Banks Collapsing | Bloomberg Technology 03/13/2023
ED: AN I AND ED LUDLOW. THE NEWS CONTINUES. A SIGH OF. CAROLINE: IT IS A NEW ERA FOR TECHNOLOGY. WE SEE POTENTIALLY, THE ONGOING SPIRALING. LET'S TALK ABOUT WHAT IS COMING UP IN THE NEXT HOUR.
THE IMPACT ON STARTUPS AND INVESTORS, REGULATORS FIGHTING FOR THEIR REPUTATIONS. ED: PRESIDENT BIDEN VOWS TO HOLD BANKS RESPONSIBLE FOR TOUGHER REGULATION ON THE INDUSTRY. CAROLINE: AND GETTING BOUGHT FOR ONE POUND.
FROM LONDON TO BEIJING AND MUMBAI. LET'S CHECK IN ON THE MARKETS. BREATHING A SIGH OF RELIEF IN THE U.S., BUT NOT WORLDWIDE. LOOKING AT THE EQUITY FRONT.
WE ARE SEEING THE U.S. SPRING BACK AS WE THINK MAYBE THE FEDERAL RESERVE WILL HAVE TO PAUSE THEIR CYCLE. IN LOOKING AT SOVEREIGN BONDS, THE THREAT TO SAFETY AND THE UNRAVELING. DOWN 38 BASIS POINTS, THE MOST WE HAVE SEEN SINCE THE 1980'S, AND TERMS OF A MOVE. A LOOK AT THE KEY ASSETS.
REMEMBER WHAT WE SAW BACK ON FRIDAY, THE WORRIES ABOUT. THIS IS A STORY ABOUT DOLLAR WEAKNESS AS WELL. ED: WE HAVE TURNED A CORNER. THIS IS NARRATIVE AROUND ONE
AND DONE WITH THE FED. A NUMBER OF THESE NAMES TURNING A CORNER. THERE IS CONTAGION CONCERN. A NUMBER OF BANKS HAVE BEEN HALTED.
HOW MUCH OF THE CONCERN APPLIES TO THESE NAMES AS REGULATORS ASSESS THE HEALTH OF THE INDUSTRY. FOR THE LATEST, BUT IS THE LATEST ON THIS SECTOR? >> HOW MANY PEOPLE IN SILICON VALLEY HAVE BANKED WITH THE LIKES OF THEM AND THEN MOVED THEIR MONEY TO A SAFER REPUBLIC. PACK LAST BASED IN LOS ANGELES -- JUST GENERAL WORRIES ABOUT THEIR BANKS CLOSE TO HOME. I WOULD ALSO SAY THAT THERE ARE OTHER PEOPLE WHO SEE THIS AS AN OPPORTUNITY TO ATTRACT MORE CLIENTS. TAKE A LOOK AT THIS TWEET THAT SAID USES LINK AND HE WILL GET A $25 BONUS -- $250 WHEN YOU SIGN UP FOR A DIRECT DEPOSIT.
WE WILL TALK A LOT MORE ABOUT THE COMPANIES THAT ARE COMING TO EKE A POSITION OF STRENGTH VERSUS THE ONES THAT HAVE A LITTLE FURTHER TO GO. CAROLINE: STEVE IS WITH US, THE HEAD OF THE GLOBAL TO KNOLOGY GROUP. STEVE, TALK TO US. BEFORE WE GET THE BENEFITS IN THIS SCENARIO, HOW MUCH DID THE EARTHSHAKING? NOBODY SEEMED TO REALIZE. >> THE SUDDEN NOTICE OF THIS IS WHAT CAUGHT EVERYBODY OFF GUARD.
BUT PEOPLE WERE VERY STRESSED OUT, NOT JUST FROM BUSINESSES BUT CLIENTS OF THE FIRM. BUT IT REALLY WOKE PEOPLE UP TO THE BIG PROBLEM OUT THERE THAT THERE IS SO MUCH RISK THAT IT REALLY JUST SHOOK EVERYBODY UP. AT THE END OF THE DAY, YOU ARE SEEING RIPPLE EFFECTS HAPPENING. QUESTIONS ARE GOING TO BE HOW DEEP WILL THIS GO? >> YOU SPENT 70 YEARS HELPING FIRMS BECOME UNICORNS. HE WORKED WITH VENTURE CAPITALISTS. ARE THE CAPITAL MARKETS CLOSING UP FOR THOSE WHO HAD EASY ACCESS TO MONEY? >> I WOULD NOT SAY THEY ARE CLOSING OFF, BUT GIVEN THAT WE ARE IN THE MIDDLE OF IT, IT IS PAINFUL FOR A LOT OF TECH COMPANIES. THE FACT THAT THE FED DID WHAT
THEY DID WAS HELPFUL AND EXPECTED. BUT CAPITAL WAS TIME TO FIND BEFORE THIS. WE ARE GETTING HUNDREDS OF CALLS FROM COMPANIES LOOKING FOR CREDIT ON, AND ALL OF THAT BUT YOU SEE SOME OF THE BIG GUYS WHO VOTE THE CHECKS , REALLY PULLING BACK ON THEIR PRIVATE INVESTMENT. WE ARE SHIFTING TO PUBLIC MARKETS. ED: YOU RUN AN ADVISORY. WHEN THE VENTURE CAPITALISTS WROTE THEIR LETTER OF SUPPORT, THEY POINTED OUT THAT IT IS NOT JUST A PLACE THAT HOLDS DEPOSITS. IT OFFERS A WIDE RANGE OF BANKING SERVICES.
