CAROLINE: I'M CAROLINE HYDE IN NEW YORK. ED: I'M ED LUDLOW IN SAN FRANCISCO. THIS IS A SPECIAL EDITION OF "BLOOMBERG TECHNOLOGY." CAROLINE: BECAUSE TODAY WE ARE FOCUSING ON THE BIGGEST BANK FAILURE SINCE THE 2008 FINANCIAL CRISIS. SILICON VALLEY BANK STARTED THE YEAR WITH MORE THAN $200 BILLION IN ASSETS. TODAY CALIFORNIA REGULATORS CLOSED THE BANK INTO RECEIVERSHIP.
BASICALLY IT COLLAPSED. A TOP LENDER TO VC BACKED STARTUPS. NOW IT'S THE SECOND SILICON VALLEY BANK TO FALL IN A WEEK AFTER SILVER GATE'S BANKRUPTCY. THIS STORY IS BLEEDING INTO THE TECH SECTOR, INTO THE FINANCIAL MARKET AT LARGE, AND HAS THE ATTENTION OF NOT ONLY FINANCIAL REGULATORS, THE WHITE HOUSE, TECH FOUNDERS OF ALL BACKGROUNDS.
TELL US A BIT ABOUT HOW IT IS IMPACTING INDIVIDUAL COMPANIES AT THIS MOMENT. ED: FIRST OFF, TRADING OF SVB FINANCIAL GROUP WAS SUSPENDED. HAD A REALLY PROFOUND IMPACT ON EQUITY MARKETS. A BANK INDEX DOWN FOR PERCENT.
OTHER NAMES, PARTICULARLY REGIONAL VENDORS WE SAW PRETTY DEEP DECLINES. FIRST REPUBLIC AND SIGNATURE BANK, SOME OF THOSE NAMES. WHERE WE DID SEE SEVERE REACTION WAS OF COURSE IN SVB GROUP'S DEBTS. I'M KEEPING THE 2033 NOTE IN PARTICULAR. WE ARE DEEP INTO DISTRESSED TERRITORY.
IN THIS CASE TRADING $.45 ON THE DOLLAR. WHAT WE HAVE IS A SITUATION WHERE THE FDIC HAS TAKEN CONTROL OF THIS BANK AND THE LATEST BLOOMBERG REPORTING IS THEY ARE TRYING TO FIND A BUYER TO TAKE ON THESE ASSETS. CAROLINE: OR WHAT IS LEFT. SONALI BASAK HAS BEEN ON AIR
ALL DAY PUSHING THIS STORY FORWARD AS WE BRACE OURSELVES FOR THIS WEEKEND. WHAT DO WE ANTICIPATE COMING FROM REGULATORS IN TERMS OF WHO COULD BE SOME SALVATION? SONALI: IT IS IMPORTANT TO THINK ABOUT THE PROCESS MOVING FORWARD FOR SILICON VALLEY BANK. ONE ON THE REGULATORY PERSPECTIVE. THE FDIC RETAINS ALL THESE ASSETS NOW. IF YOU THINK ABOUT WHAT HAPPENS IN THE EVENT OF A SALE, THEY CAN MOVE THROUGH A SALE PROCESS OR SELL CERTAIN ASSETS. THAT IS ONE THING TO THINK
ABOUT. THERE IS ALSO THIS ISSUE FOR CUSTOMERS. IF YOU HAVE ABOVE AND BEYOND TO HER $50,000 YOU NEED TO BE CALLING THE FDIC AT THIS POINT BECAUSE THAT IS THE AMOUNT FDIC ASSURES PER ACCOUNT. YOU HAVE THIS OTHER ISSUE OF WHAT HAPPENS TO THE CLIENTS THAT SILICON VALLEY BANK HAS LENT TO, THOSE VENTURE BACKED LOANS. ARE THEY CALLABLE IN ANY FASHION?
IS THERE ANY WORRY ABOUT THE CLIENTS THAT EXIST FOR SILICON VALLEY BANK? NARA MANY VENTURE -- THERE ARE MANY VENTURE CAPITALISTS WORRIED ABOUT MAKING PAYROLL. ED: THIS WAS A TECHNICAL FAILURE BY FDIC STANDARDS. SILVER GATE ALSO PART OF THIS DISCUSSION, VOLUNTARILY WOUND DOWN.
YOU AND I HAVE BEEN TRACKING FOR 24 HOURS WHAT SO MANY START FOUNDERS ARE DOING WITH THEIR OWN CASH, MOVING IT TO OTHER BANKS. WE REPORTED SOME OF THAT MOVEMENT. WHAT DO WE KNOW ABOUT WHAT CLIENTS ARE DOING TO MANAGE THIS SITUATION WITH THEIR FUNDS? SONALI: SOME OF THESE ASSETS ARE NOT NECESSARILY INSURED. THOSE ARE THE ASSETS THAT WE ARE WORRIED ABOUT THE CUSTOMER BASE FOR. PEOPLE ACT LIKE THIS IS SOMETHING THAT HAPPENED IN 24 HOURS.
THERE IS A LOT THAT DID, BUT THE REASON THIS HAPPENED IN THE FIRST PLACE WAS BECAUSE CUSTOMERS SLOWLY STARTED TO MOVE DEPOSITS. WE WANT TO KEEP AN EYE ON WHICH FIRMS STILL HAD DEPOSITS WITH SILICON VALLEY BANK UP UNTIL THIS POINT, BUT THERE WAS A SLOW MOVEMENT AND THEY HAD TO SELL ASSETS AT A LOSS TO MEET THOSE DEPOSITS. FOR A MATTER OF DEFINITION THIS IS ONE OF THE LARGEST BANK FAILURES IN U.S. HISTORY IN THE SENSE THAT IT'S THE SECOND LARGEST BANK HOLDING FAILURE SINCE WASHINGTON MUTUAL. LEHMAN BROTHERS, THERE WERE SALES INVOLVED IN THE 2008 CRISIS ERA. THIS FAILURE IS A VERY
TECHNICAL ONE AND IT IS PRETTY UNIQUE IN NATURE AND IT IS A VERY DIFFERENT TIME THAN 2008, SO QUITE CONTAINED. ED: SO MUCH OF THIS IS ABOUT PSYCHOLOGY, THE PSYCHOLOGY OF WHAT WAS CONTRIBUTING TO THE RUN. SONALI BASAK, WE WILL HAVE YOU BACK LATER. I WANT TO BRING IN THE COFOUNDER OF A VC WITH ABOUT $1.7 BILLION OF ASSETS. HE SAYS VENTURE CAPITALISTS
SHOULD PRIORITIZE FOUNDERS AND THEIR EMPLOYEES AS WELL AS PAYROLL AND BANKING PARTNERS. WELCOME TO THE PROGRAM. YOU AND I HAVE BEEN TALKING FOR 24 HOURS OR SO ON AND OFF. WHERE DO YOU STAND AS A VENTURE CAPITALIST WHOSE PORTFOLIO COMPANIES USE SILICON VALLEY BANK? >> THANKS FOR HAVING ME. I THINK WHAT IS IMPORTANT ABOUT UNDERSTANDING THE PEOPLE THAT WILL BE MOST AFFECTED ARE EARLY AND MID-STAGE COMPANIES MORE SO THAN LATE STAGE COMPANIES. BY THE TIME YOU GET TO A CERTAIN STAGE OF REVENUE, YOU START THINKING ABOUT DIVERSIFYING YOUR RISK AND THE TYPES OF PARTNERS YOU HAVE. MORGAN STANLEY, JP MORGAN, CITIBANK, THE WHOLE LIST OF THE LARGER BANKS.
