Andrew Yang, the entrepreneur who grabbed national attention during his 2020 White House run and his 2021 New York City mayoral run, urged government intervention following the Silicon Valley Bank (SVB) collapse, warning of potential mass layoffs in the near future and a “financial contagion.”
“In the absence of some kind of action you’ll see thousands of mass layoffs and defunct companies, a wiped out generation of start-ups.” Yang warned.
In a series of Twitter posts, the businessman urged the California government or the U.S. Treasury Department to intervene to prevent a series of calamities that would likely affect thousands of companies and individuals, “through no fault of their own.”
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“I think either California or the Treasury Department should backstop Silicon Valley Bank – thousands of companies will fold or lay people off next week because of lack of access to accounts through no fault of their own,” Yang wrote.
Yang argued that the collapse was not SVB clients’ fault, but the managers of the previously esteemed bank.
“Take the equity and fire the managers.” Yang stated. “There’s a big difference between irresponsible bank managers and the thousands of customers and entrepreneurs and employees who chose to use a bank that was one of the biggest banks in the country.”
“Punish one, but the other is blameless except they didn’t choose the right bank.” Yang added.
Yang prophesied that layoffs would especially spread a “financial contagion” in California, where many tech startups are located and used SVB.
“[A] huge problems in CA in particular and a spreading financial contagion that will infect a host of regional banks at a minimum,” Yang shared.
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Yang argued that federal officials will need to be SVB’s “white knight” to save the bank, since the massive bank has a “limited number of potential saviors”
“The natural white knights who could save SVB are unlikely to do so unless they get induced or a great deal. It’s a big bank with a limited number of potential saviors. Again why you probably need active leadership from officials to backstop,” Yang added.
The Federal Deposit Insurance Corporation (FDIC) announced Friday that it would close Silicon Valley Bank, until then the 16th-largest bank in the U.S., marking the worst U.S. financial institution failure since the Great Recession.
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The bank held a reputation as a go-to for a number of Silicon Valley industries and startups. Y Combinator, an incubator startup that launched Airbnb, DoorDash and DropBox, regularly referred entrepreneurs to them.
SVB’s collapse was so quick that, hours before its closure, some industry analysts were hopeful that the bank was still a good investment. The bank’s shares had fallen by 60% on Friday morning after a similar drop the day before.
Anxious depositors rushed to withdraw their money over concern for the bank’s health, causing its collapse, which may serve as “an extinction-level event for startups,” according to Y Combinator CEO Garry Tan.
The closure of SVB has spilled over into other banks, both in the U.S. and abroad, with $100 billion lost in stock revenue domestically and $50 billion in value shed by European banks over the past two days, according to a Reuters calculation.
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Fox News’ Aislinn Murphy contributed to this report.