SVB Spawns Banking Crisis As Biden Urges for Tougher Rules

is a new era for our show. It is a new era for technology, the startups, the VCS writ large as we see potentially the ongoing spiraling. Let's keep talking about what's coming up in the next hour. Ed. How Silicon Valley spawned a bank crisis, the impact on startups, investors, regulators in the lenders, all fighting for their reputations. President Biden vows to hold banks responsible, urging Congress for tougher regulation on the banking industry, and the UK arm of

SVV gets bought for one pound. We bring you the sprawling global gyrations from London to Beijing to Mumbai. But first let's check in on those markets that yes ed bread the cyber relief in the United States, but not so worldwide. We are still worried about the contagium risk. When you're looking in the equity front foot see one

hundred off by more than two percentage points. The eurostops off by more than two percent, and we are seeing the US though spring back as we start to think maybe the Federal Reserve will have to pause its hiking cycle. We therefore see the dollar wiping out all of its gains for the year. We see dollar indext off by eight tenths of a percent. I'm looking at sovereign bonds, the bid, the flight to safety, and the unraveling of

where we thought interest rates were going to go. A two year yield on the US down thirty eight basis points, the most we've seen since the nineteen eighties in terms of a move. Let's overall have a look at what's happening in the world of crypto. We've got to look at the key asset. Then it's just absolutely having a field day, up twelve and a half percent. But remember the pain trade that we saw back on Friday. The warriors around crypto and indeed, this is a story of

dollar weakness too. Yeah, individual movers, We've actually turned a big corner. These are the names most exposed to SVP in terms of the deposities in publicly traded tech companies, market Blower at the Open. We have turned a corner. There's this narrative around one and done with the FED, which is really boosting the tech sector along with dip buying. Number of these names turning the corner change the board though. Let's go straight to the banks. There is contagion concern.

A number of regional banks have been halted. We are seeing record declines across First Republic for example, Western Alliance also down very big. How much of the concern around SVP and deposit of flight still applies to these names as the regulators assess the health of this industry. For the latest bringing Bloombog Shinnali Bassak, who's on top of this story for US, Shinali, what is the latest with

this sector? There's a few things to think about here, Ed And if you think about it, how many people in Silicon Valley had banked with the likes of Silicon Valley Bank and then move their money to say First Republic, and then they're worried also about the other regional banks in the sector. Western Alliance based in Phoenix, Arizona, PacWest based in Los Angeles. There's a general worries about their banks close to home, especially after some money has moved

there very very recently. I would also say that there are other people who see this as an opportunity to attract more clients. I would take a look at this tweet over the weekend from Anthony Nodo who had said use his link to sign up and you'll get a twenty five dollars bonus and up to two hundred fifty two hundred fifty dollars when you sign up for a direct deposit. So we're going to talk a lot more.

I know about the companies here that even in the sell off, are coming to seek a position of strength versus the ones that maybe have a little further to go here when it comes to the troubles facing the banking sector, well said Shenatibaut site, you're gonna be sticking with us and piece to say this odd fintype. Ponton has found a CEO in Managing Pontus, Steve McLoughlin. He's with us. He's a full my head of Goldman's Global

Financial Technology Group, joining us for the conversation. And wow, I mean Steve told to us before we get onto the silver linings of who benefits in this scenario, just talk to us about how much the earth shook for VC's tech. The overall counterparty risk was enormous, and no one seemed to realize. Yeah. I think this sudden element

of this is what hit everybody so so hard. And I think I don't know how many years of life were taken off everyone over the weekend, but there were people super, super stressed out, you know, getting from not just big businesses but SMBs and clients of the firm, not our firm, but SVB. But it really, I think woke people up to the big problem you know out there that there's so much risk on a few big banks in Silicon Valley that it really, it really just

shook everybody out. And at the end of the day, I think you're seeing the ripple effects happen and you're right in the middle of it. So I think the probably questions are going to be, you know, how deep is this going to go? But we're still in the middle of it. We're still in the middle of it, and the reality is you have spent so many years here helping firms become unicorns through raising money, you work

