Wall Street investors agree that Silicon Valley’s “greed and greed” are responsible for the collapse of Silicon Valley Bank (SVB), one of the 20 most important banks in the United States, a specialist in lending to technology and science startups.
While Joe Biden is expected to announce a full rescue of the SVB this Monday (HSBC has already done so with the British subsidiary), bank shares in Europe fell 5.5 percent as a result of the bankruptcy of the Californian bank confirmed on Friday the 10th. March, when US financial regulators control their deposits.
Hours later, regulators also closed the operations of Signature Bank, one of the main banks, in this case related to cryptocurrencies, arguing “systemic risks”.
“The SVB crisis is far from being an isolated issue, and its root lies in a larger systemic problem, say investors and analysts quoted by CNBC. “In terms of who’s to blame, I think it’s about greed and greed that’s been around for a long time in Silicon Valley,” he told CNBC Keith Fitz Gerald, investor and director of the Fitz Gerald Group.
“The Federal Reserve changed regulations that have allowed banks like the SVB to start buying assets instead of just lending money,” he added. “I think the role of benches should be boring, like watching paint dry, and it isn’t anymore, and that’s a problem,” Fitz Gerald concluded.
The beginning of the end of the SVB
The SVB, the 16th largest bank in the United States (as of last week) was founded four decades ago. Since its inception, it has been a trusted source of funding for technology startups and venture capital companies.
Based in California, it was a subsidiary of SVB Financial-Group. By far, it was the largest bank in Silicon Valley by volume of deposits.
The collapse of the SVB began on Wednesday, March 8, when it announced that it had sold securities for some 21 billion dollars with losses of 1.85 billion.
It also said it needed to raise $2.2 billion to meet customers’ withdrawal needs and finance new loans.
That news sent the value of SVB shares plummeting, triggering a tsunami of withdrawals.
In just 24 hours, SVB’s shares plunged 65 percent, causing an estimated $80 billion drop in bank shares worldwide.
Now read:
HSBC rescues and buys part of SVB, the Silicon Valley bank that failed
FTX will return the money to its clients in February (but only in this country)
The company that Didi founded to manufacture electric cars goes bankrupt
