1 00:00:01,720 --> 00:00:05,400 Speaker 1: From Mark hard Of. We're Innovation, Money, Empower Collie in 2 00:00:05,519 --> 00:00:10,399 Speaker 1: Silicon Valley, NBR. This is Bloomberg Technology with Caroline Hide 3 00:00:10,480 --> 00:00:27,720 Speaker 1: and Ed Ludlow. I'm Caroline Hide a Bloomberg's World headquarters 4 00:00:27,720 --> 00:00:30,200 Speaker 1: in New York, and I'm a Ludlow in San Francisco. 5 00:00:30,280 --> 00:00:32,880 Speaker 1: This is Bloomberg Technology, A new time, a new era 6 00:00:32,960 --> 00:00:36,600 Speaker 1: for this show. Caroline, the news continues US technology a 7 00:00:36,760 --> 00:00:39,960 Speaker 1: sigh of relief as the US backstops depositors, but we 8 00:00:40,040 --> 00:00:43,120 Speaker 1: are very worried about ongoing risk, the contagion risk. This 9 00:00:43,360 --> 00:00:45,320 Speaker 1: is a new era for our show. It is a 10 00:00:45,360 --> 00:00:49,080 Speaker 1: new era for technology, the startups, the VCS writ large 11 00:00:49,400 --> 00:00:53,160 Speaker 1: as we see potentially the ongoing spiraling. Let's keep talking 12 00:00:53,159 --> 00:00:54,880 Speaker 1: about what's coming up in the next hour. Ed. How 13 00:00:54,960 --> 00:00:58,720 Speaker 1: Silicon Valley spawned a bank crisis, the impact on startups, investors, 14 00:00:58,720 --> 00:01:02,680 Speaker 1: regulators in the lenders, all fighting for their reputations. President 15 00:01:02,720 --> 00:01:06,520 Speaker 1: Biden vows to hold banks responsible, urging Congress for tougher 16 00:01:06,680 --> 00:01:09,240 Speaker 1: regulation on the banking industry, and the UK arm of 17 00:01:09,400 --> 00:01:12,679 Speaker 1: SVV gets bought for one pound. We bring you the 18 00:01:12,760 --> 00:01:16,520 Speaker 1: sprawling global gyrations from London to Beijing to Mumbai. But 19 00:01:16,680 --> 00:01:18,679 Speaker 1: first let's check in on those markets that yes ed 20 00:01:18,840 --> 00:01:20,880 Speaker 1: bread the cyber relief in the United States, but not 21 00:01:20,920 --> 00:01:23,679 Speaker 1: so worldwide. We are still worried about the contagium risk. 22 00:01:23,680 --> 00:01:25,440 Speaker 1: When you're looking in the equity front foot see one 23 00:01:25,520 --> 00:01:27,680 Speaker 1: hundred off by more than two percentage points. The eurostops 24 00:01:27,680 --> 00:01:29,600 Speaker 1: off by more than two percent, and we are seeing 25 00:01:29,600 --> 00:01:31,880 Speaker 1: the US though spring back as we start to think 26 00:01:32,000 --> 00:01:34,640 Speaker 1: maybe the Federal Reserve will have to pause its hiking cycle. 27 00:01:34,800 --> 00:01:36,840 Speaker 1: We therefore see the dollar wiping out all of its 28 00:01:36,920 --> 00:01:39,240 Speaker 1: gains for the year. We see dollar indext off by 29 00:01:39,280 --> 00:01:41,560 Speaker 1: eight tenths of a percent. I'm looking at sovereign bonds, 30 00:01:41,600 --> 00:01:44,200 Speaker 1: the bid, the flight to safety, and the unraveling of 31 00:01:44,240 --> 00:01:46,000 Speaker 1: where we thought interest rates were going to go. A 32 00:01:46,080 --> 00:01:49,240 Speaker 1: two year yield on the US down thirty eight basis points, 33 00:01:49,320 --> 00:01:51,480 Speaker 1: the most we've seen since the nineteen eighties in terms 34 00:01:51,480 --> 00:01:53,600 Speaker 1: of a move. Let's overall have a look at what's 35 00:01:53,600 --> 00:01:56,040 Speaker 1: happening in the world of crypto. We've got to look 36 00:01:56,040 --> 00:01:58,200 Speaker 1: at the key asset. Then it's just absolutely having a 37 00:01:58,200 --> 00:02:00,280 Speaker 1: field day, up twelve and a half percent. But remember 38 00:02:00,600 --> 00:02:02,520 Speaker 1: the pain trade that we saw back on Friday. The 39 00:02:02,560 --> 00:02:05,160 Speaker 1: warriors around crypto and indeed, this is a story of 40 00:02:05,240 --> 00:02:09,120 Speaker 1: dollar weakness too. Yeah, individual movers, We've actually turned a 41 00:02:09,120 --> 00:02:11,639 Speaker 1: big corner. These are the names most exposed to SVP 42 00:02:12,040 --> 00:02:14,760 Speaker 1: in terms of the deposities in publicly traded tech companies, 43 00:02:14,960 --> 00:02:17,200 Speaker 1: market Blower at the Open. We have turned a corner. 44 00:02:17,320 --> 00:02:19,520 Speaker 1: There's this narrative around one and done with the FED, 45 00:02:19,560 --> 00:02:22,600 Speaker 1: which is really boosting the tech sector along with dip buying. 46 00:02:22,720 --> 00:02:25,680 Speaker 1: Number of these names turning the corner change the board though. 47 00:02:25,760 --> 00:02:28,280 Speaker 1: Let's go straight to the banks. There is contagion concern. 48 00:02:28,360 --> 00:02:30,880 Speaker 1: A number of regional banks have been halted. We are 49 00:02:30,880 --> 00:02:34,919 Speaker 1: seeing record declines across First Republic for example, Western Alliance 50 00:02:35,000 --> 00:02:38,120 Speaker 1: also down very big. How much of the concern around 51 00:02:38,200 --> 00:02:41,200 Speaker 1: SVP and deposit of flight still applies to these names 52 00:02:41,320 --> 00:02:44,160 Speaker 1: as the regulators assess the health of this industry. For 53 00:02:44,200 --> 00:02:46,880 Speaker 1: the latest bringing Bloombog Shinnali Bassak, who's on top of 54 00:02:46,880 --> 00:02:49,320 Speaker 1: this story for US, Shinali, what is the latest with 55 00:02:49,440 --> 00:02:51,560 Speaker 1: this sector? There's a few things to think about here, 56 00:02:51,720 --> 00:02:53,320 Speaker 1: Ed And if you think about it, how many people 57 00:02:53,520 --> 00:02:57,480 Speaker 1: in Silicon Valley had banked with the likes of Silicon 58 00:02:57,639 --> 00:03:00,000 Speaker 1: Valley Bank and then move their money to say First Republic, 59 00:03:00,240 --> 00:03:02,800 Speaker 1: and then they're worried also about the other regional banks 60 00:03:02,800 --> 00:03:06,840 Speaker 1: in the sector. Western Alliance based in Phoenix, Arizona, PacWest 61 00:03:06,919 --> 00:03:10,120 Speaker 1: based in Los Angeles. There's a general worries about their 62 00:03:10,120 --> 00:03:12,799 Speaker 1: banks close to home, especially after some money has moved 63 00:03:12,800 --> 00:03:15,640 Speaker 1: there very very recently. I would also say that there 64 00:03:15,720 --> 00:03:18,880 Speaker 1: are other people who see this as an opportunity to 65 00:03:18,919 --> 00:03:21,800 Speaker 1: attract more clients. I would take a look at this 66 00:03:21,800 --> 00:03:24,560 Speaker 1: tweet over the weekend from Anthony Nodo who had said 67 00:03:24,680 --> 00:03:26,320 Speaker 1: use his link to sign up and you'll get a 68 00:03:26,360 --> 00:03:28,919 Speaker 1: twenty five dollars bonus and up to two hundred fifty 69 00:03:29,320 --> 00:03:31,480 Speaker 1: two hundred fifty dollars when you sign up for a 70 00:03:31,480 --> 00:03:33,680 Speaker 1: direct deposit. So we're going to talk a lot more. 71 00:03:33,720 --> 00:03:36,320 Speaker 1: I know about the companies here that even in the 72 00:03:36,320 --> 00:03:39,000 Speaker 1: sell off, are coming to seek a position of strength 73 00:03:39,160 --> 00:03:41,440 Speaker 1: versus the ones that maybe have a little further to 74 00:03:41,560 --> 00:03:43,880 Speaker 1: go here when it comes to the troubles facing the 75 00:03:43,920 --> 00:03:46,520 Speaker 1: banking sector, well said Shenatibaut site, you're gonna be sticking 76 00:03:46,560 --> 00:03:49,080 Speaker 1: with us and piece to say this odd fintype. Ponton 77 00:03:49,120 --> 00:03:52,200 Speaker 1: has found a CEO in Managing Pontus, Steve McLoughlin. He's 78 00:03:52,240 --> 00:03:54,040 Speaker 1: with us. He's a full my head of Goldman's Global 79 00:03:54,040 --> 00:03:58,160 Speaker 1: Financial Technology Group, joining us for the conversation. And wow, 80 00:03:58,240 --> 00:04:00,680 Speaker 1: I mean Steve told to us before we get onto 81 00:04:00,680 --> 00:04:03,280 Speaker 1: the silver linings of who benefits in this scenario, just 82 00:04:03,320 --> 00:04:05,880 Speaker 1: talk to us about how much the earth shook for 83 00:04:06,240 --> 00:04:09,680 Speaker 1: VC's tech. The overall counterparty risk was enormous, and no 84 00:04:09,680 --> 00:04:12,920 Speaker 1: one seemed to realize. Yeah. I think this sudden element 85 00:04:12,960 --> 00:04:15,520 Speaker 1: of this is what hit everybody so so hard. And 86 00:04:15,640 --> 00:04:17,680 Speaker 1: I think I don't know how many years of life 87 00:04:17,680 --> 00:04:19,720 Speaker 1: were taken off everyone over the weekend, but there were 88 00:04:19,800 --> 00:04:23,960 Speaker 1: people super, super stressed out, you know, getting from not 89 00:04:24,040 --> 00:04:27,880 Speaker 1: just big businesses but SMBs and clients of the firm, 90 00:04:28,640 --> 00:04:31,560 Speaker 1: not our firm, but SVB. But it really, I think 91 00:04:31,600 --> 00:04:33,760 Speaker 1: woke people up to the big problem you know out 92 00:04:33,800 --> 00:04:35,719 Speaker 1: there that there's so much risk on a few big 93 00:04:35,760 --> 00:04:40,080 Speaker 1: banks in Silicon Valley that it really, it really just 94 00:04:40,080 --> 00:04:42,280 Speaker 1: shook everybody out. And at the end of the day, 95 00:04:42,360 --> 00:04:44,880 Speaker 1: I think you're seeing the ripple effects happen and you're 96 00:04:45,160 --> 00:04:46,400 Speaker 1: right in the middle of it. So I think the 97 00:04:46,560 --> 00:04:48,760 Speaker 1: probably questions are going to be, you know, how deep 98 00:04:48,839 --> 00:04:50,159 Speaker 1: is this going to go? But we're