with their venture capitalists. Is there a sense that the capital markets are now closing up for the people who had such easy access to money for the last ten years. Well, I wouldn't say they're closing up, but I would say this isn't helpful, and given that we're right in the middle of it, it's it's pretty painful for I think a lot of tech companies across the world. I think the fact that FED came out and did what they did was incredibly helpful and expected to some extent over

the weekend. But capital was pretty hard to find before this, and so right now we're getting hundreds of calls from companies looking for whether it's credit. I saw ban On this morning of talking about credit funds and structured securities

and all that. But you see some of the big guys that wrote all the checks leading up to the big boom in tech and fintech, you know, Tiger d One Code to really kind of pulling back on their private investments and looking at their portfolio companies or shifting to public markets. Steve, you run an advisory. This at the hault of all these transactions. Right when the Vene Caitlists wrote that letter of support for SVB, they pointed out that it's not just a place that holds deposits

for this sector. It offers a wide range of banking sets is where no one else would. So, now where does this industry turn to? Where did the founders go when they need banking services and traditional banks don't offer them? Yeah, you're right. It was not just a place where you storage your money. It was where all the money got transferred. They were doing payments, they were doing treasury management, they

were doing wealth management, investment banking, you name it. And a lot of companies were essentially running their business off of SVB, not just essentially putting their deposits there. You know, I think, you know, it's interesting to hear so far and other FinTechs who we know are are you know, have their hands out to essentially take deposits and help people out. But that's just one smallest liver. The economy in the fintech universe is extremely strong, and I think

there's going to be places for people to go. We were on the phone all week on ourselves and with different clients helping them get open up accounts at Cheaping Morgan and other large banks institutions, And that was happening all weekend. And I have to say, and talking to some of the bankers that were taking those funds in that a lot of them were extremely gracious about about the situation and not trying to sort of fearmonger on it.

So a lot of support around the banking system for each other, from systemically important institutions such as JP Morgan, such a Bank America. But what about Mercury bres Capital, what about some of the neo banks? How much should we go to see these companies supported with inrow, in

flux of cash, or more warries around them. I think the good news is the bigger and better of those firms raised so much capital over the last couple of years, companies like Revolute in Europe raised a billion to fifty from US for example, and are growing like a weed and making lots of money. So some of these banks are very well healed and don't actually have risky assets on our balance sheet like some of the larger banks.

So in a weird way, some of the largest banks of the country more risky than some of the neo bank So we're very bullish on all things or most things fintech, I would say, but I think this is a great opportunity for fintech to shine. I'm so interested though you mentioned kind of helping your clients move money

into places like JP Morgan. There was a lot of chatter online, especially with the VC community, about this idea that you're systemically important and then you're everybody else, And I'm wondering has the psychology change now that the FED has stepped in, that the FDIC has stepped in the way they did and said you're safe no matter what it Does that mean that there will still be an embracing of these regional banking partners or is there still that fear given what we've seen it to a con

valley bank. I mean, there's been a twenty year trend towards bank mergers and lesser and lesser banks in the country, and that's how I sort of built my career up of Coleman Sacks doing a lot of bank mergers. But I would say, I don't think we're going to move to a system like Canada where there's like six major banks and then nothing else. I think it could be a slow movement towards that, because I don't think you

really necessarily need as many banks as we have. But I also think there's a huge place for the fintech institutions that are coming onto the scene and solving some of these problems and using some of the very largest banks. So they got a layer on top of the largest banks. You can have the best of both worlds. Steve Owner

brings some breaking news just crossing the Bloomberg terminal. Bloomberg is reporting, citing officials familiar of the matter, the European Central banks plans for big interest rate hikes in the weeks succume are going to meet more opposition now right Dubbish policymakers are likely to make the point that because of what's happened with Silicon Valley Bank, the economic picture has shifted, not just here in North America but in Europe as well, similar to what we're seeing in the

market reflecting in terms of their bets on the FED. How much has the economic picture shifted into your mind as a result of what's happened in the past five days. I think the biggest thing is people are realizing that the blunt instrument of just increasing interest rates isn't always good for for the overall macro economy, right, So it's it's great for certain elements of the world, and it's helpful for inflation, but it also has its ripple effects.

