepped in to save the day. Some will wonder whether influential tech bros have been given preferential treatment: capitalism for when things go well, socialism for when it doesn’t.

It’s why the statement is worded carefully that taxpayers will not be paying for this. Mr Biden will now have to defend the move – and reassure members of his own party that guaranteeing depositors was the only way.

SVB started as a California bank in 1983 and expanded rapidly over the last decade.

But it came under pressure as higher interest rates made it harder for start-ups to raise money through private fundraising or share sales.

In Silicon Valley, the reverberations from the collapse have been widespread as companies face questions about what it means for their finances.

Paul Ashworth, chief North America economist at Capital Economics, said the US authorities had “acted aggressively to prevent a contagion developing”.

“Rationally, this should be enough to stop any contagion from spreading and taking down more banks, which can happen in the blink of an eye in the digital age. But contagion has always been more about irrational fear, so we would stress that there is no guarantee this will work,” he added.

Meanwhile, an offer has been made for SVB’s UK arm. A consortium of investors led by the Bank of London, a UK clearing bank, has submitted a formal bid to the UK Treasury.

The British government has been working on a plan to support UK tech firms affected by the collapse of SVB.

-BBC.