After much worry and concern following the sudden collapse of Silicon Valley Bank, one local lawmaker is taking proactive steps to try and ensure such an event does not happen again. Congressman Ro Khanna recently held discussions with business leaders and nonprofit organizations in Santa Clara to go over his proposed legislation that helps protect all account holders by requiring banks to pay a higher premium to the Federal Deposit Insurance Corporation (FDIC). It aims to ensure the FDIC can meet its obligations in the case of another such collapse in the future.
The news of SVB’s failure understandably caused a wave of panic among thousands of businesses and organizations, many of whom found themselves in a difficult situation trying to cover payroll and other costs. The Federal Reserve Board, however, came to the rescue, indicating that all customers could access their money within three days, including those with funds higher than $250,000. The large turnout of customers outside of Silicon Valley Bank post-collapse was a reminder of just how much was at stake.
The proposed legislation also garnered support from tech startups and climate-tech businesses, who are already under pressure from venture capitalists when getting investments. Austin Sendek, co-founder of Aionics Inc., pointed out how essential these banks are for the success of such businesses, stating that cover for their funds across the board is necessary for the survival of climate-tech startups. Marie Bernard, CEO of nonprofit Sunnyvale Community Services, echoed these sentiments, highlighting her concerns about the organization’s current loan taken out to cover their new office in the event of an unsuccessful refinance.
Congressman Khanna emphasized that any bailout money would be going to small businesses, nonprofits and tech startups specifically, rather than just the elite or wealthy in Silicon Valley. It is his hope that, with the support of both parties, the trust between account holders and banks is maintained and the possibility of a similar event is eliminated.
Silicon Valley Bank (SVB) was founded in 1983 and has since grown to a reputation of being a leading provider of venture capital banking services and innovative financing solutions in the technology and life science sectors. As of March 2020, SVB held approximately $209 billion in assets and was the second largest US bank to fail in history.
Congressman Ro Khanna, representing the 17th congressional district in California, was first elected to the House of Representatives in 2016 and has since been an advocate for progressive causes, including fighting for more strong regulations for the U.S. banking industry. He is exploring legislation to better protect all account holders from a similarly catastrophic event and is currently trying to secure bipartisan support for his proposal.