THE THING THAT PEOPLE HAVE BEEN FORGETTING IS OUR JOB AS AN INVESTOR, AS A FIDUCIARY SITTING ON THE BOARD TO THESE COMPANIES, IS TO MAKE SURE WE ARE GIVING THEM THE BEST DEVICE AND TO HELP THEM THINK ABOUT WHAT THEY NEED TO DO. FOR A LARGE SET OF US, WE STARTED GIVING THIS ADVICE A COUPLE WEEKS AGO, MORE SO OVER THE LAST WEEK AND OVER THE LAST 24 TO 48 HOURS. IT IS ABOUT DIVERSIFYING THE RISK AND HOW YOU ARE SWEEPING THAT CASH, INTO TREASURIES DEPENDING ON HOW MANY DEPOSITS YOU HAVE IN THE FIRST PLACE. THE SECOND PIECE IS THAT A LOT
OF THESE COMPANIES DO RELY ON BANKS. SILICON VALLEY BANK WAS A PILLAR OF THE COMMITTEE THAT HELPED SUPPORT -- OF THE COMMUNITY THAT HELPED SUPPORT A LOT OF VENTURE FUNDS. THEY WERE A LENDER FOR CAPITAL. FUNDS BANKED WITH THEM, THE
FUNDS THEMSELVES. THIS REVERBERATES PRETTY QUICKLY IN THE ECOSYSTEM AROUND WHAT IT WILL LOOK LIKE FOR NOT JUST THE COMPANIES BUT THEIR BACKERS. WE DO NOT BANK WITH SVB. WE BANK WITH A LARGER SET OF
PROVIDERS, AND OUR CAPITAL CALLED LINES OF CREDIT ARE WITH DIFFERENT SERVICE PROVIDERS. CAROLINE: LET'S START WITH THE ISSUES FOR THE PORTFOLIO COMPANIES. THEY WANT TO MAKE PAYROLL. YOU ARE GIVING THEM ADVICE. AT WHAT POINT DO YOU AND OTHER VC BACKERS NEED TO GIVE LINES OF CREDIT WITHOUT THE STRINGS ATTACHED TO THOSE COMPANIES IF THEY CAN'T ACCESS IT FROM THEIR OWN BANKS AT THE MOMENT? ARJUN: GOOD QUESTION. THERE ARE SOME VENTURE CAPITALISTS THAT MIGHT NOT HAVE THE CAPABILITY TO FUND.
I SAW SOME TWEETS FROM SOME ANGEL INVESTORS, YOU CAN'T JUST WIRE MONEY TO HELP THE COMPANY. THERE IS A PROCESS YOU HAVE TO GO THROUGH, UNDERSTANDING THE RISK OF WHERE THE COMPANY IS. IF THE COMPANY ITSELF IS UNDER RIGHTABLE -- UNE DERWRITEABLE IN THE FIRST PLACE. WHO CAN WE SET THEM UP WITH THAT HAS THE CAPABILITY TO UNDERWRITE THEM? CAN WE DO BRIDGE LOANS? CAN WE BRING MORE INVESTMENT INTO THE COMPANY THROUGH EQUITY? ONE OF THE ISSUES IS YOU WILL HAVE A LOT OF PREDATORY FOLKS GOING AFTER THESE COMPANIES. OUR GOAL AS FIDUCIARIES IS TO MAKE SURE THAT DOES NOT HAPPEN. CAROLINE: YOU HAVE BEEN WRITING
THROUGHOUT THE DAY. WE HATE TO SAY SILVER LININGS IN THESE CLOUDS, BUT WHO BENEFITS ULTIMATELY FROM PORTFOLIO COMPANIES TRYING TO DIVERSIFY, AND INDEED THE VC'S? ED: MANY VENTURE CAPITALISTS BELIEVED STAYING PUT WAS THE RIGHT MOVE BUT THE NAME I KEPT HEARING WAS JP MORGAN THAT WAS GETTING A LOT OF PHONE CALLS. ALSO LESSER-KNOWN BANKS, MERCURY AS AN EXAMPLE. SOME VC'S SAY GET MONEY IN BIGGER BANKS BUT GO WITH SOME OF THE STARTUPS TOO.
THIS IS LAYING BARE THE SITUATION FOR BEING A STARTUP, A FOUNDER, ARJUN. YOU HAVE BEEN WRITING ABOUT THE DESERT WE ARE TRAVELING THROUGH IN THE WORLD OF VC AND STARTUPS. THERE IS A DEFICIT OF AVAILABLE CAPITAL.
HOW MUCH WORSE IS THAT NOW GIVEN THE EVENTS OF THE PAST 24 HOURS? ARJUN: OVER THE LAST FIVE YEARS, THE FED FIRST PRINTED TRILLIONS OF DOLLARS, THEN DENIED ANYTHING WAS HAPPENING, THEN THEY SAID IT WAS TRANSITORY. WHAT HAPPENS IS THERE IS A LOT OF TRICKLE EFFECTS FROM THIS. THE FIRST IS THAT A LOT OF VENTURE CAPITAL WENT INTO A LOT OF THESE COMPANIES, GOOD OR BAD. ROUGHLY $1.5 TRILLION. THOSE COMPANIES IN ORDER TO MEET THEIR DEMANDS, THEY PROBABLY NEED ANOTHER $3 TRILLION TO $4 TRILLION OF CAPITAL. THIS WAS BEFORE SVB. THAT BECOMES AN ISSUE. ALL OF A SUDDEN YOU HAVE SVB. PEOPLE GENERALLY GET SCARED.
IT MAY NOT BE LOGICAL, BUT THEY GET SCARED LIKE A DEER IN HEADLIGHTS. I THINK YOU WILL SEE A FLIGHT TO SAFETY. HOW DO YOU CONTINUE TO BANKROLL THEM? WHICH COMPANIES ARE GOING TO BE RESILIENT? I THINK THIS TAKES ABOUT THREE TO SIX MONTHS TO GO THROUGH THE SYSTEM.
