Silicon Valley Bank's demise impacts SF Housing projects
SANTA CLARA - The stress of Silicon Valley Bank's sudden collapse was clear Monday, as a long line of clients lined up to get cash from the Santa Clara headquarters.
"We still owe a lot of money to people we have hired, and I'm here for them actually, not myself right now," said Sangeeta Dey, a Silicon Valley Bank customer who was waiting in the line.
After Friday's FDIC takeover, the U.S. Treasury Department and Federal Reserve were quick to step in, announcing that all of SVB's $200 billion dollar assets would be sold off and clients eventually would receive all of their deposits, even for clients whose balance exceeds the $250,000 FDIC insurance limit.
That goes for Signature Bank in New York with $110 billion in assets, which also failed on Sunday.
"Americans can have confidence that the banking system is safe. Your deposits will be there when you need them," said President Biden, who also joined others in calling for an investigation and transparency.
"We must get the full accounting of what happened and why," said President Biden.
The fallout has created payroll problems and challenges that go beyond the tech sector, venture capital and startups which made up a large portion of SVB's clients.
In San Francisco, four major affordable housing projects are financed with SVB loans. Now, those are on hold.
"Underwriting is a lengthy process. And as you know, we've all heard affordable housing delays mean more money," said Anne Stanley, a spokesperson for the Mayor's Office of Housing and Community Development.
One of the projects at 234 Van Ness was scheduled to receive final confirmation on a loan from SVB last Friday, the same day that SVB collapsed. City officials hope other banks will assume SVB's loans...but are scrambling to avoid delays.
"We're trying to make sure that we can help and you know whether it's providing gap financing through the city to get them through this hard time," said Stanley.
Stanford Professor of Finance And Economics, Anat AdmatI, at the says SVB officials and regulators are to blame.
SEE ALSO: Silicon Valley Bank crisis: Feds move in to help
'The question is who's going to make sure you don't take too much risk relative to the equity that you have," said Admati.
SVB's chief risk officer reportedly left the bank in October last year and wasn't replaced until this January.
"They should monitor the funding mix. How much equity and how much debt they have," said Professor Admati, "If you have enough equity then you can take risk with it, because the risk is the shareholders."
Professor Admati voiced some concern over the bank collapses spreading.
"What you might have at other banks is there are more losses than the system is recognizing and that should be dealt with before another disaster comes," said Admati.
President Biden says taxpayers will not pay for the losses. Instead, funds will come from the Federal Deposit Insurance Company which collects fees from banks.