still in the 99 00:04:50,160 --> 00:04:51,520 Speaker 1: middle of it. We're still in the middle of it, 100 00:04:51,560 --> 00:04:54,040 Speaker 1: and the reality is you have spent so many years 101 00:04:54,120 --> 00:04:57,920 Speaker 1: here helping firms become unicorns through raising money, you work 102 00:04:57,960 --> 00:05:00,320 Speaker 1: with their venture capitalists. Is there a sense that the 103 00:05:00,360 --> 00:05:03,520 Speaker 1: capital markets are now closing up for the people who 104 00:05:03,520 --> 00:05:06,800 Speaker 1: had such easy access to money for the last ten years. Well, 105 00:05:06,839 --> 00:05:09,400 Speaker 1: I wouldn't say they're closing up, but I would say 106 00:05:09,440 --> 00:05:11,360 Speaker 1: this isn't helpful, and given that we're right in the 107 00:05:11,400 --> 00:05:13,680 Speaker 1: middle of it, it's it's pretty painful for I think 108 00:05:13,720 --> 00:05:16,200 Speaker 1: a lot of tech companies across the world. I think 109 00:05:16,240 --> 00:05:18,080 Speaker 1: the fact that FED came out and did what they 110 00:05:18,120 --> 00:05:22,880 Speaker 1: did was incredibly helpful and expected to some extent over 111 00:05:22,920 --> 00:05:26,520 Speaker 1: the weekend. But capital was pretty hard to find before this, 112 00:05:26,760 --> 00:05:30,040 Speaker 1: and so right now we're getting hundreds of calls from 113 00:05:30,040 --> 00:05:33,120 Speaker 1: companies looking for whether it's credit. I saw ban On 114 00:05:33,120 --> 00:05:36,440 Speaker 1: this morning of talking about credit funds and structured securities 115 00:05:36,440 --> 00:05:38,760 Speaker 1: and all that. But you see some of the big 116 00:05:38,760 --> 00:05:40,800 Speaker 1: guys that wrote all the checks leading up to the 117 00:05:40,800 --> 00:05:44,039 Speaker 1: big boom in tech and fintech, you know, Tiger d 118 00:05:44,200 --> 00:05:47,560 Speaker 1: One Code to really kind of pulling back on their 119 00:05:47,600 --> 00:05:50,320 Speaker 1: private investments and looking at their portfolio companies or shifting 120 00:05:50,320 --> 00:05:54,080 Speaker 1: to public markets. Steve, you run an advisory. This at 121 00:05:54,080 --> 00:05:56,479 Speaker 1: the hault of all these transactions. Right when the Vene 122 00:05:56,600 --> 00:06:00,520 Speaker 1: Caitlists wrote that letter of support for SVB, they pointed 123 00:06:00,520 --> 00:06:02,640 Speaker 1: out that it's not just a place that holds deposits 124 00:06:02,640 --> 00:06:05,960 Speaker 1: for this sector. It offers a wide range of banking 125 00:06:05,960 --> 00:06:08,400 Speaker 1: sets is where no one else would. So, now where 126 00:06:08,400 --> 00:06:11,240 Speaker 1: does this industry turn to? Where did the founders go 127 00:06:11,320 --> 00:06:15,360 Speaker 1: when they need banking services and traditional banks don't offer them? Yeah, 128 00:06:15,360 --> 00:06:17,240 Speaker 1: you're right. It was not just a place where you 129 00:06:17,279 --> 00:06:19,400 Speaker 1: storage your money. It was where all the money got transferred. 130 00:06:19,400 --> 00:06:21,640 Speaker 1: They were doing payments, they were doing treasury management, they 131 00:06:21,640 --> 00:06:24,520 Speaker 1: were doing wealth management, investment banking, you name it. And 132 00:06:24,560 --> 00:06:27,800 Speaker 1: a lot of companies were essentially running their business off 133 00:06:27,839 --> 00:06:31,600 Speaker 1: of SVB, not just essentially putting their deposits there. You know, 134 00:06:31,640 --> 00:06:34,200 Speaker 1: I think, you know, it's interesting to hear so far 135 00:06:34,360 --> 00:06:36,680 Speaker 1: and other FinTechs who we know are are you know, 136 00:06:36,839 --> 00:06:39,840 Speaker 1: have their hands out to essentially take deposits and help 137 00:06:39,839 --> 00:06:42,600 Speaker 1: people out. But that's just one smallest liver. The economy 138 00:06:42,600 --> 00:06:45,320 Speaker 1: in the fintech universe is extremely strong, and I think 139 00:06:45,320 --> 00:06:46,880 Speaker 1: there's going to be places for people to go. We 140 00:06:46,920 --> 00:06:49,080 Speaker 1: were on the phone all week on ourselves and with 141 00:06:49,200 --> 00:06:51,680 Speaker 1: different clients helping them get open up accounts at Cheaping 142 00:06:51,720 --> 00:06:55,120 Speaker 1: Morgan and other large banks institutions, And that was happening 143 00:06:55,120 --> 00:06:57,520 Speaker 1: all weekend. And I have to say, and talking to 144 00:06:57,560 --> 00:06:59,560 Speaker 1: some of the bankers that were taking those funds in 145 00:06:59,600 --> 00:07:02,000 Speaker 1: that a lot of them were extremely gracious about about 146 00:07:02,000 --> 00:07:04,600 Speaker 1: the situation and not trying to sort of fearmonger on it. 147 00:07:05,200 --> 00:07:07,520 Speaker 1: So a lot of support around the banking system for 148 00:07:07,520 --> 00:07:11,360 Speaker 1: each other, from systemically important institutions such as JP Morgan, 149 00:07:11,440 --> 00:07:14,240 Speaker 1: such a Bank America. But what about Mercury bres Capital, 150 00:07:14,280 --> 00:07:17,000 Speaker 1: what about some of the neo banks? How much should 151 00:07:17,000 --> 00:07:19,800 Speaker 1: we go to see these companies supported with inrow, in 152 00:07:19,880 --> 00:07:22,880 Speaker 1: flux of cash, or more warries around them. I think 153 00:07:22,880 --> 00:07:25,200 Speaker 1: the good news is the bigger and better of those 154 00:07:25,240 --> 00:07:28,480 Speaker 1: firms raised so much capital over the last couple of years, 155 00:07:28,520 --> 00:07:31,800 Speaker 1: companies like Revolute in Europe raised a billion to fifty 156 00:07:31,840 --> 00:07:34,120 Speaker 1: from US for example, and are growing like a weed 157 00:07:34,160 --> 00:07:35,960 Speaker 1: and making lots of money. So some of these banks 158 00:07:35,960 --> 00:07:39,040 Speaker 1: are very well healed and don't actually have risky assets 159 00:07:39,080 --> 00:07:40,840 Speaker 1: on our balance sheet like some of the larger banks. 160 00:07:40,840 --> 00:07:43,520 Speaker 1: So in a weird way, some of the largest banks 161 00:07:43,520 --> 00:07:45,200 Speaker 1: of the country more risky than some of the neo 162 00:07:45,200 --> 00:07:48,440 Speaker 1: bank So we're very bullish on all things or most 163 00:07:48,440 --> 00:07:50,840 Speaker 1: things fintech, I would say, but I think this is 164 00:07:50,840 --> 00:07:53,320 Speaker 1: a great opportunity for fintech to shine. I'm so interested 165 00:07:53,320 --> 00:07:55,560 Speaker 1: though you mentioned kind of helping your clients move money 166 00:07:55,600 --> 00:07:57,640 Speaker 1: into places like JP Morgan. There was a lot of 167 00:07:57,720 --> 00:08:00,720 Speaker 1: chatter online, especially with the VC community, about this idea 168 00:08:00,800 --> 00:08:03,720 Speaker 1: that you're systemically important and then you're everybody else, And 169 00:08:03,760 --> 00:08:07,000 Speaker 1: I'm wondering has the psychology change now that the FED 170 00:08:07,040 --> 00:08:09,160 Speaker 1: has stepped in, that the FDIC has stepped in the 171 00:08:09,160 --> 00:08:11,240 Speaker 1: way they did and said you're safe no matter what 172 00:08:11,840 --> 00:08:15,040 Speaker 1: it Does that mean that there will still be an 173 00:08:15,080 --> 00:08:18,680 Speaker 1: embracing of these regional banking partners or is there still 174 00:08:18,720 --> 00:08:20,320 Speaker 1: that fear given what we've seen it to a con 175 00:08:20,360 --> 00:08:22,520 Speaker 1: valley bank. I mean, there's been a twenty year trend 176 00:08:22,520 --> 00:08:25,840 Speaker 1: towards bank mergers and lesser and lesser banks in the country, 177 00:08:25,840 --> 00:08:27,200 Speaker 1: and that's how I sort of built my career up 178 00:08:27,200 --> 00:08:29,120 Speaker 1: of Coleman Sacks doing a lot of bank mergers. But 179 00:08:29,840 --> 00:08:31,760 Speaker 1: I would say, I don't think we're going to move 180 00:08:31,760 --> 00:08:33,880 Speaker 1: to a system like Canada where there's like six major 181 00:08:33,920 --> 00:08:35,640 Speaker 1: banks and then nothing else. I think it could be 182 00:08:35,679 --> 00:08:37,520 Speaker 1: a slow movement towards that, because I don't think you 183 00:08:37,559 --> 00:08:40,880 Speaker 1: really necessarily need as many banks as we have. But 184 00:08:40,960 --> 00:08:42,960 Speaker 1: I also think there's a huge place for the fintech 185 00:08:43,000 --> 00:08:45,640 Speaker 1: institutions that are coming onto the scene and solving some 186 00:08:45,679 --> 00:08:48,160 Speaker 1: of these problems and using some of the very largest banks. 187 00:08:48,160 --> 00:08:50,600 Speaker 1: So they got a layer on top of the largest banks. 