I THINK IT GETS WORSE OVER THE NEXT 12 TO 16 MONTHS BECAUSE A LOT MORE COMPANIES WILL NEED ACCESS TO THAT CAPITAL. THE ONE THING PEOPLE REALLY FORGET IS THAT THESE COMPANIES NEED THIS CAPITAL IN ORDER TO HIT CERTAIN THRESHOLDS OF THEIR UNIT ECONOMICS BECAUSE MOST OF THEM STILL HAVE NOT BEEN ABLE TO SHED ENOUGH PEOPLE. THE CAPITAL NEEDS WILL BECOME GREATER OVER THE NEXT YEAR. CAROLINE: TRIBE CAPITAL CO-FOUNDER, THANK YOU SO MUCH FOR PROVIDING INFORMATION ACROSS SOCIAL MEDIA CHANNELS AND FOR COMING ON THIS SHOW TOO. COMING UP, WE WILL TALK ALL
THINGS SVB, INCLUDING REGULATION. WHAT IS THE ROLE OF THE FDIC? WE WILL DISCUSS THAT WITH AARON KLEIN, BROOKINGS INSTITUTION SENIOR FELLOW. ED, DIG INTO WHAT IS STILL MOVING AFTER HOURS. ED: THERE IS MOVEMENT.
IT IS AFTERMARKET FRIDAY. YOU IMAGINE VOLUMES ARE INCREDIBLY LOW. IT IS AN OPPORTUNITY FOR RESPITE IN AN EXTREMELY VOLATILE SESSION. YOU SEE ONGOING DECLINES. SIGNATURE BANK UP ALMOST 2.5%. THIS IS BLOOMBERG. >> THERE ARE RECENT DEVELOPMENTS THAT CONCERN A FEW BANKS THAT I'M MONITORING VERY CAREFULLY.
AND WHEN BANKS EXPERIENCE FINANCIAL LOSSES, IT IS AND SHOULD BE A MATTER OF CONCERN. CAROLINE: U.S. TREASURY SECRETARY JANET YELLEN SAYING SHE WAS MONITORING THE SITUATION. ALSO SAID THE U.S. BANKING SYSTEM HAS EFFECTIVE TOOLS TO ADDRESS THE COLLAPSE OF THE SILICON VALLEY BANK. BEFORE WE GET TO THOSE OVERALL REGULATORY DISCUSSIONS WE WANT TO BRING YOU BREAKING NEWS. THIS HAS HUGE OVERARCHING IMPLICATIONS FOR PUBLICLY TRADED COMPANIES.
ROKU SAYING 26%, ONE QUARTER OF ITS TOTAL CASH AND CASH EQUIVALENTS ARE HELD WITH SVB. THE COMPANY'S DEPOSITS ARE WITH SVB ARE LARGELY UNINSURED AND THEY DON'T KNOW TO WHAT EXTENT IT CAN RECOVER THOSE CASH DEPOSITS. CURRENTLY ROKU, THE MAKER OF THE WAY IN WHICH YOU PURSUE -- YOU CONSUME WHAT YOU ARE WATCHING AT THIS MOMENT, 26% OF ITS CASH EQUIVALENTS ARE HELD WITH SVB.
EXISTING CASH FLOW IS ENOUGH FOR THE NEXT 12 MONTHS AND BEYOND. THIS IS THE LATEST PUBLIC COMPANY, FALLING 6% AFTER HOURS. ED: IT'S A QUESTION WE ARE ASKING. FORGET NOT JUST PRIVATE
STARTUPS, THERE ARE A NUMBER OF SMALLER CAP COMPANIES THAT USE SILICON VALLEY BANK. UNTIL EARLIER TODAY, IT WAS A CRITICAL BANK FOR THE WORLD OF TECHNOLOGY. CAROLINE: THIS IS WHY WE WORRY ABOUT THE STARTUPS THAT DON'T HAVE 12 MONTHS AND BEYOND OF EXISTING CASH FLOW. LET'S TALK ABOUT WHERE NEXT THE REGULATORS WILL BE WATCHING.
BLOOMBERG'S KAILEY LEINZ HAS BEEN DOING INCREDIBLE WORK. TALK TO US ABOUT WHAT WE LOOK FOR NEXT COMING FROM THE LIKES OF THE FDIC AND JANET YELLEN. KAILEY: FOR THE FDIC THIS GOES BACK TO ROKU AND THE QUESTION OF UNINSURED DEPOSITS. THIS IS THE FIRST FAILURE OF AN
INSURED INSTITUTION THIS YEAR. THAT INSURANCE ONLY GOES SO FAR. THAT CAP IS $250,000. FROM OUR UNDERSTANDING MORE THAN 90% OF THE DEPOSITS AT SILICON VALLEY BANK WERE UNINSURED. THAT WILL BE QUESTION NUMBER
ONE, WHAT HAPPENS WITH THOSE UNINSURED DEPOSITS? ARE THOSE DEPOSITORS GOING TO BE MADE WHOLE? THAT WILL BE ONE OF THE PRIORITIES WE ARE FOLLOWING FOR THOSE EARLY-STAGE COMPANIES THAT MAY BE SHORT ON CASH AT THIS POINT. THEN IT BECOMES A QUESTION OF ANY RIPPLE EFFECTS. ARE WE GOING TO SEE OTHER EPISODES OF THIS, OR WAS THIS AN ISOLATED INCIDENT? WE WERE SPEAKING WITH A FORMER OFFICIAL FROM THE FDIC EARLIER WHO SAID REGULATORS ARE HOPING THIS IS JUST AN ISOLATED INCIDENT THAT THEY CAN CONTAIN. JANET YELLEN AND THE BROADER WHITE HOUSE DID EXPRESS CONFIDENCE IN WHAT REGULATORS ARE DOING. THEY WERE QUICK TO POINT OUT
THIS IS NOT 2008, WE ARE POST DODD-FRANK. THERE ARE CAPITAL AND LIQUIDITY REQUIREMENTS IN PLACE. THE BANKING SYSTEM IN THEORY IS MORE RESILIENT NOW THAN IT WAS THEN. ED: KAILEY LEINZ IN D.C. THE REGULATORY CONVERSATION WILL NOT STOP HERE AND WE WILL CONTINUE IT WITH AARON KLEIN AT THE BROOKINGS INSTITUTION. YOU HAVE BEEN WORKING ON REGULATORY REFORM ISSUES FOR A LONG TIME. AN ECONOMIC ADVISOR TO THE SENATE BANKING, HOUSING AND URBAN AFFAIRS COMMITTEE. YELLEN SAYS SHE HAS FULL
CONFIDENCE IN THE BANKING REGULATORS. THE FDIC HAS TAKEN CONTROL OF SILICON VALLEY BANK AND WILL OVERSEE THE SALE PROCESS. DO YOU HAVE THAT CONFIDENCE BASED ON YOUR EXPERIENCE IN THIS AREA? AARON: I DO. THE FDIC HAS DONE A GREAT JOB IN RESOLVING INSTITUTIONS.
GENERALLY THEY ARE ABLE TO DO SO AT A SMALL COST TO TAXPAYERS AND RECOVER A LOT FOR UNINSURED DEPOSITORS. EACH BANK FAILURE IS A LITTLE DIFFERENT. THIS BANK WAS OVERSEEN BY THE FEDERAL RESERVE. THE FEDERAL RESERVE BANK OF SAN FRANCISCO WAS SILICON VALLEY BANK'S NUMBER ONE FEDERAL REGULATOR. SO THE SAN FRANCISCO FED SHOULD HAVE BEEN ON TOP OF WHAT WAS GOING ON. THE BANK'S EXPLOSIVE GROWTH AND IT'S NOW QUICK FAILURE. THERE ARE A LOT OF TOOLS THE
FDIC HAS TO HANDLE THIS RESOLUTION SITUATION. THIS IS A LARGE BANK. 16TH LARGEST BANK IN THE COUNTRY. BUT IT IS NOT YOUR TYPICAL BANK. IT ONLY HAS 16 BRANCHES.