WHERE DID THE FOUNDERS GO THE NAME HE'D BANKING SERVICES AND TRADITIONAL BANKS DO NOT OFFER THEM? >> IT IS WHERE ALL THE MONEY GOT TRANSFERRED. THEY WERE DOING WEALTH MANAGEMENT AND INVESTMENT BANKING. A LOT OF COMPANIES WERE ESSENTIALLY RUNNING THEIR BUSINESS OFF OF IT AND I THINK IT IS INTERESTING TO HEAR HOW THEY HAVE THEIR HANDS OUT TO TAKE DEPOSITS AND HELP PEOPLE OUT, BUT THAT IS JUST ONE SLIVER. THERE WILL BE PLACES FOR PEOPLE TO GO. IT WAS HAPPENING ALL WEEKEND AND I HAVE TO SAY, AND TALKING TO SOME OF THE BANKERS, A LOT OF THEM WERE EXTREMELY GRACIOUS ABOUT THE SITUATION AND NOT TRYING TO FEAR MONGER.
CAROLINE: FROM A SYSTEMICALLY IMPORTANT INSTITUTION, BUT WHAT ABOUT CAPITAL? WHAT ABOUT SOME OF THE MEAL BANKS? HOW MUCH ARE WE GOING TO SEE THESE COMPANIES SUPPORTED? >> THE GOOD NEWS IS THAT THEY LAID THEY ARE GROWING LIKE SOME DO NOT HAVE RISKY ASSETS, SO IN A WEIRD WAY, SOME OF THE LARGEST BANKS ARE MORE RISKY THAN SOME OF THE NEO-BANKS. I THINK THIS IS A GREAT OPPORTUNITY FOR FINTECH TO SHINE. >> THERE WAS A LOT OF CHATTER ONLINE IN THE COMMUNITY ABOUT THIS IDEA THAT YOU ARE SYSTEMICALLY IMPORTANT THAN EVERYBODY ELSE. HAS IT CHANGED NOW THAT THEY
HAVE STEPPED IN THE WAY THAT THEY HAVE SAYING THAT YOU ARE SAFE NO MATTER WHAT? WILL THERE BE AN EMBRACING OF THESE REGIONAL BANKING PARTNERS OR IS THAT -- IS THERE STILL THAT FEAR? >> THERE HAS BEEN A TREND TOWARDS BANK MERGERS IN THE COUNTRY. THAT IS HOW I BUILT MY CAREER. BUT I WOULD SAY, I DO NOT THINK WE ARE GOING TO HAVE A SYSTEM LIKE CANADA. IT COULD BE A SLOW MOVEMENT TOWARDS THAT. BUT I ALSO THINK THERE IS A PLACE FOR FINTECH SOLUTIONS. KIND OF THE BEST OF BOTH WORLDS. ED: SOME BIG NEWS JUST CROSSING THE TERMINAL.
THE EUROPEAN CENTRAL BANK'S PLANS FOR BIG INTEREST RATE HIKES IN THE WEEKS TO COME I GOING TO MEET MORE OPPOSITION. BECAUSE OF WHAT HAS HAPPENED WITH SILICON VALLEY BANK, THE ECONOMIC PICTURE HAS SHIFTED IN EUROPE AS WELL. SIMILAR TO WHAT WE ARE SEEING IN THE MARKET WITH THE FED. HOW MUCH HAS THE PICTURE SHIFTED IN YOUR MIND, AS A RESULT OF WHAT HAS HAPPENED? >> THEY ARE REALIZING THAT THE BLUNT INSTRUMENT IS NOT ALWAYS GOOD FOR THE OVERALL MACRO ECONOMY. IT IS GREAT FOR CERTAIN
ELEMENTS OF THE WORLD AND HELPFUL FOR INFLATION, BUT IT ALSO HAS RIPPLE EFFECTS. IT IS HITTING EUROPE JUST AS MUCH AS HERE. IT IS A SHAME. I THINK THAT THE RIPPLE EFFECTS ARE HAPPENING AND WE ARE RIGHT IN THE MIDDLE OF IT >> TO PEOPLE TRADING EVERY DAY IN THE MARKET, FOR THE CRYPTO COMMUNITY, THERE WERE THREE BANKS THAT WERE FRIENDLY TO THEM AND THEY EVAPORATED WITHIN FIVE DAYS, ESSENTIALLY. THERE IS CONCERN THAT ACCESS TO
THE FINANCIAL SYSTEM HAS BEEN CUT OFF, BUT YOU ARE SAYING THAT COIN UP QUITE MEANINGFULLY. >> I FIND IT INTERESTING THAT MUCH OF THE TECH IPOS ARE DOWN AND BITCOIN WAS DOWN WAY MORE THAN THAT. LONG LIVE CRYPTO. AT THE END OF THE DAY -- I DO THINK THAT THE GOVERNMENT APPEARS TO BE HAVING A VERY NEGATIVE CRACKDOWN ON CRYPTO. THE KNOCKDOWN OF THESE INSTITUTIONS IS NOT HELPFUL. A LOT OF CLIENTS ARE OFFSHORE FROM DAY ONE. CAROLINE:
WE ARE LOOKING AT INTEREST IN MIDDLE EASTERN BANKS BECAUSE THEY ARE NOT THE SIGNATURES IN U.S. ANYMORE. WAS THERE A QUESTION ABOUT -- WE SAW THE TUMULT. THEY HAD -- THAT IS WHERE COPART A LOT OF THEIR MONEY WAS IN COLLATERAL. >> I THINK AT THE END OF THE DAY, THEY SHOULD BE DIVERSIFYING THE RISK DRAMATICALLY, TO PUT SO MUCH OF IT IN ONE PLACE MAY OR MAY NOT BE THE BEST THING.
