Billionaire investor Bill Ackman warns more banks will collapse despite fed intervention

What happens next at Silicon Valley Bank? 

To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB). 

When the bank was shuttered Friday, the FDIC immediately transferred all insured deposits of Silicon Valley Bank to the DINB. 

Starting on Monday, the main office and all branches of Silicon Valley Bank will reopen under the control of the DINB.

‘Banking activities will resume no later than Monday, March 13, including on-line banking and other services. Silicon Valley Bank’s official checks will continue to clear,’ the FDIC said in a statement.

Customers with accounts in excess of the insured amount of $250,000 should contact the FDIC toll-free at 1-866-799-0959. 

Treasury Secretary Janet Yellen announced Sunday the government will not bail out the bank

President Joe Biden is said to be discussing the issue with California Gov. Gavin Newsom

Newsom (pictured in October) said in a statement that ‘Everyone is working with [the] FDIC to stabilize the situation as quickly as possible to protect jobs, peoples’ livelihoods and the entire innovation ecosystem’

Will SVB’s start-up customers get their money back? 

Following the shutdown, the FDIC said SVB depositors will have full access to their insured deposits no later than Monday morning. 

The federal agency insures each depositor up to at least $250,000. 

For customers that have deposits larger than $250,000, which likely includes many of the bank’s startup company customers, what happens next is less clear – but following the Sunday evening announcement from the Federal Reserve, they can at least rest easy knowing they will ultimately get their money back.

The FDIC said that at the time of the shutdown, the amount of uninsured deposits at the bank was undetermined. 

At the time of failure, SVB had $209 billion in total assets and owed depositors about $175.4 billion, according to the FDIC.

However, some of those assets could be difficult to liquidate, such as ownership stakes in companies that are not publicly traded, or loans to early-stage startups.

The Silicon Valley Bank New York office sits empty in New York on Friday. But following the shutdown, the Federal Reserve said SVB depositors will have full access to their deposits

The S&B 500 Bank Sector Index on Friday (above), dropping less than 1% after shedding 6.6% on Thursday in its biggest one-day loss in more than two years 

Will tech start-ups be able to meet payroll?

SVB is a main bank for start-ups and many with their cash tied up could struggle to meet payroll. Some had already indicated they risk having to lay off staff – but they are not unlikely to have to do so. 

In Seattle, Shelf Engine CEO Stefan Kalb found himself immersed in emergency meetings devoted to figuring how to meet payroll instead of focusing on his start-up company’s business of helping grocers manage their food orders.

‘It’s been a brutal day. We literally have every single penny in Silicon Valley Bank,’ Kalb said Friday, pegging the deposit amount that’s now tied up at millions of dollars.

He is filing a claim for the $250,000 limit, but that would not have be enough to keep paying Shelf Engine’s 40 employees for long. 

Tara Fung, co-founder and CEO of tech startup Co:Create that helps launch digital loyalty and rewards programs, said her firm uses multiple banks besides Silicon Valley Bank so was able switch over its payroll and vendor payments to another bank Friday.

Fung said her firm chose the bank as a partner because it is the ‘gold standard for tech firms and banking partnerships,’ and she was upset that some people seemed to be gloating about its failure and unfairly tying it to doubts about cryptocurrency ventures.

Other companies have high percentages of their cash in Silicon Valley Bank, and they need access to more than the amount protected by the FDIC.

‘If the government allows people to take at least half of the money they have in Silicon Valley Bank next week, I think everything will be fine,’ Varsavsky said Saturday. 

‘But if they stick to the $250,000, it will be an absolute disaster in which so many companies won’t be able to meet payroll.’

Andrew Alexander, a calculus teacher at a private San Francisco high school that uses Silicon Valley Bank, wasn’t overly worried. His next paycheck isn’t scheduled for another two weeks, and he’s confident many of the issues can be resolved by then.

But he worries for friends whose livelihoods are more deeply intertwined with the tech industry and Silicon Valley.

‘I have a lot of friends in the startup world who are just like terrified,’ Alexander said, ‘and I really feel for them. It’s pretty scary for them.’

People walk through the parking lot at the Silicon Valley Bank headquarters in Santa Clara on Friday after the bank was shut down by financial regulators

Charts released by SVB show sharp declines in overall VC investments (top) and the outflow of SVB client funds (bottom) over the past year as interest rates rose

What happens if there is no buyer for SVB?

If there is no buyer for SVB, then the FDIC will be selling off the bank’s assets to raise money to repay uninsured depositors, CNBC reported. 

Some assets that are highly liquid and could be sold quickly with little loss are the tens of billions of dollars in agency mortgage-backed securities.

Loans are other assets but are less liquid and may be more difficult to sell, and something that could take several weeks. It could also end with uninsured deposits being repaid less than 100 percent.