CAROLINE: BREAKING NEWS THAT CONTINUES TO UNFOLD. WE UNDERSTAND THAT SVB FINANCIAL GROUP UNSURPRISINGLY IT WILL BE REMOVED FROM THE S&P 500 AS AN INDEX. TALK US THROUGH WHAT GOT US HERE ULTIMATELY AND WHETHER THE REGULATIONS THAT YOU HAVE BEEN INFORMING AND ANALYZING, WHETHER THEY ARE THE RIGHT WAYS IN WHICH BANKS CURRENTLY HOLD CAPITAL, BUT IN SOME WAYS CAN LEAD TO EXTRAORDINARY CIRCUMSTANCES THAT WE FIND WITH SVB. AARON: MY PREMISE IS BANKS SHOULD FAIL. WE HAVE NEARLY 5000 BANKS IN
AMERICA AND A HEALTHY AMOUNT OF FAILURE IS GREATER THAN ZERO. I WAS MORE CONCERNED THE LAST TWO YEARS WHEN NOT A SINGLE BANK FAILED. THE FIRST TIME IN AMERICAN HISTORY WE WENT A YEAR WITHOUT A BANK FAILURE WAS 2005. REGULATORS TOLD US THE BANK SYSTEM WAS IN GOOD SHAPE. A LITTLE BIT OF FAILURE IS A DESIRABLE THING.
THE QUESTION IS WHEN AN INSTITUTION FAILS, IS THAT FAILURE CONTAINED? WHO BEARS THE LOSSES, AND HOW QUICKLY CAN THIS SITUATION BE RESOLVED? I THINK THE REGULATORY TOOLS, THE FDIC, THE FEDERAL RESERVE, AND OTHER REGULATORS HAVE NOW IS LIGHT-YEARS AHEAD OF WHAT THEY HAD IN 2008 WHEN THE CAUSE OF THE CRISIS WAS VERY DIFFERENT. ED: A LOT OF PEOPLE HAVE A LOT OF QUESTIONS, PRINCIPALLY STARTUP FOUNDERS WHO WERE BANKING WITH SILICON VALLEY BANK . WHEN THE FDIC COMES INTO AN INSTITUTION IN THIS SITUATION, WHAT IS THEIR PRIORITY? YOU LOOK AT THE CHART ON THE SCREEN. YOU CAN'T EVEN SEE AT ON THE RIGHT-HAND SIDE BECAUSE THIS IS THE FIRST TECHNICAL FDIC FAILURE IN A VERY LONG TIME AND THE FIRST OF THIS YEAR. AARON: SILVER GATE BANK IS ANOTHER BANK THAT FAILED RECENTLY.
THE FDIC IS ABLE TO NEGOTIATE ASSUMPTIONS HERE. THE INSURED DEPOSITORS WILL BE ABLE TO HAVE ACCESS TO THEIR MONEY LIKE NOTHING HAPPENED, JUST A REBRANDING. THAT IS THEIR NUMBER ONE PRIORITY. BUSINESSES, THEIR NUMBER TWO PRIORITY IS TO MAXIMIZE THE ONGOING VALUE OF THE INSTITUTION TO MINIMIZE THE LOSS FELT BY EVERYBODY. I WANT TO POINT SOMETHING OUT, THE FDIC IS NOT THE FIRST PERSON TO HAVE A CLAIMANT.
IF YOU THINK ABOUT WHO -- ABOUT TO WHO HAS A CLAIM ON THE ASSETS, THE BANK IS NUMBER TWO. THE FEDERAL HOME LOAN BANK OF SAN FRANCISCO HAD LENT MORE MONEY TO SILICON VALLEY BANK THAN TO ANY OTHER BANK THEY DID BUSINESS WITH AT ITS TIME OF FAILURE. CAROLINE: DIG IN, THEREFORE, YOU HAVE DONE ANALYSIS ON WHAT LENDERS HAVE PERHAPS EXPOSURE TO THE HOME LOANS ELEMENT. WHAT IS THE CONTAGION RISK? WHAT IS ULTIMATELY GOING TO BE THE LIKELIHOOD OF THE UNINSURED COMPANIES THE LIKES OF ROKU WHOSE ASSETS I SILICON VALLEY BANK ULTIMATELY ARE NOT INSURED? AARON: THE PEOPLE THAT RUN TO THE HOME LOAN BANK SYSTEM THAT ARE HEAVY USERS OF IT, A YEAR AGO SILICON VALLEY BANK DID NOT EVEN APPEAR ON THE TOP LIST OF BORROWERS FROM THE FEDERAL HOME LOAN BANK OF SAN FRANCISCO. WITHIN A YEAR THEY VAULTED TO NUMBER ONE, $20 BILLION OF OUTSTANDING ADVANCES.
SILVER GATE AT THE TIME OF ITS FAILURE HAD OVER $4 BILLION OF OUTSTANDING ADVANCES. YOU LOOK AT THE LIST OF OTHERS WHO LEANED HEAVILY ON THE HOME LOAN BANK SYSTEM, WHY ARE THEY GOING THERE? PARTICULARLY SILVER BANK, WHICH IS NOT MAKING MORTGAGES. THE PURPOSE OF THE HOME LOAN BANK SYSTEM WAS SUPPOSED TO BE A FEDERAL RESERVE FOR THESE THINGS CALLED THRIFTS THAT USED TO MAKE MORTGAGES WHEN AMERICA HAD A DIFFERENT BANKING SYSTEM.
THAT IS A CLASSIC RED FLAG IF YOU GO BACK TO 2007, COUNTRYWIDE, WASHINGTON MUTUAL, ALL THOSE FOLKS WERE RUNNING TO THE HOME LOAN BANK SYSTEM LONG AFTER THE MARKET HAD STARTED TO DRY UP ON THE ASSET THEY WERE OVER INVESTED IN. CAROLINE: BROOKINGS INSTITUTION'S AARON KLEIN. THANK YOU FOR THE INTRICACIES AROUND REGULATION.
WE WILL LOOK AT THOSE EXPOSED TO SILICON VALLEY BANK, WHO WILL BE WORRYING ABOUT WHETHER THEIR MONEY AT THE LENDER WILL BE INSURED. ROBLOX SAYING THE SVB SITUATION WILL NOT AFFECT ITS OPERATIONS BUT IT SAYS 5% OF ITS BALANCE IS HELD IN SVB. ROKU HAS ALREADY SAID 26% OVERALL OF ITS CASH HAS BEEN HELD OVER AT SVB. EXISTING CASH FLOW IS ENOUGH FOR THE NEXT 12 MONTHS AND BEYOND, THEY SAY. THEY DON'T KNOW WHAT EXTENT THEY CAN RECOVER THE SVB CASH DEPOSITS.