BUT IT DEFINITELY PUT A SCARE INTO PEOPLE. BUT YES. ED: STEVE, THANK YOU. COMING UP, THE BIDEN ADMINISTRATION A PUSH FOR STRICTER REGULATION. ON THE BREAKING FRONT -- BANKING FRONT, LOOKING AT REGIONAL BANKS AND SEEING A LOT OF STOCKS HALTED ON VOLATILITY WITH DEEP DECLINES. THE BIG QUESTION, OUR CLIENTS AND DEPOSITORS HAVING THE SAME PROBLEMS THEY WERE HAVING LAST WEEK? WE WILL CONTINUE TO TRACK.
♪ PRESIDENT BIDEN: AMERICANS CAN REST ASSURED THAT OUR BANKING SYSTEM IS SAFE. LET ME ASSURE YOU THAT WE WILL NOT STOP. WE WILL DO WHATEVER IS NEEDED. I WILL ASK CONGRESS AND REGULATORS TO STRENGTHEN THE RULES OF THE BANKS TO MAKE IT LESS LIKELY THAT THIS KIND OF BANK FAILURE WOULD HAPPEN AGAIN. WE WILL PROJECT -- PROTECT THE JOBS AND SMALL BUSINESSES. ED: FOR MORE ON THE GOVERNMENT RESPONSE, JOINING US FROM THE D.C. BUREAU. HOW IS THE WHITE HOUSE RAINING
THIS ONE? >> THEY ARE FRAMING THIS AS AN OPPORTUNITY FOR PRESIDENT BIDEN TO PUSH FOR NEW REGULATIONS ON BANKS, FRAMING IT AS MISMANAGEMENT AT THOSE BANKS AND WHAT IS NEEDED IS NEW REGULATION. HE IS WANTING TO SEE THE FRANK DODD RULE WE ESTABLISHED. ED: I HAVE BEEN SEEING THIS WORD ON TWITTER, BAILOUT OR NO BAILOUT. CAROLINE: I WAS LISTENING TO MANY PODCASTS AND THERE WAS THIS WORRY. HOW MUCH HAVE WE SEEN FROM THE ADMINISTRATION AND FROM REGULATORS? BUT OF COURSE, ALSO DEPOSITORS.
>> THAT WAS A BIG PART OF THE SPEECH THIS MORNING. HE SAID TAXPAYERS ARE NOT PAYING FOR THIS, BUT HE MADE SURE TO STRESS THAT. THE MANAGEMENT OF THE BANKS WILL BE FIRED. THE LITTLE GUY IS NOT GOING TO PAY FOR THIS. MANAGEMENT WILL BE HELD ACCOUNTABLE AND WITH THESE EMERGENCY STEPS, SMALL BUSINESSES AND DEPOSITORS WILL BE ABLE TO ACCESS THEIR MONEY. ED: HOW DO YOU PACKAGE THAT? >> IT WILL BE A TOUGH CHALLENGE. MANY OF THE SAME REPUBLICANS
WHO VOTED TO EXEMPT SMALL AND MIDSIZED BANKS FROM LENDING RESTRICTIONS THAT WERE IN THE DODD-FRANK LAW, ASKING THEM TO GO BACK ON WHAT THEY DID WILL BE A TOUGH CHALLENGE. HE CAN SEE WHAT HE CAN DO THROUGH EXECUTIVE ACTION, BUT HE MIGHT BE LIMITED. THAT LEAVES HIM VULNERABLE TO ANYTHING THAT HE DOES ON HIS OWN. CAROLINE: THE SUPPORT THAT TOOK THE BOARD BY SURPRISE, NOTABLY ON THE BOARD OF THAT VERY THING, THOSE WHO HELPED COWRITE DODD-FRANK -- I THINK ULTIMATELY, WHEN WE ARE THINKING ABOUT NEW REGULATION, ARE WE THINKING ABOUT THE COUNTERPARTY RISK AS WELL? WERE THEY TAKEN OFF GUARD BY HOW ONE SECTOR DEPENDED ON ONE SET OF THINGS? >> I THINK THAT IS SOMETHING THAT WAS SURPRISING TO A LOT OF PEOPLE. I DO NOT KNOW THAT THE ADMINISTRATION SAW THIS COMING, GIVEN THAT THEY HAD TO SCRAMBLE OVER THE WEEKEND. THEY TALKED A LOT ABOUT THE ECONOMY'S RESILIENCE.
