Reuters calculates U.S. banks have lost over $100B in value due to a bank run.
Entrepreneur and Dallas Mavericks owner Mark Cuban has demanded the Federal Reserve take action and assume responsibility following the collapse of Silicon Valley Bank (SVB) Friday.
“The Fed should IMMEDIATELY buy all the securities/debt the bank owns at near par, which should be enough to cover most deposits,” Cuban wrote.
“The Fed should IMMEDIATELY buy all the securities/debt the bank owns at near par, which should be enough to cover most deposits,” Cuban wrote as part of a lengthy Twitter chain Friday. “Any losses paid for in equity and new debt from the new bank or whoever buys it. The Fed knew this was a risk. They should own it.”
5. The Fed should IMMEDIATELY buy all the securities/debt the bank owns at near par, which should be enough to cover most deposits. Any losses paid for in equity and new debt from the new bank or whoever buys it. The Fed knew this was a risk. They should own it
— Mark Cuban (@mcuban) March 11, 2023
“If the Fed doesn’t own it, trust in the banking system becomes an issue,” Cuban argued. “There are a ton of banks with more than 50 pct uninsured deposits.”
“What would be best practices to protect from a future run if your company writes millions in checks weekly?”
The sudden closure of Silicon Valley Bank (SVB) on Friday, announced by the Federal Deposit Insurance Corporation (FDIC), has sent shockwaves through Silicon Valley, with the collapse being the worst U.S. financial institution failure since the Great Recession 15 years ago. SVB was known as a reliable bank for various industries and startups in Silicon Valley, with the startup incubator, Y Combinator, known for referring entrepreneurs to them. The bank’s collapse will likely have a significant impact on the startup community in the region.
The sudden collapse of Silicon Valley Bank (SVB) sent shockwaves through the startup community as anxious depositors rushed to withdraw their money over concerns about the bank’s health. In a matter of hours, the bank went from being seen as a good investment to becoming the 16th-largest bank in the U.S. to fail since the Great Recession 15 years ago, according to the Federal Deposit Insurance Corporation (FDIC).
The bank’s shares had plummeted by 60% on Friday morning after a similar drop the day before, marking the worst financial institution failure in the U.S. in over a decade. The collapse of SVB may have a devastating impact on startups, described by Y Combinator CEO Garry Tan as “an extinction-level event.”
Cuban, who made clear that he has no money with the bank, raised a number of questions about the bank and its oversight, finding it baffling that the bank operated as it did and perhaps unsurprising that it failed.
“It’s insane that a small company with say 2.5m in payables and payroll at the end of the month should be ‘prudent’ and split their cash across 10 banks in case of a run,” Cuban wrote. “The fees and admin would be crazy. But great for banks.”
Entrepreneur and Dallas Mavericks owner Mark Cuban expressed his frustration towards regulators over the collapse of Silicon Valley Bank, questioning where they were in warning of the bank’s health. “Where were regulators? They were supposed to watch and warn,” he stated. Cuban suggested that the Federal Reserve should take immediate action by buying all the securities and debt the bank owns at near par, which should cover most deposits, with any losses paid for in equity and new debt from the new bank or whoever buys it. “If the Fed doesn’t own it, trust in the banking system becomes an issue,” Cuban argued. He also clarified that his suggested actions were not a bailout, but instead a way to “provide cash to end the run” and acquire “long-dated assets that will pay at maturity.”
“IF THE FED DOESN’T OWN IT, TRUST IN THE BANKING SYSTEM BECOMES AN ISSUE,” CUBAN ARGUED.
Entrepreneur and Dallas Mavericks owner Mark Cuban weighed in on the collapse of Silicon Valley Bank (SVB), arguing that regulators should have done more to prevent the situation. “Where were regulators? They were supposed to watch and warn,” he wrote on Twitter. Cuban proposed that the Federal Reserve should buy all the securities and debt owned by SVB, a move he said would “provide cash to end the run” and prevent further losses. Cuban emphasized that his proposed action was not a bailout, but a way for the Fed to acquire “long-dated assets that will pay at maturity.” While he had no personal stake in SVB, Cuban admitted that some of his portfolio companies had deposits in the bank. SVB’s collapse may have far-reaching consequences, with Y Combinator CEO Garry Tan describing it as “an extinction-level event for startups.”
Silicon Valley Bank (SVB) faced a major blow when the Bank of England announced that it would initiate insolvency proceedings, which further compounded the bank’s issues. The announcement was made on Friday, and the bank, which has limited operations in the UK, will cease to accept deposits or make payments. This adds to the series of events that led to the bank’s collapse, including a significant drop in share prices and anxious depositors withdrawing their money, causing a run on the bank.
Amidst the collapse of Silicon Valley Bank, the financial industry is feeling the effects as other banks are also seeing losses. Reuters reports that domestic banks in the U.S. have lost over $100 billion in stock revenue, while European banks have seen a loss of $50 billion in value over the past two days. This is a result of the spillover effect caused by the collapse of SVB, which had been a go-to bank for many Silicon Valley startups and industries. The failure of the 16th-largest bank in the U.S. has caused concern for the banking system and raises questions about the role of regulators.
