The REAL Story Behind The Silicon Valley Bank Crisis | David Dayen | TMR

The American Prospect's David Dayen joins the program to discuss Silicon Valley Bank, which suffered heavy losses due to a digital flash bank run engineered by venture capitalists and other prominent figures in San Francisco Bay. The bank failed to manage interest rate risk, which contributed to the losses. The VC-led group warned that the government must make depositors 100% whole immediately or else other regional banks will also fail, causing startups to have trouble making payroll and triggering a torrent of withdrawals. Federal officials responded by announcing a backstop to fully protect all depositors at Silicon Valley Bank and Signature Bank, which also closed on Sunday. A special bank assessment will offset losses, shareholders and bondholders will not be protected, and a $25 billion fund will be initiated to protect deposits, with no taxpayer funds implicated.

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Read more here: https://prospect.org/economy/2023-03-15-bank-crisis-federal-reserve-failures/

"AUSTIN, TEXAS – I’m at South by Southwest, a music festival that for some reason has been expanded to include a massive bullshit factory, complete with self-congratulatory panels (every one entitled “The Future Of” something or other), an exhibit hall hawking things like “phantom snack experiences” that simulate eating food without the calories (the CIA also has a large booth), and a “conscious conversations” lounge. Reality had the bad manners to intrude when the Silicon Valley Bank collapse sent a large contingent of tech executives here into a tizzy; I too have heard about crying in the streets and people furiously attempting to conduct wire transfers during panel discussions.

But fear not! The nation’s strategic bullshit reserve is inexhaustible, a fact being eminently reinforced in the wake of the collapse of SVB, and federal regulators’ backdoor bailout of the rest of the system. The gaslighting has reached mission-critical levels, in fact.

Everyone involved in this bank crisis did something wrong, a useful state of affairs because it allows them all to deflect blame. You have the brightest minds in Silicon Valley whining their way to a bailout while unwittingly admitting that they run billion-dollar businesses without understanding the first thing about cash management. You have a bank exposed to huge flight risk from uninsured depositors from the same industry leaders who text one another constantly, yet willfully ignoring the unrealized losses on its balance sheet. You have Silicon Valley Bank’s auditor (who was also Signature Bank’s auditor) saying everything’s fine two weeks before the collapse. You have stock analysts and credit rating agencies saying everything’s fine days before the collapse. You have politicians with ties to the deregulation, like Mark Warner and Jon Tester. You have politicians with ties to the bank, like Gavin Newsom. You have ex-politicians who sat on the board of one of the dead banks, like Barney Frank. And so on."