I DO NOT THINK THAT THEY ANTICIPATED THIS PARTICULAR PROBLEM WOULD BECOME SUCH A MAJOR PROBLEM, PROMPTING QUESTIONS ABOUT CONTAGION RISKS, ETC. POLICYMAKERS ARE THINKING ABOUT RATE HIKES AS WELL. CAROLINE: WE THINK ABOUT THE U.K. PENSION SITUATION FROM A FEW MONTHS AGO AND THE IMPACT THERE, BUT THIS SCENARIO AROUND SILICON VALLEY BANK, U.K.,
INDIA -- OTHER GLOBAL STARTUPS WERE CONCERNED BECAUSE WE WILL TALK ABOUT THAT NEXT. WE WILL TALK ABOUT HOW IT AFFECTS NOT JUST D.C. BUT LONDON AND REGULATORS WORLDWIDE. I WANT TO GET YOUR POINT OF VIEW OF WHEN YOU ARE CONTRIBUTING AND REPORTING. HELPING TO PUSH THIS CONVERSATION FORWARD. TALKING ABOUT WHAT THE IMPLICATIONS ARE TO THE ECB.
>> I THINK THAT THE NARRATIVE IS NOW THE CONVERSATION. THE ECONOMIC PICTURE HAS SHIFTED, NOT JUST IN THE U.S., BUT INDIA IS A NAME THAT I KEEP HEARING ABOUT.
STARTUPS BASED A LOT OF HARDSHIP RIGHT NOW. THIS IS BLOOMBERG. >> THERE IS A SERIOUS RISK TO SOME OF THE MOST PROMISING LIFE SCIENCES. YOU WILL HAVE TO WAIT TO HEAR WHAT THE SOLUTION IS, BUT THAT RISK IS PRECISELY WHY THE PRIME MINISTER AND I HAVE BEEN WORKING OVER THE WEEKEND TO MAKE SURE THAT WE HAVE A SOLUTION. THESE ARE VERY IMPORTANT COMPANIES TO THE U.K. AND PART OF OUR FUTURE. CAROLINE:
JEREMY HUNT ON THE SITUATION ACROSS THE POND. IN LONDON WITH MOIRA. THIS IS JUST A DROP IN THE BUCKET. >> I THINK THAT THE BIG THING IS JUST GREATER EXPOSURE TO TECH COMPANIES AND HAVING A BIGGER SCALE WITH THAT INDUSTRY. THEY REALLY DID GET THE FIRST DEAL.
IT IS IMPORTANT TO REMEMBER THAT WITH THIS COLLAPSE THAT IT REALLY WAS ON THE MANAGEABILITY FRONT. THEY WERE NOT SEEING A HUGE UPTICK IN TEMPERATURES -- CUSTOMERS GOING BAD. ED: I WAS READING OVER THE WEEKEND. THEY HAD $11 BILLION IN DEPOSITS ON THEIR BANKING SHEET. BUT WHAT WOULD THE PROBLEMS EXPERIENCED BE LIKE? HOW DID THINGS PLAY OUT OVER IN LONDON? >> I THINK THERE WAS A LOT OF FEAR HERE AS WELL.
IT IS HARD TO SEPARATE IF YOU ARE A CUSTOMER OF ONE OF THESE BANKS. IT HAS BEEN CHARACTERIZED BY A LOT OF PANIC, FEAR AND WORRY. WE HAVE EXPERIENCED A LOT OF THE SAME THINGS. AS THEY ACQUIRE THIS UNIT OF THE BANK, THOSE THINGS SHAKE OUT AND WE CAN PROCEED FROM HERE. SO MY HAVING NO PROBLEMS AND OTHERS CANNOT LOG IN.
IT IS A MIXED BAG AT THIS POINT. CAROLINE: YOU'RE BASED IN LONDON AT THE MOMENT, BUT YOU ARE A FINTECH REPORTER EXTRAORDINARY. TALK TO US ABOUT WHAT HAPPENS ULTIMATELY. WE ARE WAITING FOR PEOPLE TO LOG IN, BUT THEY ARE TRYING TO AUCTION OFF A LOT OF OTHER ASSET. HOW DO YOU SEE THAT ALL UNFOLDING? QUEST THEY JUST ANNOUNCED TODAY THAT THEY FORMED A SPECIAL COMMITTEE. THEY ARE EXPLORING OPTIONS FOR
THE SECURITIES BUSINESS, AS WELL AS THE CAPITAL BUSINESS. BOTH OF THOSE WERE COMPLETELY SEPARATE FROM SILICON VALLEY BANK WHICH COLLAPSED INTO RECEIVERSHIP LAST WEEK. IT WILL BE INTERESTING TO SEE WHAT KIND OF BIDS THIS COMPANY MIGHT ATTRACT FOR THOSE ASSETS. FOR THE BROADER COMMUNITY, THIS WAS A HUGE SHOCK TO BE RELIANT ON ONE PLAYER FOR SO LONG. THERE WILL PROBABLY BE A LOT OF QUESTIONS, NOT JUST FROM THE BANKS COME BUT FROM CUSTOMERS AS WELL. ED: SO INTERESTING. WE WERE TALKING FRIDAY ABOUT THE U.K.
AND OPERATIONS IN CHINA. BY SUNDAY NIGHT, THE CONCERN WAS VOCAL ABOUT IT. CAROLINE: THEY WERE TREATING OUT SAYING THEY WERE WORRIED ABOUT SOME OF THEIR LENDING AND DEPOSITS. THIS WAS A GLOBAL COMPANY THAT SUPPORTED A LOT OF SYSTEMS. ED: WE HAVE TO GET THE TAKE FROM
THE COMMUNITY. ED: THIS IS THE EUROPEAN MARKET DOWN 2.4% WITH BANKS LEADING DECLINES. .9%.