188 00:08:50,640 --> 00:08:54,240 Speaker 1: You can have the best of both worlds. Steve Owner 189 00:08:54,280 --> 00:08:56,960 Speaker 1: brings some breaking news just crossing the Bloomberg terminal. Bloomberg 190 00:08:57,000 --> 00:09:00,480 Speaker 1: is reporting, citing officials familiar of the matter, the European 191 00:09:00,480 --> 00:09:04,080 Speaker 1: Central banks plans for big interest rate hikes in the 192 00:09:04,080 --> 00:09:07,240 Speaker 1: weeks succume are going to meet more opposition now right 193 00:09:07,280 --> 00:09:09,880 Speaker 1: Dubbish policymakers are likely to make the point that because 194 00:09:09,920 --> 00:09:13,360 Speaker 1: of what's happened with Silicon Valley Bank, the economic picture 195 00:09:13,400 --> 00:09:16,080 Speaker 1: has shifted, not just here in North America but in 196 00:09:16,120 --> 00:09:19,080 Speaker 1: Europe as well, similar to what we're seeing in the 197 00:09:19,120 --> 00:09:22,080 Speaker 1: market reflecting in terms of their bets on the FED. 198 00:09:22,480 --> 00:09:26,240 Speaker 1: How much has the economic picture shifted into your mind 199 00:09:26,280 --> 00:09:28,760 Speaker 1: as a result of what's happened in the past five days. 200 00:09:29,320 --> 00:09:31,440 Speaker 1: I think the biggest thing is people are realizing that 201 00:09:31,520 --> 00:09:34,800 Speaker 1: the blunt instrument of just increasing interest rates isn't always 202 00:09:34,800 --> 00:09:39,760 Speaker 1: good for for the overall macro economy, right, So it's 203 00:09:39,920 --> 00:09:42,400 Speaker 1: it's great for certain elements of the world, and it's 204 00:09:42,480 --> 00:09:45,079 Speaker 1: helpful for inflation, but it also has its ripple effects. 205 00:09:45,120 --> 00:09:48,360 Speaker 1: So and it's hitting it's hitting Europe just as much 206 00:09:48,360 --> 00:09:50,200 Speaker 1: as it is here. You know, at least they got 207 00:09:50,200 --> 00:09:52,439 Speaker 1: sold for a dollar. We can't even get SVB sold 208 00:09:52,440 --> 00:09:55,559 Speaker 1: in the US for anything, So that's which is a shame. 209 00:09:55,880 --> 00:09:59,240 Speaker 1: So I think the ripple effects are are are happening, 210 00:09:59,280 --> 00:10:00,959 Speaker 1: and they're I think, like I said, we're right in 211 00:10:00,960 --> 00:10:03,280 Speaker 1: the middle of it. There could be more issues. I 212 00:10:03,320 --> 00:10:05,959 Speaker 1: want to switch gears a little bit because to folks 213 00:10:05,960 --> 00:10:07,600 Speaker 1: that are trading every day in the market, maybe they're 214 00:10:07,640 --> 00:10:10,040 Speaker 1: not always focused on crypto. But for the crypto community, 215 00:10:10,080 --> 00:10:12,640 Speaker 1: they had three banks that were friendly to them just 216 00:10:12,760 --> 00:10:16,559 Speaker 1: evaporate within five days essentially, So I'm wondering what that means. 217 00:10:16,600 --> 00:10:19,800 Speaker 1: There's this concern that the access to the financial system 218 00:10:19,800 --> 00:10:22,120 Speaker 1: has been cut off for the crypto community. If you're 219 00:10:22,120 --> 00:10:25,760 Speaker 1: seeing Bitcoin up quite meaningfully, what's going on? Yeah, I 220 00:10:25,800 --> 00:10:28,920 Speaker 1: find it, you know, quite interesting to see that. You know, 221 00:10:28,960 --> 00:10:31,760 Speaker 1: most of the tech IPOs are down fifty to sixty percent, 222 00:10:31,840 --> 00:10:34,079 Speaker 1: and bitcoin was down way less than that. Now it's 223 00:10:34,120 --> 00:10:36,440 Speaker 1: back up. Whereas these stocks continue to fall, crypto and 224 00:10:36,480 --> 00:10:38,640 Speaker 1: bitcoin are going up, so you know, a long lived 225 00:10:38,679 --> 00:10:41,559 Speaker 1: crypto and at the end of the day, blockchain's here 226 00:10:41,600 --> 00:10:45,080 Speaker 1: to stay. I do think that the SEC and the 227 00:10:45,120 --> 00:10:48,120 Speaker 1: government does appear to be having a very very negative 228 00:10:48,120 --> 00:10:52,280 Speaker 1: crackdown on crypto in the US and globally, and so 229 00:10:53,559 --> 00:10:55,439 Speaker 1: you know, the knockdown of some of these institutions curlely 230 00:10:55,520 --> 00:10:57,320 Speaker 1: is not helpful, and so they're really forcing a lot 231 00:10:57,360 --> 00:10:59,080 Speaker 1: of this activity to go offshore. We have a lot 232 00:10:59,080 --> 00:11:01,280 Speaker 1: of clients in blockchain crypto and a lot of them 233 00:11:01,280 --> 00:11:04,960 Speaker 1: are offshore from day one, and they're seeking banking partners offshore. 234 00:11:05,000 --> 00:11:08,200 Speaker 1: We're looking at interest in Swiss banks, in Middle Eastern 235 00:11:08,200 --> 00:11:10,800 Speaker 1: banks at the moment, because there are the silver gates, 236 00:11:10,880 --> 00:11:14,920 Speaker 1: the signatures, the svbs. Anymore. In the US, ultimately, was 237 00:11:14,960 --> 00:11:18,240 Speaker 1: there a question really about stable coins here too? We 238 00:11:18,280 --> 00:11:22,720 Speaker 1: saw the tumult surrounding USDC, a DeFi that had to 239 00:11:22,720 --> 00:11:26,360 Speaker 1: rely on trad fi ultimately, because that's why Circle had 240 00:11:26,360 --> 00:11:29,000 Speaker 1: parked a lot of its money it's collateral. Yeah. I 241 00:11:29,000 --> 00:11:32,319 Speaker 1: think there's tremendous value in Circle and USCC and in 242 00:11:32,440 --> 00:11:34,800 Speaker 1: some of the stable coin you know operations, which is 243 00:11:34,800 --> 00:11:36,400 Speaker 1: why we're such a big fan of it. But I 244 00:11:36,400 --> 00:11:38,880 Speaker 1: think at the end of the day, these institutions should 245 00:11:38,880 --> 00:11:42,200 Speaker 1: be diversifying that risk dramatically. Right to put you know, 246 00:11:42,240 --> 00:11:44,440 Speaker 1: so much of it in one place here, may i'd 247 00:11:44,480 --> 00:11:46,160 Speaker 1: be the best idea. I think, thank god it got 248 00:11:46,280 --> 00:11:48,560 Speaker 1: it got rescued by the government, but it definitely put 249 00:11:48,600 --> 00:11:51,400 Speaker 1: it scare into people and broke the USDC buck, if 250 00:11:51,400 --> 00:11:56,160 Speaker 1: you will. But yeah, all right, fin Take Partners found 251 00:11:56,160 --> 00:11:59,880 Speaker 1: a CEO and managing partner Steve mccaughlin and Bloomberg Snary Basset. 252 00:11:59,880 --> 00:12:11,719 Speaker 1: Of course, thank you. Americans can rest assured that our 253 00:12:11,720 --> 00:12:16,079 Speaker 1: banking system is saved, your depositors saying, let me also 254 00:12:16,120 --> 00:12:19,160 Speaker 1: assure you we will not stop at this, will do 255 00:12:19,200 --> 00:12:21,760 Speaker 1: whatever is needed. I'm going to ask Congress and the 256 00:12:21,800 --> 00:12:25,439 Speaker 1: banking regulators to strengthen the rules for banks to make 257 00:12:25,480 --> 00:12:28,240 Speaker 1: it less likely this kind of bank failure would happen again, 258 00:12:28,760 --> 00:12:33,280 Speaker 1: and to protect American jobs and small businesses. Some of 259 00:12:33,360 --> 00:12:36,320 Speaker 1: President Biden earlier this morning. For more on the government response, 260 00:12:36,360 --> 00:12:40,360 Speaker 1: Bloomberg's Jordan Fabian joins us from the DC ber Jordan Howard. 261 00:12:40,400 --> 00:12:43,280 Speaker 1: The White House framing this one well, and they're framing 262 00:12:43,320 --> 00:12:47,760 Speaker 1: this as an opportunity for President Biden to push for 263 00:12:48,520 --> 00:12:52,240 Speaker 1: new new regulations on banks, basically framing it as you know, 264 00:12:52,320 --> 00:12:57,400 Speaker 1: management mismanagement at those at those banks, sub and signature 265 00:12:57,400 --> 00:13:01,160 Speaker 1: and what's needed is new regulation act. He pointed to 266 00:13:01,200 --> 00:13:04,520 Speaker 1: a Republican efforts that were successful to roll back some 267 00:13:04,600 --> 00:13:07,560 Speaker 1: requirements under the Dad Frank Law that he wants to 268 00:13:07,600 --> 00:13:12,360 Speaker 1: see basically return and reimplemented. That's going to be difficult 269 00:13:12,360 --> 00:13:14,800 Speaker 1: for him to accomplish, but that's a challenge he set 270 00:13:14,840 --> 00:13:18,720 Speaker 1: for himself and his administration. Right Laer today and Caro, 271 00:13:18,840 --> 00:13:21,760 Speaker 1: I've been seeing this word on Twitter, bailout or no bailout? 272 00:13:21,800 --> 00:13:23,199 Speaker 1: How do you frame it? You know, that's really a 273 00:13:23,280 --> 00:13:24,960 Speaker 1: question in the market this morning. And I don't know 274 00:13:24,960 --> 00:13:27,400 Speaker 1: about you, Ed, but I was listening to countless podcasts 275 00:13:27,400 --> 00:13:29,280 Speaker 1: on the phone with many of people, and there was 276 00:13:29,320 --> 00:13:31,079 Speaker 1: this worry that how are you going to frame a 277 00:13:31,120 --> 00:13:34,400 Speaker 1: bailout of what seems to be billionaires Silicon Valley in 278 00:13:34,440 --> 00:13:36,839 Speaker 1: the world of Silicon Valley Bank. Jordan to that end. 279 00:13:36,880 --> 00:13:40,680 Speaker 1: How much has we seen from the administration, from regulators, 280 00:13:40,720 --> 00:13:43,800 Speaker 1: this desire to not frame it of a bailout of investors, 281 00:13:43,880 --> 00:13:46,760 Speaker 1: but of course just of depositors. That was a huge desire. 