So and it's hitting it's hitting Europe just as much as it is here. You know, at least they got sold for a dollar. We can't even get SVB sold in the US for anything, So that's which is a shame. So I think the ripple effects are are are happening, and they're I think, like I said, we're right in the middle of it. There could be more issues. I want to switch gears a little bit because to folks that are trading every day in the market, maybe they're

not always focused on crypto. But for the crypto community, they had three banks that were friendly to them just evaporate within five days essentially, So I'm wondering what that means. There's this concern that the access to the financial system has been cut off for the crypto community. If you're seeing Bitcoin up quite meaningfully, what's going on? Yeah, I find it, you know, quite interesting to see that. You know, most of the tech IPOs are down fifty to sixty percent,

and bitcoin was down way less than that. Now it's back up. Whereas these stocks continue to fall, crypto and bitcoin are going up, so you know, a long lived crypto and at the end of the day, blockchain's here to stay. I do think that the SEC and the government does appear to be having a very very negative crackdown on crypto in the US and globally, and so you know, the knockdown of some of these institutions curlely is not helpful, and so they're really forcing a lot

of this activity to go offshore. We have a lot of clients in blockchain crypto and a lot of them are offshore from day one, and they're seeking banking partners offshore. We're looking at interest in Swiss banks, in Middle Eastern banks at the moment, because there are the silver gates, the signatures, the svbs. Anymore. In the US, ultimately, was

there a question really about stable coins here too? We saw the tumult surrounding USDC, a DeFi that had to rely on trad fi ultimately, because that's why Circle had parked a lot of its money it's collateral. Yeah. I think there's tremendous value in Circle and USCC and in some of the stable coin you know operations, which is why we're such a big fan of it. But I think at the end of the day, these institutions should

be diversifying that risk dramatically. Right to put you know, so much of it in one place here, may i'd be the best idea. I think, thank god it got it got rescued by the government, but it definitely put it scare into people and broke the USDC buck, if you will. But yeah, all right, fin Take Partners found a CEO and managing partner Steve mccaughlin and Bloomberg Snary Basset.

Of course, thank you. Americans can rest assured that our banking system is saved, your depositors saying, let me also assure you we will not stop at this, will do whatever is needed. I'm going to ask Congress and the banking regulators to strengthen the rules for banks to make it less likely this kind of bank failure would happen again, and to protect American jobs and small businesses. Some of

President Biden earlier this morning. For more on the government response, Bloomberg's Jordan Fabian joins us from the DC ber Jordan Howard. The White House framing this one well, and they're framing this as an opportunity for President Biden to push for new new regulations on banks, basically framing it as you know, management mismanagement at those at those banks, sub and signature

and what's needed is new regulation act. He pointed to a Republican efforts that were successful to roll back some requirements under the Dad Frank Law that he wants to see basically return and reimplemented. That's going to be difficult for him to accomplish, but that's a challenge he set for himself and his administration. Right Laer today and Caro, I've been seeing this word on Twitter, bailout or no bailout? How do you frame it? You know, that's really a

question in the market this morning. And I don't know about you, Ed, but I was listening to countless podcasts on the phone with many of people, and there was this worry that how are you going to frame a bailout of what seems to be billionaires Silicon Valley in the world of Silicon Valley Bank. Jordan to that end. How much has we seen from the administration, from regulators, this desire to not frame it of a bailout of investors, but of course just of depositors. That was a huge desire.

That was a central part of the President's message in his speech this morning. He said taxpayers aren't paying for this. I mean, we could debate the semantics of that, but he was sure to stress that and that the management of these banks are going to be hired. So really it's sort of a populous message, if you will, saying, look, the little guy is not going to pay for this.