WE FACTORING AROUND WHAT THE FED DOES. THE ECB BEING RESET. THE U.K. 10 YEAR YIELD DOWN. THE BANKS LEADING. LET'S GET TO SOME OF YOUR OTHER HEADLINES. HERE IS LISA MATEO.
LISA: WE HAVE THE FIRST WORD AND I AM LISA MATEO. CONGRESS WILL STRENGTHEN THE REGULATION OF THE BANKING SYSTEM. BIDEN SAID AMERICANS CAN HAVE CONFIDENCE THAT THE BANKING SYSTEM IS SAFE. HE IS SEEKING TO REASSURE THE PUBLIC ABOUT THE STATE OF THE U.S. FINANCIAL SYSTEM AFTER COLLAPSES THAT RAISED FEARS OF A FULL-BLOWN BANKING CRISIS.
PFIZER SAID IT WILL -- GAINING DRUGS THAT FIGHT TUMORS. THEY WILL PAY PER SHARE. IT IS ABOUT A THIRD MORE THAN THE CLOSING SHARE PRICE ON FRIDAY. DAVID WESTIN IS SITTING DOWN WITH THE PFIZER CEO. WE WILL HAVE THAT FOR YOU IN THE NEXT HOUR.
A POWERFUL LATE WINTER SNOW -- STORM WILL BRING SNOW AND RAIN. THE CITY WILL GET MAINLY HEAVY RAIN BUT HIGH WINDS COULD CAUSE POWER OUTAGES AND DELAYS. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON QUICKTAKE BY BLOOMBERG, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I'M LISA MATEO. THIS IS BLOOMBERG. ♪ CAROLINE: WELCOME BACK TO BLOOMBERG TECHNOLOGY. LET'S GET BACK TO SILICON VALLEY BANK. CHERYL IS WITH US.
TAKING TO TWITTER TO SAY THE ONE THING THIS MAN TAUGHT ME IS THAT MOST KNOW NOTHING ABOUT FINANCE. WHAT DO YOU MEAN? WHAT IS THIS CRITIQUE OF YOUR OWN INDUSTRY MEANT TO BE TALKING ABOUT? >> THANK YOU FOR HAVING ME. THIS TWEET TOOK OFF BECAUSE THERE WAS AN ELEMENT. AT THE SAME TIME, IT IS A HUMAN BEHAVIOR PROBLEM. IT IS A CLASSIC EXAMPLE OF EVERYONE ACTING INDIVIDUALLY RATHER THAN COLLECTIVELY.
SILICON VALLEY BANK WAS THE PARTNER OF A LOT OF DIFFERENT PLAYERS. A LOT OF DIFFERENT INITIATIVES. THEY WERE THE FIRST BANK ACCOUNTS OF MANY FOUNDERS AND THEY TOOK THIS PERSONALLY AS WELL. EVEN GIVING OUT PERSONAL LOANS AND MORTGAGES, LIENS OF CREDIT -- THAT IS SOMETHING THAT WE HAVE TO WORK TOGETHER.
THERE WILL BE A SIGNIFICANT GAP IN THE MARKET IN TERMS OF ACCESS TO CAPITAL AND LEADERSHIP. THAT IS WHAT COMMUNITIES LIKE OURS ARE TRYING TO DO. CAROLINE: I BELIEVE WHEN I LOOK ON THEIR WEBSITE, IT WAS PARTNERS LIKE SILICON VALLEY THAT HELPED TO CONTINUE TO DRIVE THE CONVERSATION AND THE NETWORK. WHAT DO YOU DO WHEN THE BANK HAS TO PULL BACK? >> SILICON VALLEY BANK WAS OUR FOUNDING SPONSOR. THEY GAVE US OUR FIRST CHECK WHEN WE WERE STILL IN THE IDEA STAGE. THEY WERE THE PERSON TO TAKE ON
THE MOST RISK WHEN IT CAME TO FINDING THINGS AT THE IDEA STAGE. THEY REALLY TOOK A CHANCE TO MAKE ECOSYSTEM BETTER AS A WHOLE AND WE REALLY WANTED TO PARTNER WITH A BANK THAT SAW OUR VISION AND WHAT WE WERE TRYING TO CREATE. WE WERE HELPING EVERYONE BREAK INTO VENTURE AND BUILD THEIR OWN STARTUPS.
LAST BUT NOT LEAST, WE ACTUALLY HELPED THEM RAISE CAPITAL FOR THEIR OWN FUNDS. THAT IS ONE OF THE KEY THINGS THAT WE WILL BE MISSING IS THAT FIRST CHECK IN THAT WILL ALLOW PEOPLE TO MAKE THIS SYSTEM BETTER. WE WERE EXPOSED BECAUSE WE WERE THERE BANKING PARTNER AND THAT IS SOMETHING THAT I COME AS AN INVESTOR AND A FOUNDER WAS REALLY COGNIZANT OF. I HAVE OTHER FOUNDERS REACHING OUT TO ME.