282 00:13:46,840 --> 00:13:49,320 Speaker 1: That was a central part of the President's message in 283 00:13:49,320 --> 00:13:53,600 Speaker 1: his speech this morning. He said taxpayers aren't paying for this. 284 00:13:53,760 --> 00:13:55,680 Speaker 1: I mean, we could debate the semantics of that, but 285 00:13:55,720 --> 00:13:58,679 Speaker 1: he was sure to stress that and that the management 286 00:13:58,679 --> 00:14:01,400 Speaker 1: of these banks are going to be hired. So really 287 00:14:01,720 --> 00:14:04,560 Speaker 1: it's sort of a populous message, if you will, saying, look, 288 00:14:04,559 --> 00:14:07,240 Speaker 1: the little guy is not going to pay for this. 289 00:14:07,360 --> 00:14:10,600 Speaker 1: Management is going to be held accountable. And with these 290 00:14:11,440 --> 00:14:14,800 Speaker 1: emergency steps that regulators took over the weekend, that small 291 00:14:14,840 --> 00:14:17,720 Speaker 1: businesses and depositors are going to be able to access 292 00:14:17,760 --> 00:14:22,160 Speaker 1: their money. The President going into Congress on big banking regulation, 293 00:14:22,720 --> 00:14:24,920 Speaker 1: how do you package that up? It's going to be 294 00:14:24,920 --> 00:14:28,520 Speaker 1: a tough challenge ed. There are houses, of course controlled 295 00:14:28,560 --> 00:14:31,640 Speaker 1: by Republicans, many of the same Republicans who voted in 296 00:14:31,680 --> 00:14:35,800 Speaker 1: twenty eighteen to exempt small and mid sized banks from 297 00:14:36,040 --> 00:14:39,960 Speaker 1: things like capital requirements, lending restrictions that were in that 298 00:14:40,120 --> 00:14:43,560 Speaker 1: Dodd Frank law. So asking them to again to basically 299 00:14:43,560 --> 00:14:45,520 Speaker 1: go back on what they just did five years ago. 300 00:14:45,760 --> 00:14:48,280 Speaker 1: It's going to be a tough challenge. Now he can 301 00:14:48,480 --> 00:14:51,880 Speaker 1: see what he can do through executive order executive action, 302 00:14:52,320 --> 00:14:55,120 Speaker 1: but he might be limited there, and that also leaves 303 00:14:55,160 --> 00:14:58,640 Speaker 1: him vulnerable to legal challenges to anything he does on 304 00:14:58,680 --> 00:15:01,600 Speaker 1: his own. What I think to add to the sort 305 00:15:01,600 --> 00:15:06,120 Speaker 1: of extraordinary nature of all of this the seizing of 306 00:15:06,240 --> 00:15:08,440 Speaker 1: Signature Bank over the course of the weekend and the 307 00:15:09,160 --> 00:15:11,840 Speaker 1: sort of support there that many would say took the 308 00:15:11,880 --> 00:15:15,360 Speaker 1: management itself the board by surprise. Notably, on the board 309 00:15:15,360 --> 00:15:17,840 Speaker 1: of that very bank is none other than one of 310 00:15:17,840 --> 00:15:21,240 Speaker 1: the people who helped co write Dodd Frank Barney Frank 311 00:15:21,360 --> 00:15:25,000 Speaker 1: himself speaking to Bloomberg a little bit earlier, Jordan, I think, ultimately, 312 00:15:25,400 --> 00:15:28,200 Speaker 1: when we're thinking about new regulation, are we really thinking 313 00:15:28,240 --> 00:15:31,360 Speaker 1: about the counterparty risk as well? Where was the administration 314 00:15:31,440 --> 00:15:35,160 Speaker 1: taken off, god by how much one particular sector depended 315 00:15:35,280 --> 00:15:39,240 Speaker 1: on one particular set of banks. I think that's something 316 00:15:39,280 --> 00:15:42,440 Speaker 1: that was surprising to a lot of people. I don't 317 00:15:42,480 --> 00:15:46,400 Speaker 1: know that the administration really saw this coming, given the 318 00:15:46,440 --> 00:15:48,880 Speaker 1: fact that they had to scramble over the weekend to 319 00:15:50,280 --> 00:15:54,360 Speaker 1: have muster or response here. Their administration has talked about 320 00:15:54,840 --> 00:15:57,880 Speaker 1: a lot about the economy's resilience overall. So I don't 321 00:15:57,920 --> 00:16:02,200 Speaker 1: think I don't think they anticipated that this particular problem 322 00:16:02,320 --> 00:16:06,760 Speaker 1: would become such a major problem, facing or prompting questions 323 00:16:06,800 --> 00:16:10,040 Speaker 1: about your contasian risks, etc. And so that's something they're 324 00:16:10,040 --> 00:16:12,400 Speaker 1: now going to have to look at, especially to your 325 00:16:12,440 --> 00:16:17,000 Speaker 1: policymakers thinking about rad hikes as well. Well, said Jordan 326 00:16:17,040 --> 00:16:19,440 Speaker 1: Fabian from Limburgh. We thank you so much and ed 327 00:16:20,080 --> 00:16:23,480 Speaker 1: so many people saying, look, when you raise rates, things break. 328 00:16:23,600 --> 00:16:26,120 Speaker 1: We think about the UK pension situation but a few 329 00:16:26,160 --> 00:16:28,920 Speaker 1: months ago and the impact there. But of course this 330 00:16:29,000 --> 00:16:35,400 Speaker 1: whole scenario around Silicon Valley Bank swooped up the UK, China, India, others, 331 00:16:35,600 --> 00:16:38,200 Speaker 1: the global startups in the concern because this was a 332 00:16:38,280 --> 00:16:40,200 Speaker 1: bank that bank too many And we're going to talk 333 00:16:40,240 --> 00:16:42,040 Speaker 1: about that just next hey, because we will talk about 334 00:16:42,040 --> 00:16:45,200 Speaker 1: how this affects not just DC but London, the regulators 335 00:16:45,520 --> 00:16:48,080 Speaker 1: far and wide. And I think ultimately I don't want 336 00:16:48,120 --> 00:16:50,160 Speaker 1: to get your point of view when you're contributing, when 337 00:16:50,160 --> 00:16:53,000 Speaker 1: you're bringing us your analysis and you're reporting, you're out 338 00:16:53,040 --> 00:16:55,920 Speaker 1: there on our Tea live blog yourself helping push this 339 00:16:55,920 --> 00:16:58,000 Speaker 1: conversation forward. I'm looking at the Tea Live blog. Now, 340 00:16:58,000 --> 00:16:59,760 Speaker 1: if you're lucky enough to have a terminal talking about 341 00:17:00,000 --> 00:17:04,119 Speaker 1: what the implications to the ECB, I think that the 342 00:17:04,240 --> 00:17:08,120 Speaker 1: narrative is now the conversation. The economic economic picture is shifted, 343 00:17:08,320 --> 00:17:10,840 Speaker 1: not just here in the United States but in Europe. 344 00:17:10,880 --> 00:17:13,159 Speaker 1: India is a name that I keep hearing about on 345 00:17:13,200 --> 00:17:16,600 Speaker 1: all of the text messages I'm getting. Startups face a 346 00:17:16,600 --> 00:17:18,600 Speaker 1: lot of hardship right now. We've got to get into it. 347 00:17:18,800 --> 00:17:35,199 Speaker 1: This is bloom bog. There is a serious risk to 348 00:17:35,520 --> 00:17:40,000 Speaker 1: some of our most promising companies and technology, life sciences. 349 00:17:40,520 --> 00:17:42,719 Speaker 1: You're going to have to wait and hear what the 350 00:17:42,760 --> 00:17:46,680 Speaker 1: solution is. But that risk is precisely why the Prime 351 00:17:46,680 --> 00:17:48,919 Speaker 1: Minister and I have been working at pace over the 352 00:17:48,960 --> 00:17:51,680 Speaker 1: weekend to make sure that we have a solution. These 353 00:17:51,720 --> 00:17:54,720 Speaker 1: are very very important companies to the UK, have very 354 00:17:54,840 --> 00:17:59,000 Speaker 1: very important part of our future. The UK Chancellor, they're 355 00:17:59,040 --> 00:18:02,040 Speaker 1: Jeremy Hunt on the SVB situation across the pond, after 356 00:18:02,160 --> 00:18:05,520 Speaker 1: HSBC of course plans to buy the UK arm of 357 00:18:05,600 --> 00:18:09,080 Speaker 1: Silicon Valley Bank for one pound Blue merged. Jenny sin 358 00:18:09,280 --> 00:18:11,800 Speaker 1: Is in London with more and many would say this 359 00:18:11,880 --> 00:18:13,919 Speaker 1: is what a drop in the bucket for HSBC, What 360 00:18:14,000 --> 00:18:16,040 Speaker 1: do they win out of this? Yeah, I mean I 361 00:18:16,080 --> 00:18:19,520 Speaker 1: think the big thing is just greater exposure to tech 362 00:18:19,560 --> 00:18:23,720 Speaker 1: companies and having a bigger scale with that industry. And 363 00:18:23,800 --> 00:18:26,160 Speaker 1: of course, as you pointed out, the price wasn't bad. 364 00:18:26,160 --> 00:18:29,160 Speaker 1: They really did get its first deal. I think it's 365 00:18:29,160 --> 00:18:34,560 Speaker 1: really important to remember with this collapse of SVB that 366 00:18:34,640 --> 00:18:38,119 Speaker 1: it really was on the asset liability management front. It 367 00:18:38,200 --> 00:18:40,639 Speaker 1: was not a credit crisis, so they weren't seeing some 368 00:18:40,720 --> 00:18:43,320 Speaker 1: huge uptick and customers going bad. It was really just 369 00:18:43,359 --> 00:18:46,280 Speaker 1: a you know, a failure and risk management on the 370 00:18:46,280 --> 00:18:49,920 Speaker 1: asset liability side. Size and scale is kind of important here, right, Jenny, 371 00:18:49,960 --> 00:18:52,320 Speaker 1: I was reading over the weekend. You know, by the 372 00:18:52,400 --> 00:18:55,120 Speaker 1: end of the financial year, Silicon Valley Bank UK had 373 00:18:55,119 --> 00:18:58,640 Speaker 1: eleven billion dollars of deposits on its balance sheet. Lloyd's, 374 00:18:58,640 --> 00:19:01,560 Speaker 1: by comparison, has four hundred and fifty billion dollars. But 375 00:19:01,600 --> 00:19:04,720 Speaker 1: what were the problems experience in UK specifically? We know 376 00:19:04,800 --> 00:19:07,520 Speaker 1: all about depositors here in the US, all about the 377 00:19:07,560 --> 00:19:10,440 Speaker 1: pain for founders and vcs. How did things play out 378 00:19:10,440 --> 00:19:12,639 Speaker 1: over in London. I mean, I think there were a 379 00:19:12,680 --> 00:19:15,960 Speaker 1: lot of fears here as well. It's hard to kind 380 00:19:16,000 --> 00:19:17,960 Speaker 1: of separate if you're a customer of one of these banks, 381 00:19:18,160 --> 00:19:20,040 Speaker 1: you know, it's it's I think a lot of the 382 00:19:20,320 --> 00:19:22,920 Speaker 1: past few days has been just characterized by a lot 383 00:19:22,920 --> 00:19:25,720 Speaker 1: of panic and fear and worries by both investors and 384 00:19:25,760 --> 00:19:28,400 Speaker 1: customers alike. And so I think you experienced a lot 385 00:19:28,400 --> 00:19:30,560 Speaker 1: of the same things. And it'll be interesting now as 386 00:19:30,880 --> 00:19:34,240 Speaker 1: you know, HSBC acquires this this unit of the bank, 387 00:19:34,320 --> 00:19:37,280 Speaker 1: and then you know, obviously FDIC continues with its work 388 00:19:37,320 --> 00:19:40,000 Speaker 1: in the US, how those things kind of shake out 389 00:19:40,160 --> 00:19:42,720 Speaker 1: and how things turn out today and proceed from here. 390 00:19:42,720 --> 00:19:46,359 Speaker 1: I think we're hearing very vastly different experiences among different customers. 