The void left by Silicon Valley Bank won’t be easy to fill

Before the Bell: The Bank That Saved the World: A Conversation with Ahmad Thomas, President of the Silicon Valley Leadership Group, and founder of Silicon Valley

A version of this story first appeared in CNN Business’ Before the Bell newsletter came out. Is that not a subscriber? You can sign up here. You can listen to an audio version of the newsletter by clicking the same link.

While SVB was largely known as a regional bank to those outside of the tight-knit venture capital sphere, within certain circles it had become an integral part of the community – a bank that managed the idiosyncrasies of the tech world and helped pave the way for the Silicon Valley-based boom that has consumed much of the economy over the past three decades.

Half of all US venture-backed technology and life science firms were banking with its parent company at the time of its collapse. It was the bank for about 2,500 venture firms.

But the influence of SVB went beyond lending and banking – former CEO Gregory Becker sat on the boards of numerous tech advocacy groups in the Bay Area. He chaired the TechNet trade association and the Silicon Valley Leadership Group, was a director of the Federal Reserve Bank of San Francisco and served on the United States Department of Commerce’s Digital Economy Board of Advisors.

To find out, Before the Bell spoke with Ahmad Thomas, president and CEO of the Silicon Valley Leadership Group. The influential advocacy group is working to convene its hundreds of member companies – including Amazon, Bank of America, BlackRock, Google, Microsoft and Meta – to discuss what happens next.

Premarket Stocks Trading: The Case of Credit Suisse and First Republic in the Light of UBS and the Inflationary Pressures in Silicon Valley

I think the swift actions taken by the leaders in Washington helped quell some of the uneasiness that was there a few days ago, but it is clear that we are now in a situation with Credit Suisse and First Republic.

This is a time where I think people need to take a step back, allow cooler heads to prevail, and understand there are opportunities for new leaders in Silicon Valley to step up, both from an investment standpoint and a community engagement standpoint.

It’s far too early for that. We will always be at the table for discussions about ways to make capital more accessible to entrepreneurs of color and to try and drive innovation and economic growth.

The problem is twofold, one being a crisis of confidence and the other being economic conditions on the ground. The economic conditions remain volatile for a variety of reasons: The softening economy, inflationary pressures and the interest rate environment. I think we need to focus on stabilizing confidence in the investor community and in the broader set of stakeholders around the strength of the innovation economy. That is something we need to shore up near term.

UBS is paying 3 billion Swiss francs ($3.25 billion) for Credit Suisse, about 60% less than the bank was worth when markets closed on Friday. Credit Suisse shareholders will be largely wiped out, receiving the equivalent of just 0.76 Swiss francs in UBS shares for stock that was worth 1.86 Swiss francs on Friday.

Source: https://www.cnn.com/2023/03/20/investing/premarket-stocks-trading/index.html

The Deal between Credit Suisse and Signature Bank Collapsed after a Year in the Life of a Ship. A Conversation with a Founding Partner

Extraordinarily, the deal will not need the approval of shareholders after the Swiss government agreed to change the law to remove any uncertainty about the deal.

Credit Suisse had lost the trust of its investors and customers. In 2022, it recorded its worst loss since the global financial crisis. But confidence collapsed last week after it acknowledged “material weakness” in its bookkeeping and as the demise of Silicon Valley Bank and Signature Bank spread fear about weaker institutions at a time when soaring interest rates have undermined the value of some financial assets.

A week after Signature Bank failed, the Federal Deposit Insurance Corporation said it has sold most of its deposits to Flagstar Bank, a subsidiary of New York Community Bank.

$60 billion of other assets are not included in the transaction. It also doesn’t include $4 billion in deposits from Signature’s digital bank business.

At the end of last year, signatures had $110 billion worth of assets, including $88.6 billion of deposits, which showed how the run against the bank two weeks ago caused a massive decline in deposits.

Wheeler replied with a question mark. His company should have sent tens of millions in paychecks to cooks, librarians, and other workers via Silicon Valley Bank during the night. The banker sent back a screengrab of a stock chart showing that SVB’s shares had fallen nearly 90 percent while Wheeler was at sea. Almost nothing of the crisis was happening back on land when Wheeler was stuck on a ship.

It was held back from moving money. But she was still concerned. “I was really afraid that we lost everything except the bare minimum,” she says, referring to the $250,000 per account guaranteed under the US Federal Deposit Insurance Corporation, or FDIC. That would cover just two months’ payroll. People text you when they’re a founder, asking what your plan is. What is your plan? And you’re like, ‘I don’t know. I can’t really have a plan.’”