Silicon Valley Bank – The initial shock of the SVB collapse has worn off, and the blame game has begun as people look for those to blame.
The tech sector is blaming Silicon Valley Bank CEO Greg Becker.
Many blame Becker for the corporation’s status as the second-largest American financial catastrophe in history.
According to an alleged SVB employee, Becker publicly highlighted the bank’s financial problems before covertly providing cash assistance to weather the storm.
Individuals withdrew their cash as a result of the activities, which created a fearful atmosphere.
“That was absolutely idiotic,” said the employee. “They were being very transparent.”
“It’s the exact opposite of what you’d normally see in a scandal. But their transparency and forthright-ness did them in.”
Greg Becker and his leadership team indicated last Wednesday night that they projected to raise $2.25 billion in cash from $21 billion in asset sales, resulting in a $1.8 billion loss.
Despite its best efforts, SVB has yet to make any firm pledges.
The news shook Silicon Valley, where the bank has been a crucial lender to tech startups.
Many business owners were terrified.
According to California regulator records, several corporations withdrew $42 billion on Thursday, while Silicon Valley Bank’s shares fell 60%.
As Silicon Valley Bank closed that day, it had a negative cash position of around $958 million.
“People are just shocked at how stupid the CEO is,” said the SVB employee.
“You’re in business for 40 years and you are telling me you can’t raise $2 billion privately? Get on a jet and fly to Kuwait like everyone else and give them control of one-third of the bank.”
Silicon Valley Bank has yet to comment, but CEO Greg Becker is claimed to have apologized to employees in a video statement.
“It’s with an incredibly heavy heart that I’m here to deliver this message,” said Becker.
“I can’t imagine what was going through your head and wonder, you know, about your job, your future.”
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Silicon Valley Bank officials, according to Jeff Sonnenfeld, CEO of Yale School of Management’s Chief Executive Leadership Institute (CELI), deserve to be admonished for their “tone-deaf, bungled execution.”
In a joint statement, Sonnenfeld and CELI’s research director, Steven Lian, noted:
“Someone lit a match and the bank yelled, ‘Fire!’ – pulling the alarms in earnest out of genuine concern for transparency and honesty.”
Sonnenfeld and Tian claimed on Wednesday night that it was unnecessary to publicize the $2.25 billion unsubscribed capital offering.
They noted that Silicon Valley Bank had sufficient capital to fulfill regulatory requirements.
They also stated that reporting the $1.8 billion shortfall was superfluous.
The one-two blow, according to Sonnenfeld and Tian, generated a massive frenzy, culminating in a rush to withdraw deposits.
They speculated that the bank may have spaced the statements by at least one or two weeks, reducing the impact.
On Sunday, President Joe Biden’s administration unveiled a proposal to assist Silicon Valley bank clients.
Biden also emphasized that the US government will investigate all parties involved in the SVB catastrophe thoroughly.
He released a statement saying:
“I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.”
The Fed’s involvement
According to Jeff Sonnenfeld and Steven Lian, Jerome Powell, the Chairman of the Federal Reserve and Biden’s choice to lead the Feds, and his colleagues bear some of the blame.
“There should be no mistaking that Silicon Valley Bank’s collapse was a direct result of the Fed’s persistent and excessive interest rate hike,” they wrote.
They stated that the Fed’s efforts to reduce inflation had two effects:
- The value of the bonds Silicon Valley Bank was relying on for capital
- The value of the tech startups SVB catered
Silicon Valley Bank, on the other hand, had over a year to prepare for and deal with the problems.
The unnamed SVB employee called the bank’s balance-sheet manipulation “stupidity,” casting doubt on the CEO and CFO’s strategy.
But, the employee, who is also a Wall Street veteran, believes the bank’s downfall was caused by mistakes and “naivety” rather than illegal activity.
“The saddest thing is that this place is Boy Scouts,” they said.
“They made mistakes, but these are not bad people.”
Image source: Reuters