391 00:19:46,359 --> 00:19:49,160 Speaker 1: You know, some are proceeding apace and having no problems. 392 00:19:49,359 --> 00:19:52,040 Speaker 1: Others can't seem to log in. So I think it's 393 00:19:52,080 --> 00:19:54,040 Speaker 1: just a mixed bag at this point, and we're still 394 00:19:54,040 --> 00:19:57,800 Speaker 1: really waiting to see where things shake out to that end. 395 00:19:57,960 --> 00:19:59,920 Speaker 1: You of course based in London at the moment, Jenny, 396 00:20:00,119 --> 00:20:03,400 Speaker 1: but you are our fintech reporter extraordinaire and someone who 397 00:20:03,400 --> 00:20:06,320 Speaker 1: can lay climb across the entire banking sector a little 398 00:20:06,320 --> 00:20:08,199 Speaker 1: bit for us. Just talk to us about what happens 399 00:20:08,280 --> 00:20:10,520 Speaker 1: ultimately with some of the we wait for people to 400 00:20:10,520 --> 00:20:13,600 Speaker 1: be able to log into Silicon Valley Bank. But SVB 401 00:20:13,720 --> 00:20:15,600 Speaker 1: and its parent company, they're trying to auction off a 402 00:20:15,600 --> 00:20:18,080 Speaker 1: lot of other assets, right There's securities parts of the business, 403 00:20:18,119 --> 00:20:20,280 Speaker 1: wealth management parts of the business. How do you see 404 00:20:20,280 --> 00:20:23,399 Speaker 1: that will unfolding. Yeah, So they just announced today that 405 00:20:23,440 --> 00:20:25,680 Speaker 1: they formed a special committee on their board and that 406 00:20:25,680 --> 00:20:28,440 Speaker 1: that committee will be in charge of that process. They're 407 00:20:28,440 --> 00:20:31,760 Speaker 1: exploring options for both the securities business, which is the 408 00:20:31,800 --> 00:20:35,440 Speaker 1: investment bank, as well as the SPB capital business, which 409 00:20:35,480 --> 00:20:39,120 Speaker 1: is the VC and private equity fund platform, and so 410 00:20:39,200 --> 00:20:42,800 Speaker 1: both of those. You know, we're completely separate from Silicon 411 00:20:42,880 --> 00:20:46,520 Speaker 1: Valley Bank that you know obviously collapsed into FDIC receivership 412 00:20:46,600 --> 00:20:49,240 Speaker 1: last week, So they're in very different places, and it'll 413 00:20:49,240 --> 00:20:51,240 Speaker 1: be interesting to see what kind of bids this company 414 00:20:51,320 --> 00:20:54,440 Speaker 1: might attract for those assets. But just in general, I think, 415 00:20:54,840 --> 00:20:57,399 Speaker 1: you know, obviously for the broader fintech community, this was 416 00:20:57,440 --> 00:21:00,280 Speaker 1: a huge shock to be reliant on one play for 417 00:21:00,359 --> 00:21:02,919 Speaker 1: so so long, and there will probably be a lot 418 00:21:02,960 --> 00:21:05,960 Speaker 1: of questions about that concentration risk, not just among banks, 419 00:21:06,000 --> 00:21:09,600 Speaker 1: but from the fintech customers themselves. Bloomberg's Jenny's rain Out 420 00:21:09,640 --> 00:21:20,000 Speaker 1: of London. Thank you so much for your reporting. Welcome 421 00:21:20,040 --> 00:21:22,680 Speaker 1: back to Bloomberg Technology. I'm Caroline Hyde in New York 422 00:21:22,720 --> 00:21:25,160 Speaker 1: and let's get back to Silicon Valley Bank. Of course, 423 00:21:25,280 --> 00:21:26,960 Speaker 1: let's bring in, in fact, the co founder of the 424 00:21:27,000 --> 00:21:30,800 Speaker 1: largest Latin X community in venture VC familiar Cheryl Campos 425 00:21:30,840 --> 00:21:32,760 Speaker 1: is with us, who took to Twitter to say, the 426 00:21:32,840 --> 00:21:35,720 Speaker 1: one thing this SVB run taught me is that most 427 00:21:35,760 --> 00:21:40,600 Speaker 1: vcs know nothing about finance. Cheryl, what do you exactly mean, 428 00:21:40,680 --> 00:21:43,600 Speaker 1: what does this sort of critique of your own industry 429 00:21:43,920 --> 00:21:46,880 Speaker 1: meant to be talking about? Well, thank you so much 430 00:21:46,920 --> 00:21:50,520 Speaker 1: for having me, And this tweet took off because there 431 00:21:50,640 --> 00:21:53,080 Speaker 1: was in fact an element of truth to it. This 432 00:21:53,240 --> 00:21:55,520 Speaker 1: was partially a finance problem, but at the same time 433 00:21:55,640 --> 00:21:58,960 Speaker 1: so human behavior problem. This was a classic example of 434 00:21:58,960 --> 00:22:04,480 Speaker 1: the prisoner's lamma and everyone really acting individualistically versus collectively. 435 00:22:04,800 --> 00:22:08,679 Speaker 1: When the venture ecosystem and so Silicon Valley Bank, quite frankly, 436 00:22:08,800 --> 00:22:12,440 Speaker 1: was the partner of a lot of different players here. 437 00:22:12,480 --> 00:22:14,719 Speaker 1: They were the first check in and a lot of 438 00:22:15,440 --> 00:22:19,399 Speaker 1: different initiatives. They were the first bank account of many founders. 439 00:22:20,240 --> 00:22:23,160 Speaker 1: They also took things personally as well. They built deep 440 00:22:23,400 --> 00:22:28,680 Speaker 1: relationships with people even giving out personal loans, mortgages, lines 441 00:22:28,680 --> 00:22:31,439 Speaker 1: of credit for GP commits, and so that is something 442 00:22:31,480 --> 00:22:33,439 Speaker 1: that I think that the ecosystem as a whole, if 443 00:22:33,440 --> 00:22:37,440 Speaker 1: we had worked together, are going to be in severe 444 00:22:38,400 --> 00:22:41,040 Speaker 1: crisis right now because there's going to be a significant 445 00:22:41,080 --> 00:22:43,399 Speaker 1: gap in the market in terms of both access to 446 00:22:43,440 --> 00:22:46,320 Speaker 1: capital and leadership. And so that is what communities like 447 00:22:46,320 --> 00:22:48,399 Speaker 1: ours a BC Familia are trying to do. Let's talk 448 00:22:48,400 --> 00:22:51,479 Speaker 1: about your community, because I believe when I look on 449 00:22:52,200 --> 00:22:56,240 Speaker 1: leaf Amilia's website, it was partners like Silicon Valley Bank 450 00:22:56,359 --> 00:22:59,560 Speaker 1: that helped fund you to out continue to drive the pipeline, 451 00:22:59,560 --> 00:23:03,320 Speaker 1: the conversation, the network. What do you do when Silicon 452 00:23:03,359 --> 00:23:05,680 Speaker 1: Valley Bank has to pull back and of course disappears 453 00:23:05,760 --> 00:23:11,320 Speaker 1: in terms of a player an infrastructure. Silicon Valley Bank 454 00:23:11,520 --> 00:23:14,800 Speaker 1: was our founding sponsor. They were the ones that gave 455 00:23:14,880 --> 00:23:17,440 Speaker 1: us our first track when we were just at the 456 00:23:17,560 --> 00:23:20,399 Speaker 1: idea stage because they were the person to take on 457 00:23:20,440 --> 00:23:25,040 Speaker 1: the most risk when it comes to funding things at 458 00:23:25,080 --> 00:23:29,000 Speaker 1: the idea stage, and so they really took a chance 459 00:23:29,080 --> 00:23:31,960 Speaker 1: to make the ecosystem better as a whole, and so 460 00:23:32,000 --> 00:23:34,000 Speaker 1: we really wanted to partner with a bank that was 461 00:23:34,040 --> 00:23:36,359 Speaker 1: a mission aligned. They saw the vision, they saw what 462 00:23:36,400 --> 00:23:38,600 Speaker 1: we were trying to create, and that's what we do. 463 00:23:38,760 --> 00:23:42,880 Speaker 1: We took and use their support in order to build pipelines. Right, 464 00:23:42,960 --> 00:23:46,400 Speaker 1: we were helping everyone break into venture and also build 465 00:23:46,440 --> 00:23:48,680 Speaker 1: their own startups. We helped them as well with the 466 00:23:48,760 --> 00:23:51,480 Speaker 1: professional development and rising up the ranks. And last one 467 00:23:51,520 --> 00:23:54,200 Speaker 1: not least, we actually helped them raise capital for their 468 00:23:54,240 --> 00:23:57,720 Speaker 1: own funds. And so that I think is one of 469 00:23:57,760 --> 00:24:00,360 Speaker 1: the key things that will be missing right is first 470 00:24:00,400 --> 00:24:03,760 Speaker 1: check in that will allow people to take these initiatives 471 00:24:03,760 --> 00:24:07,000 Speaker 1: and make the ecosystem better. And so, yes, we were 472 00:24:07,040 --> 00:24:09,800 Speaker 1: exposed as maybe because we were their banking partner, and 473 00:24:09,840 --> 00:24:13,239 Speaker 1: I think that's something that I as an investor as 474 00:24:13,320 --> 00:24:16,600 Speaker 1: a founder, was also really connisaated of because I have 475 00:24:16,840 --> 00:24:19,720 Speaker 1: twenty portfolio companies, I have other founders that are reaching 476 00:24:19,720 --> 00:24:21,760 Speaker 1: out to me, and so both as a founder as 477 00:24:21,800 --> 00:24:25,320 Speaker 1: an investor, I can clearly support using my own personal 478 00:24:25,359 --> 00:24:28,840 Speaker 1: experience as well as the community as a whole. Cheryl 479 00:24:28,880 --> 00:24:31,639 Speaker 1: talked me about the last forty eight hours, including this morning. 