Are VCs and Startups Trying To Scare Consumers To Secure a Bailout?

Following the Silicon Valley Bank (SVB) closure, lots of speculation has been flying around about the fate of consumers and depositors.

Twitter user @VivekGRamaswamy alleged that VCs and startup executives who risk losing their SVB deposits are going “out of their way” to spread the narrative that a bank run will occur on Monday if SVB depositors aren’t helped out by the government.

Ramaswamy, in his tweet describes them as “yelling fire in the proverbial theater, hoping that everyone runs and knocks down a candle on their way out.” In his opinion, they are starting a fire that may not otherwise have existed. 

These executives, he says, ignore the reality that SVB’s circumstance is special because *89%* of its deposits were not insured (way higher than normal banks).

Additionally, given the portfolio they controlled, these executives fail to remember that the bank failed to hedge interest rate risk, which is a capital offense.

Spending money to gain popularity in the appropriate prominent circles among their depositors was their true “hedging” strategy.

For instance, he cited that 5 billion dollars were pledged in 2022 for “sustainable finance and carbon neutral activities to support a healthy planet.” Maybe that hedging will pay off for their depositors if the government bails them out. But that should correctly trigger an “Occupy Silicon Valley” of historic proportions, Tweets Ramaswamy in his conclusion.

“There Is Going To Be a Bank Run”

Not everyone agrees with Ramaswamy’s take that there won’t be a bank run. @William_Blake Replying to @VivekGRamaswamy blurted, “Dude, you’re so wrong. There is going to be a bank run.” 

@m2jr believes that Ramaswamy’s tweet suggested that “VCs & startup execs” as an entire group are acting this way. According to them, “Most are NOT. They are trying to help people deal with the shock of a terrible situation they had no role in creating. Part of your opportunity to be different: rise above tribalism; stop encouraging divisions between people.”

@joeobrien513 replying to @VivekGRamaswamy admits that the tech community may be exaggerating the probability of a run on the (regional) banks but doesn’t rule out the fact that a run is certainly possible citing the Friday sell-off of regional bank equities as an example.

@joeobrien513 ends their tweet by saying: “You need to make a better distinction between the sins of SVB management/equity holders and depositors (who had nothing to do with those sins). Stay clear of the woke rhetoric on this one.”

Replying to @William_Blake, @VivekGRamaswamy opines that if there is a bank run, it’ll be in part due to the panic created by the Silicon Valley depositors who will stop at nothing until they’re made whole. 

If there’s a bank run, it’ll be in part due to the panic created by the Silicon Valley depositors who will stop at nothing until they’re made whole. SVB is unique, but they’re eliding that fact to fill up their own cookie jars instead of admitting their own mistakes.

— Vivek Ramaswamy (@VivekGRamaswamy) March 12, 2023

One user, siding with Ramaswamy agreed that there won’t be a bank run on Monday. And part of the reason for their take is because despite all of the SV Street loud voices people on Main Street have a very different attitude towards it. 

Executives Need To Take Responsibility

The fact that @m2jr absolves the execs, implying that they played no part in contributing to the catastrophe Silicon Valley has become, is irritating to others on Twitter.

@Kleptosclerosis.They tweeted: “had no role in creating, you can bury your head in the sand just like SVB’s customers. Reminder: the best part of banking crises is the recriminations! I had no role in this! It was someone else! It was out of my control! I’m not the cause, they are! Expect a lot of that.”

@xhhuang adds, saying this about the executives: “They’re rich enough to solve this situation by themselves. They’re whiny because they are greedy.”

@Austen thinks that a run is justified. They declare that if companies and individuals realize holding their money in a regional bank means it could likely disappear there will be a run on every regional bank in America, and it’ll be completely rational.

It Depends

Replying to @VivekGRamaswamy, @BorgstromJames commented that the mindset of the American people will determine if there’s a run on other banks. According to him, the government and the SVB ownership are the parties with the greatest interest in this fiasco. 

Once again government oversight wasn’t doing its job. The mindset of the American people will determine if there’s a run on other banks. My view is the government and the SVB ownership are the parties with the greatest interest in this fiasco. They should not be believed as… https://t.co/UmwDT4JyNc

— James Borgstrom (@BorgstromJames) March 12, 2023

He continues, “They should not be believed as recommendations they make will only serve their interest and we know the government and press will lie to us without shame. I think the outcome should be that SVB fails and deposits are covered as required up to $250,000. Simultaneously, the government should raise the FDIC deposit coverage to squelch a run on other planks. All government-backed institutions should be told to stop using their balance sheets to fund DEI and ESG. IMO.”

This original thread inspired this post.

This article was produced and syndicated by Wealth Of Geeks.