The Demise Of Silicon Valley Bank... and If Cash Is Not King...
I do NOT bank at Silicon Valley Bank. Social Leverage Funds I & II have low deposit levels at Silicon Valley Bank (below the FDIC threshold).
I would tell you where I bank, but I am worried Peter Thiel might find out.
Actually, in case Peter is listening, I bank at WELLS FARGO and my PIN is 6969 and my password is ‘Gawker’.
Sadly and seriously, on Friday, Silicon Valley Bank failed and regulators (The FDIC) seized the assets and control.
The internet is giving credit for the bank run on Peter Thiel.
Marc Rubinstein, my go to banking human (I had him on my ‘Panic’ podcast back in April 22 where he talked about banks going bust - minute 37), wrote the definitive post on Friday ‘The Demise of Silicon Valley Bank’ and calls it ‘the first bank run of the digital age’. His Afterword really hit home:
My friend Paul Grinberg who is Chairman of public bank Axos Financial wrote this to me which should be the first thing they now teach founders at Y Combinator:
Since Thursday, our Social Leverage team has been on the phones with founders and banks making sure a go forward plan was in place. We put together and shared this Google document for them Friday that details go forward recommendations.
I do not have exact numbers yet, but based on people I follow that invest in startups, it seems like 20-30 percent of startups right now bank at Silicon Valley Bank. I do not have the number of those that also have a second bank account but that will be 100 percent by next Friday.
So here we are on Sunday morning and the internet is doing its thing …fearmongering.
I have no idea why Yellen et al have not guaranteed deposits yet. We live in an era of the internet and waiting until Sunday evening is stone age behavior.
I am not a believer in ‘bailouts’.
I do believe Yellen and company should make depositors whole and should have announced that Friday evening. Making depositor’s whole is not a bailout. It is the only way to stop a total run on the banks.
There is an old saying…‘Cash Is King’.
Unfortunately that is outdated.
It should read…’Treasuries are King’ or ‘Cash is King up to $250,000.00’
This panic will push more people to say ‘self custodied Bitcoin or ______ digital asset is king’.
There is nothing funny about businesses not being able to access their deposited cash.
Back to work.