480 00:24:31,760 --> 00:24:35,000 Speaker 1: Silicon Valley Bank has technically opened its doors in the 481 00:24:35,080 --> 00:24:37,640 Speaker 1: last thirty minutes here in California. What have you had 482 00:24:37,680 --> 00:24:40,600 Speaker 1: to do to help founders make payroll. Have you had 483 00:24:40,640 --> 00:24:42,639 Speaker 1: to move money around, have you had to make deals 484 00:24:43,000 --> 00:24:46,880 Speaker 1: with co investing partners and other vcs. So I mean 485 00:24:47,400 --> 00:24:50,120 Speaker 1: we all had a collective side relief yesterday right when 486 00:24:50,119 --> 00:24:51,760 Speaker 1: we saw that the government was going to step in 487 00:24:51,840 --> 00:24:54,880 Speaker 1: there and make sure that deposits were whole. So we did. 488 00:24:54,960 --> 00:24:57,359 Speaker 1: Our money is safe, right, But the loss really is 489 00:24:57,359 --> 00:25:00,280 Speaker 1: around losing Silicon Valley Bank as a partner, as a 490 00:25:00,359 --> 00:25:03,920 Speaker 1: leader in this space. And so I think that that 491 00:25:03,960 --> 00:25:07,960 Speaker 1: has allowed for founders and including communities like ourselves, really 492 00:25:08,000 --> 00:25:10,520 Speaker 1: go back to the basics, right of our strategy, making 493 00:25:10,520 --> 00:25:13,480 Speaker 1: sure that you know when times are tough, these are 494 00:25:14,240 --> 00:25:16,959 Speaker 1: times where you know what people are made out of. 495 00:25:17,200 --> 00:25:19,800 Speaker 1: And so going back to the fundamental supporting people with 496 00:25:19,880 --> 00:25:23,439 Speaker 1: their payroll, supporting people with their strategies, and bringing scaling 497 00:25:23,480 --> 00:25:25,600 Speaker 1: things a little bit back to figure out how other 498 00:25:25,640 --> 00:25:28,920 Speaker 1: things play out. We see this morning that first Republic 499 00:25:29,080 --> 00:25:32,639 Speaker 1: and others potentially are risk and so rocky times are 500 00:25:32,680 --> 00:25:36,280 Speaker 1: far from over. But I've seen this before. I was 501 00:25:36,320 --> 00:25:38,800 Speaker 1: an executive of Republic, which is a startup that threat 502 00:25:38,880 --> 00:25:41,560 Speaker 1: unit current status, and I had my fair share of 503 00:25:41,640 --> 00:25:46,600 Speaker 1: rocky times through COVID, through Royd fluid. And so the 504 00:25:46,600 --> 00:25:48,760 Speaker 1: biggest lesson that we can learn here is that when 505 00:25:48,800 --> 00:25:51,000 Speaker 1: there's times of chaos as times of opportunity, And so 506 00:25:51,119 --> 00:25:53,359 Speaker 1: by going back to basics, I'm understanding how where your 507 00:25:53,400 --> 00:25:56,520 Speaker 1: position is right now, you're able to then take advantage 508 00:25:56,520 --> 00:25:59,760 Speaker 1: of these chances. If you go back to see days 509 00:26:00,040 --> 00:26:03,360 Speaker 1: before Silicon Valley Bank tried to issue shares and raise 510 00:26:03,440 --> 00:26:06,040 Speaker 1: more money before we knew what had happened, it seems 511 00:26:06,080 --> 00:26:09,360 Speaker 1: like times are really hard for startups anyway. Yeah, it's 512 00:26:09,359 --> 00:26:11,639 Speaker 1: the last five days actually just mask what is a 513 00:26:11,720 --> 00:26:14,480 Speaker 1: much bigger ongoing problem cash fun and a lack of 514 00:26:14,520 --> 00:26:18,600 Speaker 1: access to capital. I don't think anybody saw this coming 515 00:26:18,840 --> 00:26:21,800 Speaker 1: right before, you know, Wednesday, we're on Thursday, and I 516 00:26:21,840 --> 00:26:26,359 Speaker 1: think that was something where we saw a lot of 517 00:26:26,400 --> 00:26:28,840 Speaker 1: founders are going to get hit by this negatively. But 518 00:26:29,000 --> 00:26:32,240 Speaker 1: I'd like to also sate that diverse founders in particular 519 00:26:33,040 --> 00:26:35,120 Speaker 1: weren't even getting access to capital in the first place 520 00:26:35,119 --> 00:26:37,600 Speaker 1: when capital was good and times we were flush. Right. 521 00:26:38,760 --> 00:26:41,360 Speaker 1: We actually showed a statement last year with a couple 522 00:26:41,359 --> 00:26:45,680 Speaker 1: other Latin organizations because even though it was the largest 523 00:26:45,760 --> 00:26:49,440 Speaker 1: venture capital funding a year to day, latinos only got 524 00:26:49,480 --> 00:26:51,760 Speaker 1: one point two percent of all of that, and so 525 00:26:51,880 --> 00:26:54,840 Speaker 1: that is where we see that even when times are good, 526 00:26:54,840 --> 00:26:57,199 Speaker 1: we're not getting enough money and then diverse founders in 527 00:26:57,200 --> 00:27:00,679 Speaker 1: particular will continue to have less access the capital, and 528 00:27:00,680 --> 00:27:02,800 Speaker 1: so that's where that access and leadership that as to 529 00:27:03,040 --> 00:27:06,280 Speaker 1: be played and this ecosystem will be missed. And that's 530 00:27:06,320 --> 00:27:09,880 Speaker 1: why we're banding together with Ray's Black VC, Gold House 531 00:27:09,880 --> 00:27:12,320 Speaker 1: and a couple other communities as well to show united front. 532 00:27:12,560 --> 00:27:14,680 Speaker 1: Our motto is la us at the Foresight, which means 533 00:27:14,680 --> 00:27:16,479 Speaker 1: strength and unity, and so we really want to make 534 00:27:16,520 --> 00:27:18,960 Speaker 1: sure that we're there for our communities. Thank you for 535 00:27:19,000 --> 00:27:20,720 Speaker 1: coming on the show and sharing that message with us. 536 00:27:20,800 --> 00:27:24,120 Speaker 1: VC familiar founder and investor Cheryl Campos, thank you. Now 537 00:27:24,119 --> 00:27:27,399 Speaker 1: coming up, we'll hear from vcs who banded together in 538 00:27:27,480 --> 00:27:30,600 Speaker 1: support of Silicon Valley Bank. General catalyst CEO him On 539 00:27:30,640 --> 00:27:33,560 Speaker 1: Tenada joins us next for more In that discussion, Caroline 540 00:27:33,720 --> 00:27:36,440 Speaker 1: and the point also ed about Silicon Valley Bank. Many 541 00:27:36,440 --> 00:27:39,560 Speaker 1: were worried about, of course, relationships not just private companies still, 542 00:27:39,600 --> 00:27:42,440 Speaker 1: but those that did go public they remain very intertwined 543 00:27:42,440 --> 00:27:44,280 Speaker 1: in terms of their banking relationships. And we got that 544 00:27:44,440 --> 00:27:46,840 Speaker 1: feeding of the information as we went after the bell 545 00:27:46,880 --> 00:27:48,960 Speaker 1: on Friday. I look at Roku now down seven tenths 546 00:27:48,960 --> 00:27:51,880 Speaker 1: of percent. It had more than five hundred almost five 547 00:27:51,960 --> 00:27:54,320 Speaker 1: hundred million dollars of cash with Silicon Valley Bank. It 548 00:27:54,359 --> 00:27:56,800 Speaker 1: now has access. Of course, we're seeing Roku just down 549 00:27:56,840 --> 00:27:58,840 Speaker 1: that little bit. Look at what happens with Roadbrocks five 550 00:27:58,840 --> 00:28:01,640 Speaker 1: percent of its cash Mysilican Valley Bank, ties of Rocket 551 00:28:01,680 --> 00:28:03,920 Speaker 1: Labs as well as under pressure today. Look at the 552 00:28:03,920 --> 00:28:07,439 Speaker 1: bounce back in one particularly Canadian company, an ad tech company. 553 00:28:07,600 --> 00:28:09,960 Speaker 1: They said it had ninety percent of its cache the 554 00:28:10,080 --> 00:28:13,600 Speaker 1: Silicon Valley Bank. That's all. Let's get more on the 555 00:28:13,720 --> 00:28:35,240 Speaker 1: VC community in a moment as a bring back. It's 556 00:28:35,240 --> 00:28:38,880 Speaker 1: been incredible chaos. So my phone has been blowing up. 557 00:28:39,080 --> 00:28:40,600 Speaker 1: The people that are going to be the most effected 558 00:28:40,680 --> 00:28:44,280 Speaker 1: here are early in mid stage companies, more so than 559 00:28:44,400 --> 00:28:47,280 Speaker 1: late stage companies. Venture capitalists like to run around saying 560 00:28:47,280 --> 00:28:49,600 Speaker 1: they provide value. Well, this is the time to provide 561 00:28:49,680 --> 00:28:53,080 Speaker 1: value to your portfolio companies. Long term events like this 562 00:28:53,160 --> 00:28:57,280 Speaker 1: are massively bullish for the crypto complex, and the San 563 00:28:57,280 --> 00:28:59,880 Speaker 1: Francisco FED should have been on top of what was 564 00:29:00,120 --> 00:29:03,360 Speaker 1: going on. The bank's explosive growth and now it's very 565 00:29:03,400 --> 00:29:08,040 Speaker 1: quick failure. That was some of our guest reaction to 566 00:29:08,080 --> 00:29:11,120 Speaker 1: the SVB fallout as it was in raveling late last week. 567 00:29:11,480 --> 00:29:13,640 Speaker 1: Let's get the take of another VC, and not just 568 00:29:13,720 --> 00:29:17,120 Speaker 1: any VC, actually general catalysts, which led hundreds of VC 569 00:29:17,280 --> 00:29:20,040 Speaker 1: firms to band together over the weekend in support a 570 00:29:20,160 --> 00:29:24,160 Speaker 1: Silicon Valley Bank. CEO On Teenager joins us, Now, I 571 00:29:24,160 --> 00:29:26,960 Speaker 1: think I'm right in saying they're in our six hundred signatories, 572 00:29:27,960 --> 00:29:31,080 Speaker 1: over six hundreds to your effort, you still want to 573 00:29:31,120 --> 00:29:35,320 Speaker 1: do business with whatever Silicon Valley Bank ends up being. 574 00:29:35,440 --> 00:29:39,080 Speaker 1: What are you hearing about? How likely that is? Absolutely? 