Management is going to be held accountable. And with these emergency steps that regulators took over the weekend, that small businesses and depositors are going to be able to access their money. The President going into Congress on big banking regulation,

how do you package that up? It's going to be a tough challenge ed. There are houses, of course controlled by Republicans, many of the same Republicans who voted in twenty eighteen to exempt small and mid sized banks from things like capital requirements, lending restrictions that were in that Dodd Frank law. So asking them to again to basically go back on what they just did five years ago.

It's going to be a tough challenge. Now he can see what he can do through executive order executive action, but he might be limited there, and that also leaves him vulnerable to legal challenges to anything he does on his own. What I think to add to the sort of extraordinary nature of all of this the seizing of Signature Bank over the course of the weekend and the sort of support there that many would say took the

management itself the board by surprise. Notably, on the board of that very bank is none other than one of the people who helped co write Dodd Frank Barney Frank himself speaking to Bloomberg a little bit earlier, Jordan, I think, ultimately, when we're thinking about new regulation, are we really thinking about the counterparty risk as well? Where was the administration taken off, god by how much one particular sector depended on one particular set of banks. I think that's something

that was surprising to a lot of people. I don't know that the administration really saw this coming, given the fact that they had to scramble over the weekend to have muster or response here. Their administration has talked about

a lot about the economy's resilience overall. So I don't think I don't think they anticipated that this particular problem would become such a major problem, facing or prompting questions about your contasian risks, etc. And so that's something they're now going to have to look at, especially to your policymakers thinking about rad hikes as well. Well, said Jordan Fabian from Limburgh. We thank you so much and ed so many people saying, look, when you raise rates, things break.

We think about the UK pension situation but a few months ago and the impact there. But of course this whole scenario around Silicon Valley Bank swooped up the UK, China, India, others, the global startups in the concern because this was a bank that bank too many And we're going to talk about that just next hey, because we will talk about how this affects not just DC but London, the regulators

far and wide. And I think ultimately I don't want to get your point of view when you're contributing, when you're bringing us your analysis and you're reporting, you're out there on our Tea live blog yourself helping push this conversation forward. I'm looking at the Tea Live blog. Now, if you're lucky enough to have a terminal talking about what the implications to the ECB, I think that the

narrative is now the conversation. The economic economic picture is shifted, not just here in the United States but in Europe. India is a name that I keep hearing about on all of the text messages I'm getting. Startups face a lot of hardship right now. We've got to get into it. This is bloom bog. There is a serious risk to some of our most promising companies and technology, life sciences. You're going to have to wait and hear what the

solution is. But that risk is precisely why the Prime Minister and I have been working at pace over the weekend to make sure that we have a solution. These are very very important companies to the UK, have very very important part of our future. The UK Chancellor, they're Jeremy Hunt on the SVB situation across the pond, after HSBC of course plans to buy the UK arm of

Silicon Valley Bank for one pound Blue merged. Jenny sin Is in London with more and many would say this is what a drop in the bucket for HSBC, What do they win out of this? Yeah, I mean I think the big thing is just greater exposure to tech companies and having a bigger scale with that industry. And of course, as you pointed out, the price wasn't bad. They really did get its first deal. I think it's really important to remember with this collapse of SVB that

it really was on the asset liability management front. It was not a credit crisis, so they weren't seeing some huge uptick and customers going bad. It was really just a you know, a failure and risk management on the asset liability side. Size and scale is kind of important here, right, Jenny, I was reading over the weekend. You know, by the end of the financial year, Silicon Valley Bank UK had eleven billion dollars of deposits on its balance sheet. Lloyd's,

by comparison, has four hundred and fifty billion dollars. But what were the problems experience in UK specifically? We know all about depositors here in the US, all about the pain for founders and vcs. How did things play out over in London. I mean, I think there were a

lot of fears here as well. It's hard to kind of separate if you're a customer of one of these banks, you know, it's it's I think a lot of the past few days has been just characterized by a lot of panic and fear and worries by both investors and customers alike. And so I think you experienced a lot

of the same things. And it'll be interesting now as you know, HSBC acquires this this unit of the bank, and then you know, obviously FDIC continues with its work in the US, how those things kind of shake out and how things turn out today and proceed from here. I think we're hearing very vastly different experiences among different customers. You know, some are proceeding apace and having no problems.

