SVB failure means '65,000 startups could miss payroll,' creating 'huge problems for the startup and tech economy,' warns an expert.
The biggest worry is that if savings exceeding $250,000 are not protected, customers may lose trust in other mid-sized banks, hence a catastrophic collapse, according to multiple media reports."Where is Powell? Where is Yellen? Stop this crisis NOW. Announce that all depositors will be safe," David Sacks, VC, Craft Ventures,"Place SVB with a Top 4 bank. Do this before Monday open, or there will be contagion, and the crisis will spread," he suggested.
Up to $250,000 per depositor is covered by the Federal Deposit Insurance Corporation , which may be ready to start compensating those depositors as soon as Monday.According to regulatory records, the deposit base of the bank was over 95% uninsured as of December.Startups, which make up a large portion of these depositors, are worried that they won't be able to pay their employees this month, which could lead to a large number of business bankruptcies and job losses in the IT sector.
Investors worry that these failures could erode trust in the banking industry, especially among mid-sized institutions with deposits of under $250 billion. "$250k is too low. It's insane that a small company with, say, 2.5m in payables and payroll at the end of the month should be 'prudent' and split their cash across 10 banks in case of a run," Mark Cuban, popular US business tycoon, and Shark Tank star stated in a
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