Monday, March 13, 2023

Silicon Valley Bank Contagion

Silicon Valley Bank Collapse Threatens Climate Start-Ups The bank had relationships with more than 1,500 companies working on technologies aimed at curbing global warming........ The bank, the largest to fail since 2008, worked with more than 1,550 technology firms that are creating solar, hydrogen and battery storage projects. ....... the bank issued them billions in loans. ....... “Silicon Valley Bank was in many ways a climate bank” .

Regional Banks Slammed by Fear of a Broader Financial Crisis Across the country, banks of various sizes are battling market turmoil as customers rushed to withdraw their deposits and investors, worried about more bank runs, dumped bank stocks...... The unexpected seizure of two banks in three days by regulators intensified fears of a broader financial crisis, sending the stocks of more than two dozen banks into free fall on Monday, even as President Biden reassured Americans that the banking system was resilient and that customers’ money was safe. ....... protect depositors without rewarding risk-taking executives and investors. ........the KBW Bank Index, a proxy for the industry, down nearly 12 percent. On a day when the S&P 500 stock index ended up flat, shares of First Republic tumbled 60 percent and Western Alliance slumped 45 percent. ....... the 2008 financial crisis, when 465 banks failed within four years, sometimes dozens in a month ....... the banks whose stocks tanked had enough funds to meet their obligations. ........ Last week, Silvergate, a cryptocurrency focused bank, said it would shut down; between Friday and Sunday, the government seized Silicon Valley Bank and Signature Bank. ....... The Federal Reserve Bank of San Francisco, on whose board the former chief executive of Silicon Valley Bank, Gregory Becker, sat until Friday, was responsible for supervising the failed bank............. “The events surrounding Silicon Valley Bank demand a thorough, transparent and swift review by the Federal Reserve,” Jerome H. Powell, chairman of the Federal Reserve ......... Silicon Valley Bank had roughly $175 billion in deposits before last week, and Signature had under $100 billion before it was shut down. ........ Anticipating a blood bath on Monday, First Republic, the nation’s 14th largest bank, said a day earlier that it could grab $70 billion if needed from sources including the Federal Reserve and JPMorgan Chase, the nation’s largest bank by assets. Its shares still lost nearly three-fifths of their value on Monday — at one point touching $30, a low they had not touched since the end of 2010. .......... “On each coast, we have bank failures that are uniquely focused on very wealthy and very connected industries.” ....... On Sunday, the F.D.I.C. said that all customers of Silicon Valley Bank and Signature Bank with deposits above $250,000 would be made whole. ......... Bigger banks had little interest in the $1.1 million loan he needed — puny by their standards ....... .

Preventing panic in the banking sector A government-organized deposit guarantee should tame the animal spirits. .



3 Lessons From Silicon Valley Bank’s Failure Here’s one takeaway: The bank’s extremely online clientele may have contributed to its downfall....... The bank had a gold-plated reputation inside the Silicon Valley start-up scene.... ...... was a Silicon Valley institution, and that it counted many of the tech industry’s best-known start-ups and investment firms as its clients ...... what brought S.V.B. down wasn’t lending to risky start-ups, or gambling on sketchy crypto coins, or some other ill-considered tech scheme. It was an old-fashioned bank run, set off back in 2021 by a series of old-fashioned bad decisions......... It was known for taking a risk on start-ups that no other banks would touch. ....... as it collapsed, start-up founders told stories of how they’d gotten their first business loans or their first credit cards from Silicon Valley Bank. Some tech workers got their home mortgages and car loans there. ........ and the entire start-up ecosystem collapses because many cannot make payroll — could be catastrophic......... Silicon Valley Bank’s extremely online clientele may have contributed to its downfall. ........ At most normal, midsize regional banks, what happened at S.V.B. probably wouldn’t have led to a panic. Banks sell assets all the time. They run into liquidity problems and raise short-term capital to solve them. Most of the time, customers never notice or care. ........... talk to each other on the internet all day. Once a few people in tech raised questions about the firm’s solvency, Slack channels and Twitter feeds lit up with dire warnings from venture capitalists, and soon many people were panicking. ......... the clubby, herd-following nature of the industry it served. ....... With any luck, a big bank will subsume the old S.V.B. seamlessly, make its larger depositors whole, and there will be no domino effect — no taxpayer bailouts, no mass start-up failures, just a simple and orderly bank failure. ......

Silicon Valley will have regulation to thank for its survival.

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13: News Bulletin

The US Treasury, Federal Reserve, and the FDIC say all Silicon Valley Bank depositors will be “fully” protected, and their money will be available on March 13
HSBC plans to acquire Silicon Valley Bank UK for £1, citing “strategic sense for our business”; as of March 10, SVB UK had ~£5.5B loans and ~£6.7B deposits
Having perfected the art of using hype to move markets, VCs managed to hype their own rumors to collapse SVB, accidentally slaying a much loved accomplice
SVB draws support from 500+ VCs, including General Catalyst and Sequoia, while 5,000+ founders and CEOs sign a Y Combinator petition asking US Congress to act
Sources: long before its collapse, SVB remained technologically stagnant, including failing to integrate Stripe's tech and biometric authentication on mobile



CNN wins its first Oscar for Navalny, in the documentary feature film category, about Russian dissident Alexei Navalny and commissioned by CNN Films and HBO Max
New York shuts down Signature Bank as US regulators cite a “systemic risk exception” like for SVB, announcing all of Signature's depositors will be “made whole”
The closure of SVB, Silvergate, Silvergate Exchange Network, and Signature adds stress to a troubled crypto industry; fiat conversion costs may rise by 20%-40%
Signature closing means its real-time payment platform Signet can no longer serve crypto clients, a blow after SEN closed; BTC jumps ~7% and USDC regains peg
As AI explodes, humanity must accelerate its adaptation or reach a collective, enforceable decision to slow the development of these technologies

A YouTuber who went viral as a toddler says she resents her family for monetizing her childhood, as some influencer parents take their children off social media
Netflix wins six Oscars, including the Best International Feature Film for All Quiet on the Western Front and the Best Animated Feature Film for Pinocchio
A developer runs Meta's 13B LLaMA model, considered to be competitive with GPT-3, on his laptop, showing local language models are feasible on consumer hardware
Meta plans to block Canadians' ability to view or share written and broadcast news on Facebook and Instagram if the country passes its proposed Online News Act
A look at the unprecedented level of executive turnover at Apple, which lost 11 key people, most just below Senior Vice President, since the second half of 2022

Twitter is in decline and less stable under Elon Musk, echoing LiveJournal and Tumblr falling apart under new ownership that didn't understand their communities
Worried that cloud giants offer concentrated hacking targets, the US plans to regulate the security practices of Amazon, Microsoft, Google, Oracle, and others
An interview with Gowalla co-founder and CEO Josh Williams as he re-launches his location-based social networking app at SXSW, 14 years after its debut



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