Others can't seem to log in. So I think it's just a mixed bag at this point, and we're still really waiting to see where things shake out to that end. You of course based in London at the moment, Jenny, but you are our fintech reporter extraordinaire and someone who can lay climb across the entire banking sector a little bit for us. Just talk to us about what happens ultimately with some of the we wait for people to

be able to log into Silicon Valley Bank. But SVB and its parent company, they're trying to auction off a lot of other assets, right There's securities parts of the business, wealth management parts of the business. How do you see that will unfolding. Yeah, So they just announced today that they formed a special committee on their board and that

that committee will be in charge of that process. They're exploring options for both the securities business, which is the investment bank, as well as the SPB capital business, which is the VC and private equity fund platform, and so both of those. You know, we're completely separate from Silicon Valley Bank that you know obviously collapsed into FDIC receivership last week, So they're in very different places, and it'll be interesting to see what kind of bids this company

might attract for those assets. But just in general, I think, you know, obviously for the broader fintech community, this was a huge shock to be reliant on one play for so so long, and there will probably be a lot of questions about that concentration risk, not just among banks, but from the fintech customers themselves. Bloomberg's Jenny's rain Out of London. Thank you so much for your reporting. Welcome back to Bloomberg Technology. I'm Caroline Hyde in New York

and let's get back to Silicon Valley Bank. Of course, let's bring in, in fact, the co founder of the largest Latin X community in venture VC familiar Cheryl Campos is with us, who took to Twitter to say, the one thing this SVB run taught me is that most vcs know nothing about finance. Cheryl, what do you exactly mean, what does this sort of critique of your own industry meant to be talking about? Well, thank you so much for having me, And this tweet took off because there

was in fact an element of truth to it. This was partially a finance problem, but at the same time so human behavior problem. This was a classic example of the prisoner's lamma and everyone really acting individualistically versus collectively. When the venture ecosystem and so Silicon Valley Bank, quite frankly, was the partner of a lot of different players here. They were the first check in and a lot of different initiatives. They were the first bank account of many founders.

They also took things personally as well. They built deep relationships with people even giving out personal loans, mortgages, lines of credit for GP commits, and so that is something that I think that the ecosystem as a whole, if we had worked together, are going to be in severe crisis right now because there's going to be a significant gap in the market in terms of both access to capital and leadership. And so that is what communities like

ours a BC Familia are trying to do. Let's talk about your community, because I believe when I look on leaf Amilia's website, it was partners like Silicon Valley Bank that helped fund you to out continue to drive the pipeline, the conversation, the network. What do you do when Silicon Valley Bank has to pull back and of course disappears in terms of a player an infrastructure. Silicon Valley Bank

was our founding sponsor. They were the ones that gave us our first track when we were just at the idea stage because they were the person to take on the most risk when it comes to funding things at the idea stage, and so they really took a chance to make the ecosystem better as a whole, and so we really wanted to partner with a bank that was a mission aligned. They saw the vision, they saw what we were trying to create, and that's what we do.

We took and use their support in order to build pipelines. Right, we were helping everyone break into venture and also build their own startups. We helped them as well with the professional development and rising up the ranks. And last one not least, we actually helped them raise capital for their own funds. And so that I think is one of the key things that will be missing right is first check in that will allow people to take these initiatives

and make the ecosystem better. And so, yes, we were exposed as maybe because we were their banking partner, and I think that's something that I as an investor as a founder, was also really connisaated of because I have twenty portfolio companies, I have other founders that are reaching out to me, and so both as a founder as an investor, I can clearly support using my own personal

experience as well as the community as a whole. Cheryl talked me about the last forty eight hours, including this morning. Silicon Valley Bank has technically opened its doors in the last thirty minutes here in California. What have you had to do to help founders make payroll. Have you had to move money around, have you had to make deals with co investing partners and other vcs. So I mean we all had a collective side relief yesterday right when we saw that the government was going to step in

there and make sure that deposits were whole. So we did. Our money is safe, right, But the loss really is around losing Silicon Valley Bank as a partner, as a leader in this space. And so I think that that has allowed for founders and including communities like ourselves, really go back to the basics, right of our strategy, making sure that you know when times are tough, these are times where you know what people are made out of.