AS A FOUNDER AND INVESTOR, I CAN CLEARLY SUPPORT USING MY OWN EXPERIENCE AND THE EXPERIENCE -- THE COMMUNITY AS A WHOLE. QUEST -- ED: THEY HAVE OPEN THEIR DOORS. WHAT HAVE YOU DONE TO HELP FOUNDERS MAKE PAYROLL? HAVE YOU HAD TO MOVE MONEY AROUND OR MAKE DEALS? >> WE ALL HAD A COLLECTIVE SIGH OF RELIEF THE OTHER DAY. MAKING SURE THAT DEPOSITS WERE WHOLE. OUR MONEY IS SAFE, BUT THE LOSS IS AROUND LOSING SILICON VALLEY AS A LEADER IN THE SPACE. I THINK THAT HAS ALLOWED FOR FOUNDERS AND COMMUNITIES TO GO BACK TO THE BASICS. WHEN TIMES ARE TOUGH, THESE ARE
TIMES WHEN YOU KNOW WHAT PEOPLE ARE MADE OUT OF. SUPPORTING PEOPLE WITH PAYROLL AND WITH STRATEGIES, SCALING THINGS BACK TO FIGURE OUT HOW OTHER THINGS PLAY OUT. OTHERS ARE POTENTIALLY AT RISK. BUT I HAVE SEEN THIS BEFORE. I WAS AN EXECUTIVE AND I HAD MY FAIR SHARE OF ROCKY TIMES THROUGH COVID AND GEORGE FLOYD. THE BIG LESSON THAT WE CAN
LEARN IS THAT WHEN THERE ARE TIMES OF CHAOS, THERE ARE ALSO TIMES OF OPPORTUNITY. YOU ARE ABLE TO TAKE ADVANTAGE OF THESE CHANCES. ED: GO BACK SIX DAYS BEFORE SILICON VALLEY. IT SEEMS TIMES ARE HARD FOR STARTUPS ANYWAYS. DOES THIS MASK A MUCH BIGGER PROBLEM WITH AND ACCESS TO CAPITAL? >> I DO NOT THINK ANYBODY SAW THIS COMING. I THINK THAT WAS SOMETHING WHERE WE SAW A LOT OF FOUNDERS ARE GOING TO GET HIT I THIS NEGATIVELY, BUT I WOULD LIKE TO STATE THAT DIVERSE BOUNDARIES WERE NOT GETTING ACCESS TO CAPITAL IN THE FIRST PLACE.
WE ACTUALLY ISSUED A STATEMENT LAST YEAR BECAUSE EVEN THOUGH IT WAS THE LARGEST VENTURE CAPITAL FUNDING YEAR TO DATE, LATINOS GOT A PERCENTAGE OF THAT. EVEN WHEN TIMES ARE GOOD, WE ARE NOT GETTING ENOUGH MONEY. THEY WILL CONTINUE TO HAVE LESS ACCESS TO CAPITAL. THAT IS WHY WE ARE BANDING TOGETHER TO SHOW A UNITED FRONT. OUR MOTTO IS STRENGTH AND UNITY AND WE WANT TO MAKE SURE THAT WE ARE THERE FOR OUR COMMUNITIES. ED: THANK YOU. COMING UP, WE WILL HEAR FROM VCS THAT BANDED TOGETHER IN SUPPORT OF SILICON VALLEY BANK.
CAROLINE: AND THE POINT ABOUT SILICON VALLEY BANK. RELATIONSHIPS, NOT JUST PRIVATE COMPANIES, BUT THOSE THAT DID GO PUBLIC REMAIN VERY INTERTWINED. WE GOT THAT FEEDING OF THE INFORMATION AFTER THE BELL ON FRIDAY. ROKU NOW DOWN .7%. IT HAD ALMOST $500 MILLION IN CASH. WE HAVE SEEN ROKU DOWN THAT LITTLE BIT.
TIES WITH ROCKET LABS ARE UNDER PRESSURE TODAY. A CANADIAN COMPANY HAD 90% OF ITS CASH WITH SILICON VALLEY BANK. LET'S GET MORE ON THE VC COMMUNITY IN A MOMENT. THIS IS BLOOMBERG. ♪ >> IT HAS BEEN INCREDIBLE CHAOS. MY PHONE HAS BEEN BLOWING UP. >> THE PEOPLE MOST AFFECTED ARE EARLY AND MID-STAGE COMPANIES. >> THIS IS THE TIME TO PROVIDE VALUE TO YOUR PORTFOLIO COMPANIES.
>> THEY ARE MASSIVELY BULLISH FOR THE COMPLEX. QUEST THEY SHOULD HAVE BEEN ON TOP OF WHAT WAS GOING ON. ED: SOME OF OUR GUEST REALLY -- JUST TO -- GUEST REACTION.
LET'S GET A TAKE. FIRMS BANNING -- BANDING TOGETHER. OVER 600 SIGNATURES. DO YOU STILL WANT TO DO BUSINESS WITH WHATEVER SILICON VALLEY BANK INSET BN? >> ABSOLUTELY. I THINK IT IS IMPORTANT THAT SILICON VALLEY CONTINUES TO THRIVE.
THERE ARE CONVERSATIONS BEING HAD WITH SOME BANKS. IT IS UNCLEAR IF THERE IS A DEAL THAT HAS BEEN MADE YET. I REALLY HOPE THAT A DEAL COMES TOGETHER. ED: I KNOW THAT THEY ARE SINGLE CHEESE TO YOUR LETTER, PEOPLE BACKING YOUR INITIATIVE TO KEEP SILICON VALLEY BANK ALIVE, BUT WHO ARE ALSO TELLING PORTFOLIO COMPANIES TO POOL MONEY FOR WHATEVER REASON. HOW DO YOU? >> THURSDAY MORNING, WITH THE NEWS GOT OUT, EVERY INVESTOR WAS GETTING CONTACTED ABOUT WHAT TO DO.
