Decisions will be made soon.

Silicon Valley Bank was aptly named: It held the funds of hundreds of U.S. tech companies and was a crucial player in the valley’s economy. But on Friday, it became the second largest bank failure in U.S. history after a rapid run on its deposits. Some $175 billion in customer accounts were taken over by the Federal Deposit Insurance Corporation (FDIC), which is now tasked with returning money to the bank’s customers.

 

But more than 85% of the bank’s deposits were uninsured, according to estimates in a recent regulatory filing. That’s because FDIC deposit insurance is meant for everyday bank customers and maxes out at $250,000. Many Silicon Valley startups had millions, or even hundreds of millions of dollars deposited at the bank—money they used to run their companies and pay employees. Right now, nobody’s sure how much of that cash is left.

 

The tech sector was already wading through a harsh macroeconomic climate, with layoffs abounding and stock prices sinking precipitously. Silicon Valley Bank’s downfall is likely to exacerbate those problems—and could threaten the wider economy. “It’s like a Lehman Brothers moment for Silicon Valley,” says one Silicon Valley startup founder whose company has millions of dollars tied up in SVB. “It feels like something that never should have happened, because it’s such a trustworthy entity.” The person spoke on the condition of anonymity because they are worried about losing customers over their ties to SVB.

Insured to $250k means exactly that. The taxpayers should not be on the hook for anything above that. Does it suck for the depositors? Absolutely. Is it tragic for the people who won’t get paid next week because the money is gone? I can’t imagine the stress. It sucks. It all sucks.

But terms are terms and contracts are contracts. We have to stop the madness of thinking that the American taxpayers will ride to the rescue every time bad things happen in the private sector. There is too much money in the economy chasing too few goods. Hence, inflation. While it sucks, the evaporation of billions of dollars out of the economy is a necessary evil to stymie the larger evil of inflation. I continue to contend that the best thing would be for the federal government to cancel much of the inflationary spending, but absent the political will to do that, the private sector will have to contract to let the air out of the inflationary bubble.

Warning to all. If you have more than $250k in a bank, you should spread your money into multiple banks or accept the risk.

The Fed’s efforts to deflate the economy to stem inflation is working. Sort of. The problem is that there will be unforeseen consequences. A better way to cool inflation would be for the federal government to pull back hundreds and hundreds of billions of dollars that are committed, but not yet spent, as part of the various spending sprees of the past five years.

Regulators shuttered SVB Friday and seized its deposits in the largest U.S. banking failure since the 2008 financial crisis and the second-largest ever. The company’s downward spiral began late Wednesday, when it surprised investors with news that it needed to raise $2.25 billion to shore up its balance sheet. What followed was the rapid collapse of a highly-respected bank that had grown alongside its technology clients.

 

Even now, as the dust begins to settle on the second bank wind-down announced this week, members of the VC community are lamenting the role that other investors played in SVB’s demise.

 

“This was a hysteria-induced bank run caused by VCs,” Ryan Falvey, a fintech investor of Restive Ventures, told CNBC. “This is going to go down as one of the ultimate cases of an industry cutting its nose off to spite its face.”

 

The episode is the latest fallout from the Federal Reserve’s actions to stem inflation with its most aggressive rate hiking campaign in four decades. The ramifications could be far-reaching, with concerns that startups may be unable to pay employees in coming days, venture investors may struggle to raise funds, and an already-battered sector could face a deeper malaise.

 

The roots of SVB’s collapse stem from dislocations spurred by higher rates. As startup clients withdrew deposits to keep their companies afloat in a chilly environment for IPOs and private fundraising, SVB found itself short on capital. It had been forced to sell all of its available-for-sale bonds at a $1.8 billion loss, the bank said late Wednesday.

It’s nice to see the same rules applying to everyone.

In a move political observers viewed as retaliation, Florida lawmakers this month passed a bill, which DeSantis signed into law, that authorizes the governor to appoint five supervisors to oversee traditional municipal services, such a fire protection, public utilities, waste collection and road maintenance in the region where Disney World operates.

[…]

 

The new law changes the district’s name from the Reedy Creek Improvement District to the Central Florida Tourism Oversight District and subjects it to various layers of state oversight.

 

The creation of the self-governing district was instrumental in Disney’s decision to build near Orlando in the 1960s. The company had told the state it planned to build a futuristic city that would include a transit system and urban planning innovations, so it needed autonomy in building and deciding how to use the land. The futuristic city never materialized and instead morphed into a second theme park that opened in 1982.

It’s like Democrats don’t know how real people think and act.

“In the absence of robust investments in fair and affordable housing, it is clear that additional timely executive action is needed to address the urgent issue of historically high rental costs and housing instability,” the lawmakers wrote. “…We urge your Administration to pursue all possible strategies to end corporate price gouging in the real estate sector.”

 

Specifically, lawmakers had called on the president to direct the FTC to issue new regulations defining excessive rent increases and enforce actions against rent gouging, suggestions that are aggressive than what the administration has so far put forth. The letter also asked to have FHFA put in place rent protection for tenants living in properties financed with government-backed mortgage properties, which is more closely aligned with what the president outlined on Wednesday.

 

In Wednesday’s announcement, the administration also sought to rally state and local governments — as well as the private sector — to protect renters.

 

The Wisconsin Housing and Economic Development Authority and Pennsylvania Housing Finance Agency, for instance, have agreed to cap annual rental increases to 5% per year for federal- or state-subsidized affordable housing.

Do you know what will result in even less affordable housing? The government punishing people who choose to build it and rent to marginal renters. If government is going to cap rents and make it impossible to evict deadbeats, landlords will just stop participating in that part of the market.

Nothing spurs activity in a capitalist system like promising to tax the crap out of any profits you might make. This is by design. Biden wants the higher energy prices while putting on a show of disapproval for the idiots who believe him.

Biden has been waging a battle with oil companies over the last few months, but he escalated it in November when he called on them to “act beyond their narrow self-interest,” to “invest in America by increasing production and refining capacity” on behalf of “their consumers, their community and their country.”

 

And if they don’t? Biden warns they’re going to face “a higher tax on their excess profits and … higher restrictions.”

 

The president didn’t elaborate on what those restrictions might be, but promised his administration would work with Congress to evaluate all the available options.

 

“It’s time for these companies to stop war profiteering, meet their responsibilities in this country and give the American people a break,” Biden added.