And so going back to the fundamental supporting people with their payroll, supporting people with their strategies, and bringing scaling things a little bit back to figure out how other things play out. We see this morning that first Republic and others potentially are risk and so rocky times are far from over. But I've seen this before. I was an executive of Republic, which is a startup that threat unit current status, and I had my fair share of

rocky times through COVID, through Royd fluid. And so the biggest lesson that we can learn here is that when there's times of chaos as times of opportunity, And so by going back to basics, I'm understanding how where your position is right now, you're able to then take advantage of these chances. If you go back to see days before Silicon Valley Bank tried to issue shares and raise more money before we knew what had happened, it seems

like times are really hard for startups anyway. Yeah, it's the last five days actually just mask what is a much bigger ongoing problem cash fun and a lack of access to capital. I don't think anybody saw this coming right before, you know, Wednesday, we're on Thursday, and I think that was something where we saw a lot of founders are going to get hit by this negatively. But I'd like to also sate that diverse founders in particular weren't even getting access to capital in the first place

when capital was good and times we were flush. Right.

We actually showed a statement last year with a couple other Latin organizations because even though it was the largest venture capital funding a year to day, latinos only got one point two percent of all of that, and so that is where we see that even when times are good, we're not getting enough money and then diverse founders in particular will continue to have less access the capital, and so that's where that access and leadership that as to

be played and this ecosystem will be missed. And that's why we're banding together with Ray's Black VC, Gold House and a couple other communities as well to show united front. Our motto is la us at the Foresight, which means strength and unity, and so we really want to make sure that we're there for our communities. Thank you for coming on the show and sharing that message with us.

VC familiar founder and investor Cheryl Campos, thank you. Now coming up, we'll hear from vcs who banded together in support of Silicon Valley Bank. General catalyst CEO him On Tenada joins us next for more In that discussion, Caroline and the point also ed about Silicon Valley Bank. Many were worried about, of course, relationships not just private companies still, but those that did go public they remain very intertwined

in terms of their banking relationships. And we got that feeding of the information as we went after the bell on Friday. I look at Roku now down seven tenths of percent. It had more than five hundred almost five hundred million dollars of cash with Silicon Valley Bank. It now has access. Of course, we're seeing Roku just down that little bit. Look at what happens with Roadbrocks five percent of its cash Mysilican Valley Bank, ties of Rocket

Labs as well as under pressure today. Look at the bounce back in one particularly Canadian company, an ad tech company. They said it had ninety percent of its cache the Silicon Valley Bank. That's all. Let's get more on the VC community in a moment as a bring back. It's been incredible chaos. So my phone has been blowing up. The people that are going to be the most effected here are early in mid stage companies, more so than late stage companies. Venture capitalists like to run around saying

they provide value. Well, this is the time to provide value to your portfolio companies. Long term events like this are massively bullish for the crypto complex, and the San Francisco FED should have been on top of what was going on. The bank's explosive growth and now it's very quick failure. That was some of our guest reaction to the SVB fallout as it was in raveling late last week.

Let's get the take of another VC, and not just any VC, actually general catalysts, which led hundreds of VC firms to band together over the weekend in support a Silicon Valley Bank. CEO On Teenager joins us, Now, I think I'm right in saying they're in our six hundred signatories, over six hundreds to your effort, you still want to do business with whatever Silicon Valley Bank ends up being. What are you hearing about? How likely that is? Absolutely?

