Silicon Valley Bank's fall: 5,000 CEOs & founders write to Yellen
The collapse of Silicon Valley Bank, which focused on lending to startups, became the biggest since the financial crisis of 2008, tumbling the global markets and triggering a selloff in banking stocks across the world.
Since the California Department of Financial Protection and Innovation shut down the bank on Friday, less than two days after the bank tried to persuade clients not to pull their money over concerns it was running low on available cash, experts are voicing concern and asking for measures to tackle the crisis.
Over 5,000 CEOs and founders representing over 400,000 employees knock on the doors of US Secretary Janet Yellen, Chairman Martin J. Gruenberg, Chairman Brown, and Chairman McHenry.
Garry Tan, CEO and President of Y Combinator, one of the prominent signatories of a petition to influential officials, expressed concern over the rapid failure of Silicon Valley Bank.
"We are not asking for a bailout for the bank equity holders or its management; we are asking you to save innovation in the American economy. We ask for relief and attention to the immediate critical impact on small businesses, startups, and their employees who are depositors at the bank," Tan said.
According to the NVCA, Silicon Valley Bank has over 37,000 small businesses with more than $250,000 in deposits.
According to him, one-third of startups with exposure to SVB used SVB as their sole bank account in the Y Combinator community.
His concern stems from the fact that they will not have enough cash to run payroll in the next 30 days. By that measure, he said, payroll-related furloughs or shutdowns will impact more than 10,000 small businesses and startups.
"If the average small business or startup employs 10 workers, this will have an immediate effect of furloughs, layoffs, or shutting down, affecting over 100,000 jobs in the most vibrant sector of innovation in our economy," he said.
Silicon Valley Bank’s failure, which has a real risk of systemic contagion, has already instilled fear among founders and management teams to look for safer havens for their remaining cash, which can trigger a bank run on every other smaller bank.
Tan said the fallout can have a bearing on the US technology industry and US competitiveness worldwide and ultimately set back US competitiveness by a decade or more, while the rest of the world races forward.
As measures, he said small business depositors at Silicon Valley Bank should be made whole, regulators need to conduct a backstop of depositors, need restoration of stronger regulatory oversight and capital requirements for regional banks, and any malfeasance or mismanagement on the part of SVB executives leading to this failure should be investigated.
He called for swift and decisive action in order to prevent further shockwaves through the economy that could lead to a financial crisis and the layoffs of more than 100,000 workers.