ONE LAST HEADLINE, ROCKET LAB HAS DEPOSIT ACCOUNTS WITH SVB TOTALING $38 MILLION, 7.9% OF CASH AND EQUIVALENTS WITH SVB. WE HAVE SO MUCH MORE GOING ON AFTER THE BREAK. THIS IS BLOOMBERG. >> I'M PART OF A VENTURE-CAPITAL TEAM. I'M OUTSIDE SILICON VALLEY BANK 'S OFFICE IN SAN FRANCISCO.
THEY ARE IN THE NASDAQ BUILDING. ALL MORNING THERE HAS BEEN A SLOW TRICKLE OF CUSTOMERS COMING IN. ONLY ONE EVERY 15, 20 MINUTES OR SO. THEY ARE BEING REDIRECTED TO THE BANK'S PALO ALTO OFFICE.
THEY ARE BEING TOLD THAT IF THEY WANT ANY INFORMATION, THAT IS WHERE THEY HAVE TO GO. IT IS UNCLEAR IF ANYONE IS EVEN IN THIS OFFICE NOW IN SAN FRANCISCO. ED: WELCOME BACK TO A SPECIAL EDITION OF "BLOOMBERG TECHNOLOGY ." I'M ED LUDLOW IN SAN FRANCISCO.
CAROLINE: I'M CAROLINE HYDE IN NEW YORK. LET'S GET BACK TO WHAT HAPPENED IN THE DAY'S MARKET TRADING. THIS SEEMED TO EVOLVE OVER THE LAST 24 HOURS, BUT IT HAD A DAMAGING EFFECT ON THE NASDAQ, ON RISK SENTIMENT IN GENERAL.
THE OVERALL COLLAPSE OF SILICON VALLEY BANK, WHICH SWIFTLY FOLLOWED SILVER GATE, NASDAQ OFF BY 4.7%, ALSO LARGELY TO DO WITH THE INCREASE IN INTEREST RATES. CRYPTO ON THE DOWNSIDE, MORE THAN 9%. WE ARE LOOKING AT THE FLIGHT TO SAFETY, YIELDS CRESCENDOING LOWER. LOOK AT WHAT HAPPENED ACROSS
THE ASSETS. WE ARE LOOKING AT THE BOND MARKET THAT REALLY EXEMPLIFIED THE RISKS WITH WHAT HAPPENED WITH SILICON VALLEY BANK, HOW SWIFTLY THE OVERALL BOND PRICES FELL. 43%, THE PARENT COMPANY OF SILICON VALLEY BANK. YOU CAN SEE THE LIKES OF SOME OTHER SMALLER LENDERS.
WESTERN ALLIANCE IS THERE. FIRST REPUBLIC IS IN THE TEAL COLOR. ED: THE NEXT QUESTION IS WHAT HAPPENS TO THE FUTURE OF THOSE ASSETS HELD BY THE BANK? WHAT HAPPENS TO THE BANK AND WHAT HAPPENS TO THE COMPANIES THAT WERE BANKING WITH, NOT JUST THE PRIVATE ONES? WE ARE GETTING HEADLINES ABOUT THE PUBLIC COMPANIES' EXPOSURE T O SVB. MAX, GIVE US THE LATEST NEWS OUT OF SILICON VALLEY BANK. MAX: EXACTLY LIKE YOU ARE SAYING, WE ARE SEEING PUBLIC COMPANIES COME OUT THIS AFTERNOON, TELLING US ESSENTIALLY HOW MUCH EXPOSURE THEY HAVE LOCKED UP AT THE BANK. WHEN YOU SEE A BANK RUN LIKE THIS, THE CONCERN IS IF YOU HAVE DEPOSITS THAT ARE NOT INJURED, YOU WILL NOT HAVE -- NOT INSURED, YOU WILL NOT HAVE ACCESS TO THOSE FUNDS.
PARTICULARLY WITH A COMMERCIAL BANK THAT IS FOCUSED ON ONE SECTOR, IF EVERYONE PANICS AT ONCE AND YOU SEE THIS DRAWDOWN MOTIVATED BY TALK FROM VC'S TELLING THEIR PORTFOLIO COMPANIES TO GET OUT, IT'S ALMOST A CLASSIC FOR SINNERS DILEMMA WHERE IF EVERYONE WORKS TOGETHER WE WON'T SEE THIS HAPPEN BUT IF EVERYONE BREAKS YOU HAVE THIS SITUATION WHERE FOLKS ARE IN DIRE STRAITS AND NO CLEAR WAY OF GETTING AT THEIR MONEY. CAROLINE: TALK TO US ABOUT THE CONTAGION EFFECT. HOW MUCH ARE PEOPLE NOW FOCUSING IN ON OTHER REGIONAL LENDERS THAT MAY BE SOME ARE FOCUSED ON THE TECH SECTOR TOO? MAX: I WANT TO BE CAREFUL WITH HOW I TALK ABOUT THIS BECAUSE SVB IS A UNIQUE ANIMAL WHEN IT COMES TO BANKING. SO FORGET WAS THE SAME WAY FOR CRYPTO -- SILVER GATE WAS THE SAME WAY FOR CRYPTO. IT MADE IT VERY SUSCEPTIBLE TO A MOMENT LIKE THIS. THERE ARE CONCERNS AROUND CONTAGION. PEOPLE ARE AFRAID THIS COULD
HAPPEN ELSEWHERE. THE KEY THING DRIVING IT IS INTEREST RATES, THE FACT THAT THE ASSET SIDE OF THE BALANCE SHEET HAS BEEN UNDERWATER BECAUSE THEY BOUGHT THESE BONDS FOR LESS THAN THEY ARE WORTH CURRENTLY. IF THEY HAVE TO SELL THEM, THEY WILL REALIZE LOSSES.
THAT HAS BEEN DRIVING THIS CRISIS AT THIS POINT, AT LEAST AMONG A FEW BANKING INSTITUTIONS IN CALIFORNIA. EVERYONE IS TRYING TO SORT OUT WHAT COMES NEXT. I DON'T WANT TO PROGNOSTICATE. CAROLINE: MAX, HE HAS BEEN SO THOROUGH ON THIS STORY. THERE HAVE BEEN RIPPLE EFFECTS. LET'S DIG INTO THE IMPACT ON
STARTUPS, ON THE VENTURE COMMUNITY IN PARTICULAR. A WELL-KNOWN MANAGING PARTNER AND COFOUNDER FOCUSING ON EARLY-STAGE TECH STARTUPS, YOU TAUGHT AT CORNELL TECH, BUT PROLIFIC WORK WITH TECH STARS. WHAT HAVE YOU BEEN ADVISING YOUR PORTFOLIO COMPANIES THIS DAY? >> IT HAS BEEN INCREDIBLE CHAOS. MY PHONE HAS BEEN BLOWING UP. WE HAVE 250 PORTFOLIO COMPANIES. ABOUT 30% ARE INVOLVED WITH SVB.