575 00:29:39,120 --> 00:29:41,480 Speaker 1: I think it's really important that Silicon Valley and this 576 00:29:41,680 --> 00:29:45,880 Speaker 1: next incarnation does continue to survive and thrive. What there 577 00:29:45,880 --> 00:29:51,400 Speaker 1: are conversations being had with some banks, obviously, it's it's 578 00:29:51,480 --> 00:29:53,920 Speaker 1: unclear if there's a deal that has been media. There 579 00:29:53,920 --> 00:29:56,480 Speaker 1: are some private investors that are looking at potentially investing 580 00:29:56,480 --> 00:29:58,640 Speaker 1: in the bank and recapitalizing as well, and I really 581 00:29:58,640 --> 00:30:00,880 Speaker 1: hope a deal comes to together so the bank can 582 00:30:00,920 --> 00:30:04,200 Speaker 1: be a going concern. I know in the conversations I've 583 00:30:04,200 --> 00:30:09,000 Speaker 1: had there are signatories to your letter, people backing your 584 00:30:09,040 --> 00:30:12,800 Speaker 1: initiative to keep Silicon Valley Bank Alive do business a bit, 585 00:30:13,080 --> 00:30:16,160 Speaker 1: but who were also telling port failure companies to pull 586 00:30:16,240 --> 00:30:22,360 Speaker 1: money for whatever reason. How do you Yeah, So look 587 00:30:22,960 --> 00:30:26,080 Speaker 1: Thursday morning, when the news got out that the bank 588 00:30:26,160 --> 00:30:29,239 Speaker 1: might be at risk, every investor was getting contacted by 589 00:30:29,280 --> 00:30:32,320 Speaker 1: their fund or what to do, and your fiducial responsibilities 590 00:30:32,360 --> 00:30:35,560 Speaker 1: to say, yeah, even though the bank the risk is 591 00:30:35,600 --> 00:30:37,720 Speaker 1: low that the bank would go under, probably safe to 592 00:30:37,720 --> 00:30:40,360 Speaker 1: pull money out. When we started hearing that multiple times, 593 00:30:40,480 --> 00:30:42,680 Speaker 1: when you convened the leaders of some of the larger 594 00:30:42,720 --> 00:30:45,160 Speaker 1: eventual firms to say, hey, this is a prisoner's dilemma 595 00:30:45,200 --> 00:30:48,360 Speaker 1: situation where on our own everybody's going to give the 596 00:30:48,440 --> 00:30:50,560 Speaker 1: same guidance. But that's not the right thing for the 597 00:30:50,600 --> 00:30:53,000 Speaker 1: collective because while some starts may be able to take 598 00:30:53,000 --> 00:30:55,360 Speaker 1: their money out, others will be left and the bank 599 00:30:55,400 --> 00:30:58,160 Speaker 1: will be in a precarious position. And so that is 600 00:30:58,200 --> 00:31:00,520 Speaker 1: where we tried to stop. But as you know, in 601 00:31:00,560 --> 00:31:02,680 Speaker 1: a digital age, a run on a bank can happen 602 00:31:02,880 --> 00:31:05,240 Speaker 1: very fast. So within a few hours it was too late, 603 00:31:05,280 --> 00:31:07,760 Speaker 1: and by the time we got our group together, the 604 00:31:07,800 --> 00:31:13,000 Speaker 1: fdi C already stepped in. Now, of course, regulating support depositors. 605 00:31:13,080 --> 00:31:16,840 Speaker 1: Hamant but there's still a lot of stress because equity holders, 606 00:31:16,840 --> 00:31:19,480 Speaker 1: bondholders are not protected. We're looking at the full out 607 00:31:19,520 --> 00:31:22,000 Speaker 1: in terms of share price from First Republic, for example, 608 00:31:22,000 --> 00:31:24,960 Speaker 1: which does also have ties with the startup community. Are 609 00:31:24,960 --> 00:31:27,240 Speaker 1: you still having to talk to your portfolio companies about 610 00:31:27,280 --> 00:31:30,880 Speaker 1: diversification of their treasury. Absolutely. First of all, I have 611 00:31:31,000 --> 00:31:34,400 Speaker 1: to say, the government stepped in here in exactly the 612 00:31:34,520 --> 00:31:36,520 Speaker 1: right way, in exactly the right time. Had they not 613 00:31:36,560 --> 00:31:38,440 Speaker 1: done that, this truly would have been a contagion. I 614 00:31:38,440 --> 00:31:42,000 Speaker 1: think things are in a very stable place now, and 615 00:31:42,520 --> 00:31:46,400 Speaker 1: the advice we are giving our portfolio companies first informist 616 00:31:46,480 --> 00:31:49,360 Speaker 1: has been let's make sure we have business continuity and 617 00:31:49,800 --> 00:31:52,760 Speaker 1: we are perils being met and the operations are there, 618 00:31:52,760 --> 00:31:54,960 Speaker 1: the employees are comfortable that they're going to get paid 619 00:31:55,000 --> 00:31:57,520 Speaker 1: this week, and then we are saying we need to 620 00:31:57,520 --> 00:32:00,520 Speaker 1: think about diversification, not just for them, for ven firms too. 621 00:32:00,520 --> 00:32:03,240 Speaker 1: We were all just so used to relying on SVB 622 00:32:03,400 --> 00:32:08,120 Speaker 1: as as our bank. You say the government is exactly 623 00:32:08,120 --> 00:32:10,680 Speaker 1: what it should have done. Now many would say, yes, 624 00:32:10,760 --> 00:32:14,600 Speaker 1: they do need to step into help depositors. But what then, 625 00:32:15,040 --> 00:32:18,320 Speaker 1: of basically being a bailout to venture capital firms in 626 00:32:18,320 --> 00:32:20,520 Speaker 1: and of themselves. Is there nothing you could have done 627 00:32:20,880 --> 00:32:24,880 Speaker 1: specifically as a grouping to support the bank. This is 628 00:32:24,920 --> 00:32:28,560 Speaker 1: not a venture capital bailout, first and foremost, I do 629 00:32:28,600 --> 00:32:30,880 Speaker 1: think we could have done things. And in fact, over 630 00:32:30,920 --> 00:32:33,600 Speaker 1: the weekend, all the firms, including us, we had put 631 00:32:33,640 --> 00:32:37,640 Speaker 1: together plans to lend capital from our balance sheets to 632 00:32:37,640 --> 00:32:40,040 Speaker 1: help these companies make perol. You know, I think that 633 00:32:40,040 --> 00:32:42,520 Speaker 1: would have at least a word the crisis for a 634 00:32:42,560 --> 00:32:46,720 Speaker 1: couple of weeks while the right you know, solutions were 635 00:32:46,720 --> 00:32:50,240 Speaker 1: in place. But this all happened so fast that honestly, 636 00:32:50,360 --> 00:32:53,800 Speaker 1: if the FED hadn't stepped in and guarantee these deposits, 637 00:32:54,960 --> 00:32:57,840 Speaker 1: it would have been very difficult. Parolls being made now, 638 00:32:57,880 --> 00:33:00,840 Speaker 1: Parols being made now. The site from who last I 639 00:33:00,880 --> 00:33:03,000 Speaker 1: heard this VB side had started processing. Then it was 640 00:33:03,040 --> 00:33:05,000 Speaker 1: down because there were so many folks checking. But but 641 00:33:05,080 --> 00:33:07,520 Speaker 1: it's in motion now. What's the net result of all 642 00:33:07,520 --> 00:33:10,240 Speaker 1: of this funding was already hard to come by five 643 00:33:10,320 --> 00:33:15,360 Speaker 1: days ago the deal counts drop listen. We approved the 644 00:33:15,400 --> 00:33:17,120 Speaker 1: deal on Saturday, just to give you a sense, in 645 00:33:17,160 --> 00:33:20,400 Speaker 1: the middle of all this investment on Saturday, so I 646 00:33:20,680 --> 00:33:22,920 Speaker 1: will say, look, this is a This was a very 647 00:33:22,960 --> 00:33:26,720 Speaker 1: serious situation. Hopefully we'll get this averted soon. I don't 648 00:33:26,720 --> 00:33:28,840 Speaker 1: think this has a matural impact on what happens in 649 00:33:28,920 --> 00:33:31,160 Speaker 1: terms of the venture capital business. I mean five days ago, 650 00:33:31,200 --> 00:33:34,560 Speaker 1: if you recall, we were all very excited about what's 651 00:33:34,560 --> 00:33:36,440 Speaker 1: happening with AI and is at the beginning of the 652 00:33:36,480 --> 00:33:39,200 Speaker 1: new cycle, just like social and cloud was fifteen years ago. 653 00:33:39,240 --> 00:33:42,000 Speaker 1: And I think those trends are there. So the entrepreneur 654 00:33:42,040 --> 00:33:44,160 Speaker 1: e activity I do think is very strong and it's 655 00:33:44,160 --> 00:33:47,240 Speaker 1: going to continue to be strong. Man, there's been plenty 656 00:33:47,240 --> 00:33:50,800 Speaker 1: of worry and handwringing about VC funds going under. Have 657 00:33:50,960 --> 00:33:55,720 Speaker 1: your LPs been willing to be helping other LPs stepping 658 00:33:55,760 --> 00:33:58,960 Speaker 1: in backing VC funds to make this payroll lending that 659 00:33:59,000 --> 00:34:01,600 Speaker 1: you said the support Aaron. Ultimately, will you still see 660 00:34:01,640 --> 00:34:05,920 Speaker 1: money going into the VC community? Absolutely? I don't think 661 00:34:05,960 --> 00:34:09,640 Speaker 1: this will impact the capitalization of the venture capital community. 662 00:34:09,719 --> 00:34:13,080 Speaker 1: I don't. I think this is a This is at 663 00:34:13,080 --> 00:34:16,120 Speaker 1: the end of the day, a bank that wasn't didn't 664 00:34:16,120 --> 00:34:18,600 Speaker 1: have the risk management in place for a really fast 665 00:34:18,680 --> 00:34:23,719 Speaker 1: interest rate rising environment, and again the failure around that 666 00:34:23,760 --> 00:34:25,360 Speaker 1: has been managed. And I don't think this is going 667 00:34:25,440 --> 00:34:31,720 Speaker 1: to impact the venture capital firms or the investment pacing. 668 00:34:31,760 --> 00:34:34,880 Speaker 1: That's that's going to be happening in the industry. Optimism 669 00:34:34,920 --> 00:34:38,120 Speaker 1: coming from Tanisa, Thank you so much, General catalysts. Great 670 00:34:38,120 --> 00:34:40,120 Speaker 1: to have you coming and joining us. Let you get 671 00:34:40,120 --> 00:34:51,000 Speaker 1: back to your portfailio companies. Now, rising interest rates are 672 00:34:51,040 --> 00:34:53,880 Speaker 1: good for banks until they aren't. That's what we're seeing 673 00:34:53,880 --> 00:34:56,120 Speaker 1: with the collapse of Silicon Valley Bank and sell off 674 00:34:56,120 --> 00:34:59,920 Speaker 1: in other bank stocks. Here's the backdrop. Higher rates increase 675 00:35:00,000 --> 00:35:02,799 Speaker 1: the profitability of a bank's main business, which is to 676 00:35:02,880 --> 00:35:06,400 Speaker 1: pay lower rates on deposits than they charge for extending loans. 