The drama of the collapse of Silicon Valley Bank by breakfast on Friday and it’s last-minute rescue by Janet Yellen and President Biden on Sunday has come to a temporary close. Now it’s time to find answers to some hard questions in order to make sure such a calamity does not take place again and that the tech and media industries can continue to thrive on sound footing.
- Why was there a single point of failure for the financial ecosystem of the tech industry in the first place? What can we do spread risk better and ensure more stability?
- Why did the SVB Board not catch SVB executives faulty risk management and intervene?
- Why did the San Francisco Fed not see SVB’s increasingly shaky financial situation?
- Why did so many start-ups put their capital into just one bank, uninsured?
- How do we deal with the consequences of the decision to make all depositors whole 100%? One, this will encourage more risky financial behavior on the part of investors, when what we want instead is more responsible behavior for more financial stability. And two, if the sale of SVB’s assets cannot cover deposits -it seems likely they’ll only be able to make up for roughly 90% of them-, in essence, this is a bailout, paid for by U.S. taxpayers, at a time when the general public is rapidly losing trust in tech.
- What was the nature of SVB executive’s stock sales in the two weeks leading up to SVB’s collapse? Was it insider trading?
@SecYellen and @POTUS
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