“Government has about 48 hours to fix a mistake that is about to be irreparable”: Bill Ackman warns some businesses may not be able to meet wages after SVB’s failure
“The government has about 48 hours to correct the mistake that is about to be irreparable. By allowing SVB Financial to go bankrupt without protecting all depositors, the world has awakened to what it means to be uninsured deposits — an unsecured liquidity requirement for a failed bank. produce. No JPMorgan or Citi or Bank of America acquiring SVB before opening on Monday, a prospect that I believe is unlikely or the government bailing out all of SVB’s deposits, big sound you hear seen would be the withdrawal of almost all uninsured deposits from all but ‘systemically important banks’ (SIBs).“
The collapse of the Silicon Valley Bank on Friday left some startups struggling to pay workers and wondering if they would be forced to lay off employees if the money held by the bank keep frozen or lost or not.
Major companies like connected TV provider Roku and video game maker Roblox have warned investors that they have hundreds of millions of cash deposits in Silicon Valley Bank that could be in jeopardy.
See: Roku says they ‘don’t know’ how much cash they can recover from SVB
“Thousands of the fastest growing, most innovative venture-backed companies in the U.S. will start going zero pay next week,” Ackman said for a long timeg tweet on Saturday.
According to its website, Silicon Valley Bank has relationships with more than half of the venture-backed companies in the United States. Garry Tan, chief executive officer of Y Combinator, one of the most important start-up incubators in Silicon Valley, said that without a quick bailout of the bank, the consequences could be dire for many startups. industry and the broader technology landscape.
See: Y Combinator’s Garry Tan Says Silicon Valley Bank Failure Is An Extinction Level Event For Startups
While the Federal Deposit Insurance Corporation (FDIC) took over the bank, the bank was known for lending to start-ups but also providing private banking for mortgages and loans. other services, deposits are only insured up to $250,000. Total assets of the bank amounted to more than 200 billion USD. About $42 billion was withdrawn from the bank on Thursday alone, according to the California Department of Financial Protection and Innovation.
Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (FDIC) on Friday, and a recipient has been designated. The bank became the first FDIC-backed institution to fail this year.
See: Silicon Valley Bank branches closed by regulator in biggest bank bust since Washington Mutual
The FDIC said Silicon Valley Bank had total assets of about $209 billion and total deposits of about $175.4 billion at the end of December, but it’s unclear how much the bank has on its balance sheet right now. . The FDIC said deposit holders will be able to withdraw up to $250,000 on Monday. For those sending more than that amount, it offers a hotline number to call.
“My overall assessment of SVB’s balance sheet shows that even in liquidation, depositors will eventually get about 98% of their deposits back, but ultimately it’s too long when you pay next week,” Ackman said. “So even without assigning any franchise value to SVB, the cost of government guarantees on SVB’s deposits will be minimal.”
As U.S. regulators look for buyers for the remainder of SVB Financial Group, they will work to find buyers for their commercial banking, asset unit, investment banking and management operations. fund manager of SVB. Bloomberg reports Saturday.
The FDIC’s statement on Friday, however, does not indicate the possibility of a quick sale of the entire company. The regulator said it will issue an advance dividend to uninsured depositors next week with future payments likely to come when the asset sale takes place.