677 00:35:06,960 --> 00:35:09,719 Speaker 1: But when the Federal Reserve plows ahead with NonStop interest 678 00:35:09,840 --> 00:35:12,920 Speaker 1: rate increases like gets done over the past year, problems 679 00:35:12,920 --> 00:35:16,520 Speaker 1: start cropping up quickly. Silicon Valley Bank got hit with 680 00:35:16,560 --> 00:35:19,799 Speaker 1: a one two punch Number one. It's customers. A lot 681 00:35:19,840 --> 00:35:22,319 Speaker 1: of startups were burning through more cash because it got 682 00:35:22,320 --> 00:35:24,880 Speaker 1: harder for them to get funding. VC firms are no 683 00:35:24,960 --> 00:35:28,040 Speaker 1: longer throwing their money around, and when your customers need cash, 684 00:35:28,239 --> 00:35:30,839 Speaker 1: you need to have enough on hand. Banks usually park 685 00:35:30,880 --> 00:35:33,160 Speaker 1: a big chunk of their money in super safe investments 686 00:35:33,200 --> 00:35:37,480 Speaker 1: like treasuries and other securities. So number two SVB was 687 00:35:37,520 --> 00:35:39,879 Speaker 1: forced to sell those investments to raise cash to meet 688 00:35:39,920 --> 00:35:42,520 Speaker 1: all the withdrawals. The fence rate hikes had push bond 689 00:35:42,520 --> 00:35:46,040 Speaker 1: prices lower, which meant SBB sold a securities at a loss. 690 00:35:46,320 --> 00:35:50,560 Speaker 1: The total loss one point eight billion dollars. When SBB 691 00:35:50,680 --> 00:35:53,800 Speaker 1: announced the loss, other startups got scared and started pulling 692 00:35:53,840 --> 00:35:56,200 Speaker 1: their money out. It was an old fashioned run on 693 00:35:56,239 --> 00:35:58,480 Speaker 1: the bank. Big banks may end up the winner here. 694 00:35:58,800 --> 00:36:01,920 Speaker 1: After the Great Financials, the government imposed all kinds of 695 00:36:01,920 --> 00:36:04,640 Speaker 1: capital rules on banks that it deemed too big to fail, 696 00:36:04,960 --> 00:36:08,160 Speaker 1: meaning JP, Morgan Chase, Bank of America and their peers 697 00:36:08,480 --> 00:36:10,399 Speaker 1: are required to have a lot more cash on hand 698 00:36:10,400 --> 00:36:13,360 Speaker 1: to meet potential withdrawals. They even have to ask permission 699 00:36:13,360 --> 00:36:16,080 Speaker 1: to pay dividends to shareholders. And now many of those 700 00:36:16,080 --> 00:36:18,799 Speaker 1: startups are playing it safe by diverse mind where they 701 00:36:18,880 --> 00:36:23,240 Speaker 1: put their money and opening accounts at the big banks. 702 00:36:23,080 --> 00:36:25,680 Speaker 1: That's how it started. How's it going, x rays with 703 00:36:25,800 --> 00:36:29,080 Speaker 1: their acap the busiest man over this weekend, And still 704 00:36:29,160 --> 00:36:31,560 Speaker 1: for me, the key concern has got to be the 705 00:36:31,600 --> 00:36:34,480 Speaker 1: fact that share prices are still down hard at some 706 00:36:34,520 --> 00:36:36,839 Speaker 1: of the competitors, even though many annets would say there 707 00:36:36,880 --> 00:36:39,359 Speaker 1: is nothing exactly out there like Silicon Valley Bank. Yeah, 708 00:36:39,400 --> 00:36:41,640 Speaker 1: I would say the fundamental question at this point is 709 00:36:41,680 --> 00:36:45,680 Speaker 1: one of sentiments. Obviously, the FED and other regulators moved 710 00:36:45,840 --> 00:36:50,000 Speaker 1: to reassure depositors, right, not even investors, but depositors. They 711 00:36:50,080 --> 00:36:53,120 Speaker 1: lined up this new liquidity facility. They made it easier 712 00:36:53,480 --> 00:36:56,200 Speaker 1: and less expensive, essentially for banks to borrow from their 713 00:36:56,200 --> 00:36:59,520 Speaker 1: discount window the lender of last resort right. But it's 714 00:36:59,640 --> 00:37:02,080 Speaker 1: still unclear of whether or not that has managed to 715 00:37:02,120 --> 00:37:04,680 Speaker 1: calm people down. It certainly hasn't calmed down investors, and 716 00:37:04,840 --> 00:37:06,560 Speaker 1: I don't think we can yet say if it's calmed 717 00:37:06,560 --> 00:37:10,400 Speaker 1: down depositors. We find ourselves once again in a situation 718 00:37:10,400 --> 00:37:13,880 Speaker 1: where there are more questions than answers. Particularly is there 719 00:37:13,920 --> 00:37:16,080 Speaker 1: a buyer that's going to come in for SVB? What's 720 00:37:16,080 --> 00:37:19,960 Speaker 1: happening with signature? First Republic's response is pretty dramatic, even 721 00:37:19,960 --> 00:37:23,000 Speaker 1: though it's so vocal about the strength as it put 722 00:37:22,800 --> 00:37:25,640 Speaker 1: it at its liquidity position. Why is there still so 723 00:37:25,719 --> 00:37:28,920 Speaker 1: much anst out there? Max From the exity market reaction alone, 724 00:37:29,600 --> 00:37:32,560 Speaker 1: I think the fundamental issue is that FED policy is 725 00:37:32,600 --> 00:37:34,400 Speaker 1: still in place when it comes to interest rates. So 726 00:37:34,480 --> 00:37:37,400 Speaker 1: even with these backstops, even with these countermeasures, people are 727 00:37:37,440 --> 00:37:39,960 Speaker 1: still worried this problem will persist. I honestly can't say though. 728 00:37:39,960 --> 00:37:42,239 Speaker 1: I mean, again, when it comes to banking, the number 729 00:37:42,280 --> 00:37:45,200 Speaker 1: one thing is confidence, right and sentiment, And if both 730 00:37:45,200 --> 00:37:47,759 Speaker 1: of those things are down just because you have these 731 00:37:47,840 --> 00:37:50,960 Speaker 1: kind of back to back enclosures and failures, I think 732 00:37:50,960 --> 00:37:54,560 Speaker 1: it's hard to win overhearts and mind. Max, what are 733 00:37:54,560 --> 00:37:57,920 Speaker 1: we hearing about Silicon Valley Bank and depositors access to 734 00:37:58,000 --> 00:38:01,719 Speaker 1: their cash this morning? It sounds mixed from what I 735 00:38:01,719 --> 00:38:03,960 Speaker 1: saw on our reporting, I unfortunately have not been as 736 00:38:03,960 --> 00:38:05,520 Speaker 1: close to that as some of our tech reporters have 737 00:38:05,600 --> 00:38:07,800 Speaker 1: been doing, you know, a real bang up job. Apparently 738 00:38:07,880 --> 00:38:09,680 Speaker 1: they are able to get access to it, right, and 739 00:38:09,719 --> 00:38:12,560 Speaker 1: that was kind of the promise made sorry depositors would 740 00:38:12,600 --> 00:38:14,560 Speaker 1: be made whole, they'd be given access, and we are 741 00:38:14,600 --> 00:38:18,120 Speaker 1: seeing that though apparently there have been some hiccups. But again, 742 00:38:18,200 --> 00:38:21,720 Speaker 1: I think the regulators have moved to give people access 743 00:38:21,719 --> 00:38:24,759 Speaker 1: to their deposits to fully backstop them, and that's I 744 00:38:24,800 --> 00:38:27,439 Speaker 1: think what we're seeing play out this Monday morning. And Max, 745 00:38:27,520 --> 00:38:30,960 Speaker 1: ultimately this came down to a massive counterparty risk that 746 00:38:31,000 --> 00:38:34,799 Speaker 1: people hadn't quite factored in in one sector. Will regulation 747 00:38:35,200 --> 00:38:38,200 Speaker 1: change do you think because the administration promises it about banks, 748 00:38:38,200 --> 00:38:42,160 Speaker 1: for example, the big question I think is whether or 749 00:38:42,200 --> 00:38:45,600 Speaker 1: not we'll see some kind of rollback or alteration to 750 00:38:46,160 --> 00:38:50,600 Speaker 1: Trump era moves that made it essentially less cumbersome, less 751 00:38:50,600 --> 00:38:53,640 Speaker 1: burdens on regional banks when it comes to capital requirements, 752 00:38:53,640 --> 00:38:56,480 Speaker 1: when it comes to compliance requirements, whether or not we 753 00:38:56,840 --> 00:38:59,120 Speaker 1: see a push to move away from that, to put 754 00:38:59,120 --> 00:39:03,400 Speaker 1: a new regulations for those banks around capital is the question. 755 00:39:03,480 --> 00:39:06,840 Speaker 1: I don't have the answers on that, unfortunately, but I 756 00:39:06,840 --> 00:39:08,360 Speaker 1: think it would make sense to see some level of 757 00:39:08,560 --> 00:39:11,880 Speaker 1: around that out of DC. Bloombog's Max Ray is one 758 00:39:11,920 --> 00:39:14,000 Speaker 1: of the busiest people I know in the last forty 759 00:39:14,000 --> 00:39:17,080 Speaker 1: eight hours tracking down every angle angle Caroline from the 760 00:39:17,080 --> 00:39:20,600 Speaker 1: Bloomberg newsroom, and what an extraordinary day to have our 761 00:39:20,640 --> 00:39:24,320 Speaker 1: first edition of the twelve pm New York nine am 762 00:39:24,360 --> 00:39:27,719 Speaker 1: Pacific time Bloomberg Technology Tune in tomorrow, and we've got 763 00:39:27,719 --> 00:39:29,560 Speaker 1: so much more to come thick am Fast. We've got 764 00:39:29,600 --> 00:39:33,120 Speaker 1: Trey Steven's partner of founders, Fun no Less joining this program. 765 00:39:33,920 --> 00:39:36,200 Speaker 1: Just a key key conversation is someone that knows the 766 00:39:36,280 --> 00:39:39,200 Speaker 1: valley well, don't forget so much to recap on the podcast. 767 00:39:39,239 --> 00:39:42,080 Speaker 1: You can get it on Apple podcasts, Spotify, iHeart, of course, 768 00:39:42,080 --> 00:39:45,160 Speaker 1: on Bloomberg dot com as well wherever you get your podcasts. 769 00:39:45,239 --> 00:39:48,240 Speaker 1: Day one done, Caroline, But a lot of questions remain 770 00:39:48,480 --> 00:39:51,440 Speaker 1: of what's happening in global technology. This is Bloomberg