THE FIRST THING WE SAID TO THEM YESTERDAY WAS WE NEED TO STAY CALM AND GET COLLECTIVELY ON THE SAME PAGE OF WHAT IS HAPPENING. IN OUR CASE WE HAVE 250 PORTFOLIO COMPANIES. ANOTHER 500 LP'S THAT ARE ALSO FOUNDERS. THEY ARE REALLY SUFFERING.
IN TERMS OF ADVICE, WE TEND TO TAKE AN APPROACH OF LET'S SHARE INFORMATION AND FOUNDERS NEED TO MAKE THEIR OWN DECISIONS. CAROLINE: ULTIMATELY DO YOU HAVE A RELATIONSHIP WITH SILICON VALLEY BANK AND WHAT HAVE YOU DECIDED TO DO WITH THE MONEY YOU HAVE WITH THEM? JENNY: I HAD A LONG-STANDING RELATIONSHIP WITH SVB. THEY HAVE BEEN INCREDIBLE SUPPORTERS OF THE STARTUP ECOSYSTEM. QUITE FRANKLY OF THE EMERGING MANAGERS AS WELL. WE HAVE A BANKING RELATIONSHIP
WITH THEM AND KEEP ASSETS WITH THEM. WE ARE TRYING TO HELP OUR STARTUPS AND ALSO OURSELVES. JUST THAT CONTRAST HAS BEEN QUITE HARD. ED: WHAT I KEEP HEARING FROM
VENTURE CAPITALISTS AND FOUNDERS IS THERE IS A REAL CONCERN NOT JUST ABOUT THE OPERATIONAL CASH NEEDS OF STARTUPS, BUT THEIR MENTAL HEALTH. I WONDER IF YOU WOULD REFLECT ON THE CONVERSATIONS YOU HAD WITH PORTFOLIO FOUNDERS TODAY AND HOW DIFFICULT IT HAS BEEN FOR THEM AS BUSINESS OPERATORS. JENNY: I CANCELED PRETTY MUCH ALL OF MY MEETINGS TODAY JUST TO FIELD CALLS FROM FOUNDERS. THIS IS AN UNSETTLING TIME.
THIS IS A HARD TIME IN TECH IN GENERAL. THE MARKETS HAVE CREATED A LOT OF PRESSURE ON THESE COMPANIES. RAISING CAPITAL IS NOW HOW IT WAS LAST YEAR. COMPOUNDING WHAT IS HAPPENING TODAY, A LOT OF OUR COMPANIES ARE SUFFERING. WE TRY TO LISTEN AND PROVIDE RESOURCES, BUT ULTIMATELY IT IS A TRAUMATIC TIME. ED:
THERE WAS A PROPOSED IDEA THAT WHAT FOUNDERS AND STARTUPS NEED RIGHT NOW IS CASH, JUST GIVE CASH IF YOU CAN. DOES THAT MAKE SENSE TO YOU AS A STOPGAP FOR WHAT IS HAPPENING IN TERMS OF MAKING PAYROLL AND WORKING CAPITAL? JENNY: IT REALLY DOES. VENTURE CAPITALISTS LIKE TO SAY THEY PROVIDE VALUE. THIS IS A TIME TO PROVIDE VALUE
TO YOUR PORTFOLIO COMPANIES. YOU NEED TO LISTEN TO THEM AND SUPPORT THEM. MANY VC'S ARE ABLE TO DO THAT. OR PROVIDE RESOURCES. THERE ARE OTHER OPPORTUNITIES FOR PEOPLE TO COME IN. IF YOU HAVE PAYROLL AND HAVE BEEN TIED UP IN SILICON VALLEY BANK AND THAT MONEY, MAYBE $250000 IS AVAILABLE MONDAY, YOU ARE IN A DEFICIT OF ABOUT $100,000 THIS MONDAY. EVERYONE IS QUITE NERVOUS. IT IS THE TIME TO SUPPORT OUR
FOUNDERS. CAROLINE: PARKER CONRAD OF RIPPLING, WHICH IN MANY WAYS IS A COMPANY THAT HELPS PAYROLL, THEY DISCOVERED YESTERDAY THE SILICON VALLEY ISSUE AND THEY HAVE THEIR OWN EXPOSURE. THEY NOTIFIED SOME CUSTOMERS THAT SOME PAYROLL PROCESSING WILL BE STALLED BECAUSE OF SVB, EVEN THOUGH THEY SWITCHED THE BANKING TO JP MORGAN IN LARGE PART. DOES THIS HAVE A CASCADE
EFFECT? WHAT DO PEOPLE DO ABOUT NOT BEING ABLE TO MAKE PAYROLL? TWO THEY HAVE TO LET PEOPLE GO. JENNY: IT IS AN INTERESTING QUESTION. THE MOST IMPORTANT THING IS THERE IS OPEN COMMUNICATION. WHEN THERE IS NOT GOOD COMMUNICATION WITH EMPLOYEES, THAT IS WHEN THINGS GO AWRY. OUR FOUNDERS ARE SPEAKING TO THEIR EMPLOYEES ALL THE TIME, TODAY, OF WHAT IS GOIG -- GOING ON. THAT IS A GREAT SIGN OF
LEADERSHIP, BEING PROACTIVE. THERE IS A REAL WORRY THAT PAYROLL WILL NOT BE MADE ON MONDAY. ED: ARJUN FROM TRIBE CAPITAL MAKES THE POINT THAT THERE WAS ALREADY A FUNDING DEFICIT PRIOR TO THE LAST 24 HOURS.
HE EXPECTS A NUMBER OF STARTUPS TO FAIL, BUT NOT AS MANY AS YOU MIGHT THINK. WHAT IS YOUR OUTLOOK FOR THE HEALTH AT THE EARLY-STAGE? JENNY: THE EARLY-STAGE HAS BEEN SOMEWHAT SHIELDED FROM THE STUFF GOING ON. IF YOU ARE A STARTUP IN THE SERIES B, C, IT HAS BEEN QUITE DIRE, BUT EARLY STAGE HAS BEEN OK. WE INVEST AT THE FIRST ROUND OF
CAPITAL. WE WANT TO HOLD OUR POSITIONS FOR 10 YEARS. WE HAVE A BETTER OUTLOOK LONG-TERM. SHORT-TERM WE NEED TO SUPPORT OUR FOUNDERS. ED: THE MANAGING PARTNER AND
COFOUNDER AT THE FUND, HELPING US COVER THIS STORY IN THE SHORT TERM. WE WILL CONTINUE THE CONVERSATION IN THE LONG-TERM. COMING UP, WHAT THE SVB FAILURE MEANS FOR THE CRYPTO SPACE IN PARTICULAR, AND THE ARGUMENT AROUND DECENTRALIZED BANKING SYSTEMS. THAT IS ALL NEXT. CAROLINE: WHAT A TORRID TIME IT HAS BEEN FOR SVB. SHARES HALTED TODAY, BUT ULTIMATELY SEEING ABSOLUTE COLLAPSE IN VALUATION YESTERDAY. STOCK PLUNGING EVEN BEFORE THE OFFICIAL COLLAPSE. THE FDIC HAS NOW TAKEN OVER AND SILICON VALLEY BANK, WHICH IS OWNED BY SVB, IS IN RECEIVERSHIP . WE WILL KEEP YOU ABREAST OF ALL
THE PUBLIC COMPANIES CURRENTLY DISCLOSING THEIR OWN EXPOSURE TO SVB, ROKU SAYING IT HAS A SUBSTANTIAL AMOUNT OF CASH WITH THE COMPANY AND DOES NOT KNOW HOW MUCH UNINSURED CASH IT WILL HAVE ACCESS TO. ROBLOX CORPORATION SAYING ITS OPERATIONS WILL NOT BE AFFECTED BUT IT TOO HAS CASH WITH SVB. THIS IS BLOOMBERG. ♪ >> I THINK THE PRUDENT THING WE HAVE LEARNED IS COUNTERPARTY RISK ONCE THESE THINGS START. THIS IS A CLASSIC BANK RUN. ONCE IT STARTS YOU DON'T WANT TO BE THE LAST GUY THERE WONDERING WHAT HAPPENED. CAROLINE:
AVA LABS REACTION TO THE SVB NEWS ON LAST NIGHT'S SHOW. LET'S DISCUSS THE IMPLICATIONS ON THE CRYPTO SPACE AND STARTUP SPACE WRIT LARGE. WITH US IS THE CEO AND COFOUNDER OF A CRYPTO DERIVATIVES TRADING PLATFORM.