I think it's really important that Silicon Valley and this next incarnation does continue to survive and thrive. What there are conversations being had with some banks, obviously, it's it's unclear if there's a deal that has been media. There are some private investors that are looking at potentially investing in the bank and recapitalizing as well, and I really hope a deal comes to together so the bank can

be a going concern. I know in the conversations I've had there are signatories to your letter, people backing your initiative to keep Silicon Valley Bank Alive do business a bit, but who were also telling port failure companies to pull

money for whatever reason. How do you Yeah, So look Thursday morning, when the news got out that the bank might be at risk, every investor was getting contacted by their fund or what to do, and your fiducial responsibilities to say, yeah, even though the bank the risk is low that the bank would go under, probably safe to

pull money out. When we started hearing that multiple times, when you convened the leaders of some of the larger eventual firms to say, hey, this is a prisoner's dilemma situation where on our own everybody's going to give the same guidance. But that's not the right thing for the collective because while some starts may be able to take their money out, others will be left and the bank will be in a precarious position. And so that is

where we tried to stop. But as you know, in a digital age, a run on a bank can happen very fast. So within a few hours it was too late, and by the time we got our group together, the fdi C already stepped in. Now, of course, regulating support depositors. Hamant but there's still a lot of stress because equity holders, bondholders are not protected. We're looking at the full out in terms of share price from First Republic, for example,

which does also have ties with the startup community. Are you still having to talk to your portfolio companies about diversification of their treasury. Absolutely. First of all, I have to say, the government stepped in here in exactly the right way, in exactly the right time. Had they not

done that, this truly would have been a contagion. I think things are in a very stable place now, and the advice we are giving our portfolio companies first informist has been let's make sure we have business continuity and we are perils being met and the operations are there, the employees are comfortable that they're going to get paid this week, and then we are saying we need to think about diversification, not just for them, for ven firms too. We were all just so used to relying on SVB

as as our bank. You say the government is exactly what it should have done. Now many would say, yes, they do need to step into help depositors. But what then, of basically being a bailout to venture capital firms in and of themselves. Is there nothing you could have done specifically as a grouping to support the bank. This is not a venture capital bailout, first and foremost, I do

think we could have done things. And in fact, over the weekend, all the firms, including us, we had put together plans to lend capital from our balance sheets to help these companies make perol. You know, I think that would have at least a word the crisis for a couple of weeks while the right you know, solutions were in place. But this all happened so fast that honestly, if the FED hadn't stepped in and guarantee these deposits, it would have been very difficult. Parolls being made now,

Parols being made now. The site from who last I heard this VB side had started processing. Then it was down because there were so many folks checking. But but it's in motion now. What's the net result of all of this funding was already hard to come by five days ago the deal counts drop listen. We approved the deal on Saturday, just to give you a sense, in the middle of all this investment on Saturday, so I will say, look, this is a This was a very

serious situation. Hopefully we'll get this averted soon. I don't think this has a matural impact on what happens in terms of the venture capital business. I mean five days ago, if you recall, we were all very excited about what's happening with AI and is at the beginning of the new cycle, just like social and cloud was fifteen years ago. And I think those trends are there. So the entrepreneur e activity I do think is very strong and it's going to continue to be strong. Man, there's been plenty

of worry and handwringing about VC funds going under. Have your LPs been willing to be helping other LPs stepping in backing VC funds to make this payroll lending that you said the support Aaron. Ultimately, will you still see money going into the VC community? Absolutely? I don't think this will impact the capitalization of the venture capital community.

I don't. I think this is a This is at the end of the day, a bank that wasn't didn't have the risk management in place for a really fast interest rate rising environment, and again the failure around that has been managed. And I don't think this is going to impact the venture capital firms or the investment pacing. That's that's going to be happening in the industry. Optimism coming from Tanisa, Thank you so much, General catalysts. Great to have you coming and joining us. Let you get

back to your portfailio companies. Now, rising interest rates are good for banks until they aren't. That's what we're seeing with the collapse of Silicon Valley Bank and sell off in other bank stocks. Here's the backdrop. Higher rates increase the profitability of a bank's main business, which is to pay lower rates on deposits than they charge for extending loans. But when the Federal Reserve plows ahead with NonStop interest rate increases like gets done over the past year, problems