YOUR FINANCIAL RESPONSIBILITY IS TO SAY EVEN THOUGH THE RISK IS LOW, THAT THE BANK COULD GO OVER -- GO UNDER -- THE LEADERS SAID THIS IS A PRISONERS DILEMMA SITUATION. ON OUR OWN, EVERYBODY WILL GIVE THE SAME GUIDANCE, BUT THAT IS NOT RIGHT COLLECTIVE. THE BANK WILL BE IN A PRECARIOUS POSITION. THAT IS WHAT WE TRIED TO STOP, BUT IN A DIGITAL AGE, RUNNING A BANK CAN HAPPEN VERY FAST. BY THE TIME WE GOT OUR GROUP TOGETHER, THE OTHER GROUP AT ARTIE'S -- ALREADY STEPPED IN. CAROLINE: THERE IS STILL A LOT OF STRESS BECAUSE BONDHOLDERS ARE NOT PROTECTED.
WE ARE LOOKING AT THE FALLOUT FROM FIRST REPUBLIC, WHICH ALSO HAS TIES WITH THE START OF COMMUNITY. ARE YOU TALKING ABOUT DIVERSIFICATION OF THEIR TREASURY? >> ABSOLUTELY. THE GOVERNMENT STEPPED IN IN EXACTLY THE RIGHT WAY, AT THE RIGHT TIME. I THINK THINGS ARE IN A VERY STABLE PLACE RIGHT NOW. THE ADVICE THAT WE ARE GIVING OUR COMPANIES IS MAKING SURE THAT WE HAVE BUSINESS CONTINUITY.
THE OPERATIONS ARE THERE, WE WANT TO MAKE SURE THAT OUR EMPLOYEES ARE COMFORTABLE. WE NEED TO THINK ABOUT DIVERSIFICATION. WE WERE SO USED TO RELYING ON THEM AS A BANK. CAROLINE: WHAT OF BASICALLY BEING A BAILOUT TO VENTURE CAPITAL FIRMS? IS THERE NOTHING THAT YOU COULD HAVE DONE AS A GROUPING TO SUPPORT THE BANK? >> THIS IS NOT A VENTURE-CAPITAL BAILOUT, FIRST AND FOREMOST. OVER THE WEEKEND, ALL OF THE FIRMS, INCLUDING US, WE PUT TOGETHER PLANS FROM OUR BALANCE SHEETS.
I THINK IT WOULD HAVE AVERTED THE CRISIS FOR A COUPLE OF WEEKS WHILE THE RIGHT SOLUTIONS WERE IN PLACE, BUT THIS ALL HAPPENED SO FAST THAT HONESTLY, IF THE FED HAD NOT STEPPED IN WITH THESE DEPOSITS, IT WOULD HAVE BEEN VERY DIFFICULT. THE PAYROLL IS BEING MADE NOW. LAST I HEARD, IT WAS DOWN, BUT IT IS IN MOTION NOW. ED: FUNDING WAS ALREADY HARD TO COME BY DAYS AGO. >> LISTEN, WE APPROVED A DEAL ON SATURDAY. I WILL SAY, THIS IS A VERY SERIOUS SITUATION.
HOPEFULLY WE WILL GET THIS AVERTED SOON. FIVE DAYS AGO ON IF YOU RECALL, WE WERE VERY EXCITED ABOUT WHAT WAS HAPPENING AT THE BEGINNING OF A NEW CYCLE. I THINK THOSE TRENDS ARE THERE. THE ENTREPRENEUR ACTIVITY IS STRONG. CAROLINE:
PLENTY OF WORRY ABOUT VC FUNDS GOING UNDER. HAVE THEY BEEN WILLING TO STEP IN TO MAKE THE SUPPORT THERE? WILL YOU STILL SEE MONEY GOING INTO THE VC COMMUNITY? >> ABSOLUTELY. I DO NOT THINK THIS WILL IMPACT THE VENTURE CAPITAL COMMUNITY. AT THE END OF THE DAY, THIS IS A BANK THAT DID NOT HAVE THE RISK MANAGEMENT IN PLACE AND THE FAILURE AROUND IT HAS BEEN MANAGED. I DO NOT THINK THIS WILL IMPACT THE VENTURE CAPITAL FIRMS OR THE INVESTMENT PACING THAT WILL BE HAPPENING IN THE INDUSTRY. CAROLINE: OPTIMISM. THANK YOU FOR COMING AND JOINING US.
WE WILL LET YOU COME BACK -- GO BACK TO YOUR PORTFOLIO COMPANIES. WHAT TO EXPECT NEXT. WE HAVE SO MUCH IN TERMS OF THE DEBRIEF. ED: LET'S CHECK IN ON THE MARKETS AS WE HEAD INTO BREAK. THERE IS TYPE OUTPERFORMANCE. A BIG CONVERSATION ON FED EXPECTATIONS. WE WILL TRACK THE NUMBERS. THIS IS BLOOMBERG.
♪ >> RISING INTEREST RATES ARE GOOD FOR BANKS UNTIL THEY ARE NOT. THAT IS WHAT WE ARE SEEING WITH THE COLLAPSE OF SILICON VALLEY BANK AND OTHER BANK STOCKS. HIGHER RATES INCREASE THE PROFITABILITY OF A BANK'S MAIN BUSINESS. BUT WHEN THE FEDERAL RESERVE PLOWS AHEAD WITH NONSTOP INTEREST RATE INCREASES, PROBLEMS START CROPPING UP QUICKLY.