YOU ARE ALSO AN EXPERT IN ELECTRONICS TRADING'S SYSTEMS USED BY MORGAN STANLEY AND THE LIKE. TELL US WHETHER THIS IS A SYSTEMIC ISSUE ACROSS BANKING, AND ALSO WHAT IT MEANS FOR CRYPTO COMPANIES SUCH AS YOURSELF. >> IT'S FASCINATING ACTUALLY BECAUSE IF YOU THINK ABOUT THE CORE OF CRYPTO AND WHAT BITCOIN IS ABOUT, IT IS ABOUT THE OPPOSITION OF FRACTIONAL RESERVE BANKING, NOT TAKING COUNTERPARTY RISK. I WILL NOT TAKE CREDIT FOR IT. SOMEONE FROM MORGAN CREEK DOES A GREAT JOB.
HIS POINT IS CRYPTO IS TRUTH TECHNOLOGY TO REPLACE THE NEED FOR CENTRALIZED TRUST. LONG-TERM, EVENTS LIKE THIS ARE MASSIVELY BULLISH FOR THE CRYPTO COMPLEX. MANY OF THE ASSETS IN CRYPTO WILL ACTUALLY BE HURT BY THIS.
BITCOIN I THINK WILL BE HELPED. WE WILL SEE HOW IT GOES. AS FAR AS IF THIS IS SYSTEMIC OR NOT, THAT IS A DIFFERENT QUESTION. ED: I WILL BRING ONE OF YOUR TWEETS UP ON THE SCREEN. YOUR BASIC ARGUMENT IS THAT THE CONTAGION RISK FROM THE BANKING SYSTEM IS ACTUALLY MUCH MORE POTENTIAL HE DAMAGING TO CRYPTO AND -- MORE POTENTIALLY DAMAGING TO CRYPTO AND BANKS. WHAT ARE YOU TRYING TO SAY?
DAVE: AT THE END OF THE DAY, EVERY TIME THERE HAS BEEN AN INCIDENT IN CRYPTO, IT HAS NOT SPILLED BACK OVER TO THE MAINSTREAM UNTIL FTX. FTX IS SEPARATE FROM ALL THE OTHER FAILURES. WE HAD THREE HUGE FAILURES IN 2022 IN THE WORLD OF CRYPTO, ALL WERE PREVENTABLE WITH PRINCIPLES BASED REGULATION THAT WE SHOULD HAVE HAD AND SHOULD ACTUALLY BUILD BUT DON'T HAVE. THE FIRST WAS LOTS OF MONEY IN
A STABLECOIN THAT WAS NOT STABLE. I HAD ZERO DOLLARS IN LUNA, ZERO DOLLARS IN UST. THE WHOLE NOTION OF AN ALGORITHMIC STABLECOIN TO ME SOUNDS LIKE A PONZI SCHEME. IT IS RECURSIVE, TO USE A QUANTITATIVE TERM.
DESPITE THE PEDIGREE OF THE AUTHORS, I THINK IT IS A TERRIBLE IDEA. THAT WAS THAT ONE. REGULATIONS THAT SAY STABLECOINS HAVE TO BE FULLY BACKED MAKES THAT NOT BE A PROBLEM. THE SECOND WHICH WAS FAR WORSE WAS FROM BAD DISCLOSURES. FIRMS SHOULD HAVE TO DISCLOSE THEIR RISKS.
THE THIRD ONE, FTX, WAS FAR MORE LIKE BERNIE MADE OFF THAN ANYTHING ELSE. THEY SIMPLY GAMBLED AWAY $8 BILLION AND $10 BILLION AND STOLE IT FROM THEIR CUSTOMERS. THEY COULD EASILY HAVE BEEN DOING SPORTS BETTING. MONEY WAS STOLEN. THAT IS NOT A SYSTEMIC RISK FROM CRYPTO, THAT IS A MASSIVE THEFT. IF YOU LOOK AT EVERYTHING ELSE,
ALL THE OTHER MAJOR VOLATILE EVENTS AND CRYPTO HAS NEVER REALLY SPILLED OVER TO THE TRADITIONAL FINANCIAL SYSTEM. ED: DAVE, 24 HOURS AGO, CAROLINE AND I WERE HAVING THIS DISCUSSION THAT THIS IS THE NET RESULT OF HIGHER RATES, AND WHAT HIGHER RATES HAVE DONE IS CUT FROTH OUT OF THE MARKET. WHERE IS THE MOST FROTH? ACCORDING TO BLOOMBERG REPORTING IT WAS IN THE CRYPTO SECTOR. CAROLINE: THAT WAS WHAT THE DEMISE BEHIND SILVER DATE, THEN -- SILVER GATE, THEN THE TECH COMMUNITY NEEDING TO GET THROUGH THE CASH BURN. YOU WERE JUST MENTIONING STABLECOINS.