start cropping up quickly. Silicon Valley Bank got hit with a one two punch Number one. It's customers. A lot of startups were burning through more cash because it got harder for them to get funding. VC firms are no longer throwing their money around, and when your customers need cash, you need to have enough on hand. Banks usually park a big chunk of their money in super safe investments

like treasuries and other securities. So number two SVB was forced to sell those investments to raise cash to meet all the withdrawals. The fence rate hikes had push bond prices lower, which meant SBB sold a securities at a loss. The total loss one point eight billion dollars. When SBB announced the loss, other startups got scared and started pulling their money out. It was an old fashioned run on the bank. Big banks may end up the winner here.

After the Great Financials, the government imposed all kinds of capital rules on banks that it deemed too big to fail, meaning JP, Morgan Chase, Bank of America and their peers are required to have a lot more cash on hand to meet potential withdrawals. They even have to ask permission to pay dividends to shareholders. And now many of those startups are playing it safe by diverse mind where they put their money and opening accounts at the big banks.

That's how it started. How's it going, x rays with their acap the busiest man over this weekend, And still for me, the key concern has got to be the fact that share prices are still down hard at some of the competitors, even though many annets would say there is nothing exactly out there like Silicon Valley Bank. Yeah, I would say the fundamental question at this point is one of sentiments. Obviously, the FED and other regulators moved

to reassure depositors, right, not even investors, but depositors. They lined up this new liquidity facility. They made it easier and less expensive, essentially for banks to borrow from their discount window the lender of last resort right. But it's still unclear of whether or not that has managed to calm people down. It certainly hasn't calmed down investors, and I don't think we can yet say if it's calmed down depositors. We find ourselves once again in a situation

where there are more questions than answers. Particularly is there a buyer that's going to come in for SVB? What's happening with signature? First Republic's response is pretty dramatic, even though it's so vocal about the strength as it put it at its liquidity position. Why is there still so much anst out there? Max From the exity market reaction alone, I think the fundamental issue is that FED policy is

still in place when it comes to interest rates. So even with these backstops, even with these countermeasures, people are still worried this problem will persist. I honestly can't say though. I mean, again, when it comes to banking, the number one thing is confidence, right and sentiment, And if both of those things are down just because you have these kind of back to back enclosures and failures, I think

it's hard to win overhearts and mind. Max, what are we hearing about Silicon Valley Bank and depositors access to their cash this morning? It sounds mixed from what I saw on our reporting, I unfortunately have not been as close to that as some of our tech reporters have been doing, you know, a real bang up job. Apparently they are able to get access to it, right, and that was kind of the promise made sorry depositors would be made whole, they'd be given access, and we are

seeing that though apparently there have been some hiccups. But again, I think the regulators have moved to give people access to their deposits to fully backstop them, and that's I think what we're seeing play out this Monday morning. And Max, ultimately this came down to a massive counterparty risk that

people hadn't quite factored in in one sector. Will regulation change do you think because the administration promises it about banks, for example, the big question I think is whether or not we'll see some kind of rollback or alteration to Trump era moves that made it essentially less cumbersome, less burdens on regional banks when it comes to capital requirements, when it comes to compliance requirements, whether or not we see a push to move away from that, to put

a new regulations for those banks around capital is the question. I don't have the answers on that, unfortunately, but I think it would make sense to see some level of

around that out of DC. Bloombog's Max Ray is one of the busiest people I know in the last forty eight hours tracking down every angle angle Caroline from the Bloomberg newsroom, and what an extraordinary day to have our first edition of the twelve pm New York nine am Pacific time Bloomberg Technology Tune in tomorrow, and we've got so much more to come thick am Fast. We've got Trey Steven's partner of founders, Fun no Less joining this program.

Just a key key conversation is someone that knows the valley well, don't forget so much to recap on the podcast. You can get it on Apple podcasts, Spotify, iHeart, of course, on Bloomberg dot com as well wherever you get your podcasts. Day one done, Caroline, But a lot of questions remain of what's happening in global technology. This is Bloomberg