The tech bank collapse of 2023

The loans increased as the bank began looking weaker, Bloomberg reports.

In its most-recent proxy statement, SVB Financial Group, the parent company of Silicon Valley Bank before its collapse, said it made loans last year to related parties including “companies in which certain of our directors or their affiliated venture funds are beneficial owners of 10% or more of the equity securities of such companies.”

The Fed was focusing on monetary policy when it was raising interest rates, says Peter Conti-Brown, a Wharton School expert on the Federal Reserve. But was it supervising places like Silicon Valley Bank to see what the outcome of that policy was?

Hey, remember the phrase “structured by cows” from the aftermath of the 2008 financial crisis? I think about it once a week, no reason.

Anyway! When Signature and Silicon Valley Bank collapsed, they were both highly-rated by credit ratings agencies.

A year before the collapse, a senior team of Fed examiners started telling SVB about its problems, Bloomberg reports. But by then it was already late in the game. It had been the fastest-growing bank in the nation for five years, but apparently this didn’t ring alarm bells.

FT Alphaville rounds up the Signature Bank music videos.

Yes, that’s right. In addition to loans, Signature made music videos. This seems weird until you remember that it’s one of two banks that heavily serviced Broadway productions — so they’re meeting their customers where their customers are, I guess.

And so now the federales are looking into stock sales made by Silicon Valley Bank’s leadership before the bank failed.

Axios got some details on Peter Thiel’s Founders Fund and its decision to advise portfolio companies to pull funds from the troubled Silicon Valley Bank.

The story assures us that Thiel wasn’t “part of the conversation” and that Founders Fund told “LPs that this was all about prudently protecting their investments.”

That didn’t quite work out on Sunday, but the Wall Street Journal reports officials told senators they have “additional flexibility” to make a deal now that the bank’s collapse has been deemed a threat to the financial system.

The move also gives regulators the ability to offer would-be buyers deal sweeteners such as loss-sharing agreements, according to former regulators. 

While none of the largest U.S. banks bid on SVB during a failed auction on Sunday, at least one offer was made by another institution, but it was declined by the FDIC, officials told lawmakers on Monday.

It’s the promise the president made to depositors in a speech at the White House on Monday. Throughout his brief remarks, Biden also reassured viewers that no taxpayer money would be used to bail out the bank.

The speech followed a Sunday announcement from the government’s top banking regulators that they were setting up an emergency lending program to ensure all SVB depositors are made whole.

Depositors will be paid back in full and can access their money starting Monday morning, officials said. In an interview on Face the Nation, US Treasury Secretary Janet Yellen ruled out a government-backed bailout:

During the financial crisis, there were investors and owners of systemic large banks that were bailed out. And the reforms that have been put in place means that we’re not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs.

The company told the SEC that it had $487 million, around 26 percent of its cash, held with Silicon Valley Bank, which folded today. It also said it’s unsure about how much of that it’ll get back — a common concern among firms that banked there, especially with payday looming.

Silvergate is gone. The FDIC took over Silicon Valley Bank. Several other banks have lost billions in value, and it’s unclear whether a number of tech companies will be able to keep operating while all of this gets figured out.

If you’re unclear why our situation is the way it is, go back and take a look at Liz Lopatto’s article from a few weeks ago about interest rates and what they mean for tech companies right now.

Exactly one month ago, Silvergate’s CEO insisted things were ok, despite the problems with FTX, a major customer.

Today its Q4 filing reveals deposits from crypto customers shrank from $11.9 billion to $3.9 billion in three months, $150 million of the bank's deposits are held by customers who’ve filed bankruptcy, and it’s laying off 200 employees.

The company’s stock price is down 46 percent.