I'M INTERESTED TO WHAT HAPPENS IF SOME OF THE COMPANIES BEHIND IT HAVE RELATIONSHIPS WITH SILICON VALLEY BANK. DAVE: THAT IS A GREAT QUESTION AND I WISH I KNEW THE ANSWER. I DON'T KNOW JEREMY FROM CIRCLE. WE HAVE NEVER MET. BUT IF I WERE RUNNING CIRCLE I WOULD HAVE HAD 98% OF MY DEPOSITS IN T BILLS AND T NOTES. THERE IS NO REASON TO HAVE BANK
INVESTMENTS. YOU NEED BANKING FOR LIQUIDITY ON THE MARGINS, SO IT SHOULD BE A VERY SMALL AMOUNT. WHY DO I SAY THAT? WE WERE OFFERED BANK SAVINGS ACCOUNTS AND WE COMPARED THAT TO 30 DAY T BILLS FOR OUR CASH NEEDS. YOU GET MULTIPLE PERCENT HIGHER BY INVESTING IN GOVERNMENT DEBT, WHICH IS FAR SAFER, THAN YOU DO IN BANKS. IF YOU LOOK AT BANKRATE.COM, THEY WILL TELL YOU THE AVERAGE
SAVINGS ACCOUNT RATE IS 0.23%. ONE HAS TO ASK WHY ARE PEOPLE LEAVING MONEY IN BANK DEPOSITS? I DON'T KNOW THE ANSWER. AT COINROUTES, OUR TREASURY FOR OUR THREE YEARS PLUS OF RUNWAY IS SITTING IN LARGE BANKS OR IN TREASURIES. ED:
ON THE ISSUE OF CIRCLE, WE WILL GO TO THEM AND GET COMMENT FROM THEIR SIDE OF THIS STORY. I DON'T YET SEE ANY COMMENTARY FROM THEM TODAY. COINROUTES CEO AND COFOUNDER, THANK YOU VERY MUCH. UP NEXT, THE IMPLICATIONS ON
SILICON VALLEY ITSELF THE PLACE, BUT ALSO THE TECH SECTOR AS A WHOLE. LET'S TALK ABOUT ALL OF THAT, NOT JUST THAT VIEW ON YOUR SCREEN, BUT THE MILES OF COMPANIES, FOUNDERS, VENTURE CAPITALISTS IN THE DISTANCE. THIS IS BLOOMBERG.
ED: LET'S TALK ABOUT HOW THE SILICON VALLEY BANK MELTDOWN HAS IMPACTED SILICON VALLEY. WE HAVE NOT REALLY TALKED ABOUT OUT WEST AND ALL THE COMPANIES HERE THAT ARE SUFFERING AS A CONSEQUENCE. WE WILL BRING IN BLOOMBERG'S SMELLY BASKET -- SONALI BASIK, AND TOM GILES LEADING THE COVERAGE FROM THE TECH PERSPECTIVE. WHAT WE ARE LEARNING RAPIDLY IS IT'S NOT JUST PRIVATE COMPANIES AND FOUNDERS WITH EXPOSURE HERE, THERE ARE PUBLICLY TRADED TECHNOLOGY COMPANIES WITH EXPOSURE TOO. TOM: THIS COMPANY, THIS BANK HAD ITS TENTACLES ACROSS SO MANY DIFFERENT INDUSTRIES, SO MANY DIFFERENT TYPES OF BUSINESSES. THESE ARE PUBLICLY TRADED COMPANIES THAT KEPT A LOT OF THEIR CASH WITH SVB, AND CLEARLY WHEN YOU HAVE 26% OF YOUR CASH, THE CASE WITH ROKU, THAT GOES WELL ABOVE WHAT IS INSURED. THIS IS A COMPANY THAT IS
FALLING IN LATE TRADING. THEY DISCLOSED IN A REGULATORY FILING THEIR SHARES ARE DOWN 6%. 26% OF THEIR TOTAL CASH WAS HELD WITHIN SILICON VALLEY BANK. ROCKET LABS I ANOTHER WENTS. -- ANOTHER ONE. A LOT OF COMPANIES SAYING WE HAVE EXPOSURE OR MINIMAL EXPOSURE. THAT IS SOMETHING THESE COMPANIES NEED TO SHARE WITH THEIR SHAREHOLDERS WHO ARE CONCERNED ABOUT EXPOSURE TO A BANK THAT JUST GONE INTO RECEIVERSHIP. CAROLINE:
$500 MILLION OR THEREABOUTS SVB HAS WITH ROKU. WHAT NEXT? PUSH US FORWARD FROM WHAT WE HEAR NOT ONLY FROM THE PUBLICLY TRADED COMPANIES AND PRIVATE ONES TO DISCLOSE THEIR EXPOSURE, BUT THE FDIC AND REGULAR. WE HAVE A WEEKEND TO WORK THIS OUT. SONALI:
THERE IS A QUESTION OF WHETHER THEY WILL SEEK A BUYER FOR SOME OF THE ASSETS. SILICON VALLEY BANK, THERE HAS BEEN A LOT OF COME OCCASIONS. FOR ANY POTENTIAL BUYER, THEY WOULD HAVE WANTED TO BUY THE RELATIONSHIPS.
THINK ABOUT HOW BIG SOME OF THESE BUSINESSES HAVE GOTTEN. INVESTMENT BANKING, THEY HAD A LARGE WEALTH CLIENT BASE AS WELL. THESE ARE ATTRACTIVE TO A LOT OF WALL STREET. THAT SAID, WHAT ARE THE TROUBLES THAT STILL EXIST FOR THE CLIENT BASE? THAT IS THE MOST IMMEDIATE CONCERN.
ESPECIALLY IF THEY DO FIND BUYERS, WHAT HAPPENS TO THOSE ASSET BASES IN THAT EVENT, ESPECIALLY IF SOME PARTS GET LEFT BEHIND. ED: ON THE TECHNOLOGY SIDE OF THIS STORY, WHERE DOES THIS RANK IN ALL OF THE CRISES AND MEGA TE CH STORIES WE HAVE COVERED OVER THE YEARS? TOM: THIS IS STUFF THAT SPEAKS TO A VERY VISCERAL, FUNDAMENTAL FEAR THAT YOU HAVE AS A PERSON, AS A BUSINESS. THAT IS ESSENTIALLY WHERE I'M PUTTING MY ASSETS. YOU THINK THEY ARE SAFE. THIS HITS AT THE FUNDAMENTAL FEAR FOR ANY BUSINESS, WHICH IS MY SAVINGS ARE NOT SAFE. PUTTING YOUR MONEY IN A BANK IS NOT SUPPOSED TO BE THIS SPECULATIVE GAME.
THIS IS NOT INVESTING IN CRYPTO, NOT INVESTING IN SECURITIES, NOT EVEN IN BONDS, THIS IS JUST KEEPING IT IN LIQUID CASH MONEY MARKET SECURITIES. THIS CUTS AT THE HEART OF THE TRUST RELATIONSHIP THAT EXISTS BETWEEN A BUSINESS AND ITS BANK. CAROLINE: ULTIMATELY THIS IS WHY THE WHITE HOUSE WEIGHS IN, WHY THE TREASURY SECRETARY WEIGHS IN, WHY WE AWAIT WHAT REGULATORS WILL SAY OVER THE WEEKEND. WE THANK YOU BOTH SO MUCH FOR YOUR TIME. THAT DOES IT FOR THIS EDITION OF "BLOOMBERG TECHNOLOGY" BUT WE HAVE BIG MOVES TO MAKE ON MONDAY. ED: WE ARE RELAUNCHING NOON
EASTERN, 9:00 A.M. PACIFIC WITH THE NEW SHOWTIME. WE ARE GOING BIG. THIS AS WE GO TO BREAK WITH ONE
2023-03-13