SILICON VALLEY BANK GOT HIT WITH A ONE-TWO PUNCH. IT'S CUSTOMERS WERE BURNING THROUGH MORE CASH BECAUSE IT BECAME HARDER TO GET FUNDING. WHEN YOUR CUSTOMERS NEED CASH, YOU NEED TO HAVE ENOUGH ON HAND. THANKS USUALLY PARK A LOT OF THEIR MONEY IN SAFE INVESTMENT. THEY WERE FORCED TO SELL THOSE INVESTMENTS TO RAISE CASH TO MEET THOSE WITHDRAWALS. THEY SOLD THEIR SECURITY IS AT A LOSS. THE TOTAL LOSS? $1.8 BILLION.
WHEN THE ANNOUNCED THE LOSS, OTHER STARTUPS GOT SCARED AND STARTED PULLING OUT THEIR MONEY. AFTER THE GREAT FINANCIAL CRISIS, THE GOVERNMENT IMPOSED ALL KINDS OF ON BANKS THAT THEY DEEMED TOO BIG TO FAIL THAT J.P. MORGAN CHASE, BANK OF AMERICA AND THEIR PEERS. THEY EVEN HAVE TO ASK PERMISSION TO GIVE DIVIDENDS TO SHAREHOLDERS AND NOW MANY SHAREHOLDERS ARE PLAYING IT SAFE FOR DIVERSIFYING WHERE THEY PUT THEIR MONEY. CAROLINE: THAT IS HOW IT STARTED. HOW IS IT GOING? THE BUSIEST MAN OVER THE WEEKEND AND THE KEY CONCERN HAS TO BE THE FACT THAT SHARE PRICES ARE STILL DOWN.
I WOULD SAY THE FUNDAMENTAL QUESTION IS ONE OF SENTIMENT. THEY MOVED TO REASSURE DEPOSITARIES. THEY LINED UP THIS NEW LIQUIDITY FACILITY AND EASIER AND LESS EXPENSIVE TO BORROW FROM THE DISCOUNT IN. BUT IT IS STILL UNCLEAR WHETHER OR NOT THAT HAS MANAGED TO CALM PEOPLE DOWN. IT HAS NOT MANAGED TO CALM DOWN INVESTORS. ED: WE FIND OURSELVES IN A
SITUATION WHERE THERE ARE MORE QUESTIONS THAN ANSWERS. IS THERE A BUYER FOR SVB? THE RESPONSE IS PRETTY DRAMATIC EVEN THOUGH THEY WERE SO VOCAL ABOUT THE STRENGTH OF THE LIQUIDITY POSITION. WHY IS THERE SO MUCH ANGST OUT THERE ABOUT REACTION ALONE? >> FED POLICY IS STILL IN PLACE. EVEN WITH THESE
COUNTERMEASURES, PEOPLE ARE STILL WORRIED THAT THIS PROBLEM WILL PERSIST. WHEN IT COMES TO BANKING, THE NUMBER ONE THING IS SENTIMENT. IF THEY ARE DOWN BECAUSE OF BACK-TO-BACK BANK CLOSURES AND FAILURES, IT IS HARD TO WIN OVER HEARTS AND MINDS. ED:
WHAT ARE WE HEARING ABOUT GETTING ACCESS TO THEIR CASH? >> IT SOUNDS A LITTLE BIT MIXED. I HAVE NOT BEEN AS CLOSE TO THAT AS OTHERS. THEY ARE ABLE TO GET ACCESS TO IT. WE ARE SEEING THAT, ALTHOUGH THERE HAS BEEN SOME HICCUPS. I THINK THAT THE REGULATORS HAVE MOVED TO GET PEOPLE ACCESS TO THEIR DEPOSITS TO FULLY BACKSTOP THEM. I THINK THAT IS WHAT WE ARE SEEING THIS MORNING. CAROLINE:
THIS CAME DOWN TO A MAJOR COUNTERPARTY RISK THAT PEOPLE HAD NOT FACTORED IN. WILL REGULATION CHANGE? >> THE BIG QUESTION IS WHETHER OR NOT WE WILL SEE SOME KIND OF ROLLBACK OR ALTERATION TO TRUMP ERA MOVES THAT MADE IT LESS CUMBERSOME OR BURDENSOME WHEN IT COMES TO CAPITAL REQUIREMENTS, WHETHER OR NOT WE SEE A PUSH TO MOVE AWAY FROM THAT FOR BANKS AROUND CAPITAL IS THE QUESTION THAT I DO NOT HAVE THE ANSWERS TO, BUT I THINK IT WOULD MAKE SOME SENSE. ED: ONE OF THE BUSIEST PEOPLE I KNOW IN THE LAST 48 HOURS, TRACKING DOWN EVERY ANGLE. CAROLINE: WHAT AN EXTRAORDINARY DAY TO HAVE OUR FIRST EDITION OF THE 12:00 P.M.
NEW YORK BLOOMBERG TECHNOLOGY. TWO NAMES TOMORROW. WE HAVE TREY STEVENS JOINING THIS PROGRAM. ED: A KEY CONVERSATION WITH SOMEBODY WHO KNOWS THE VALUE WELL. DO NOT FORGET THAT YOU CAN GET A RECAP ON OUR PODCASTS. WHEREVER YOU GET YOUR PODCASTS.
2023-03-15 13:07
