Two weeks after Silicon Valley Bank’s catastrophic collapse abruptly left thousands of businesses reeling, one lawmaker is exploring legislation to ensure it doesn’t happen again. U.S. Representative Ro Khanna has proposed a bill that would require banks to pay higher premiums to the Federal Deposit Insurance Corporation (FDIC). These premiums would protect deposits that exceed the current $250,000 insurance cap, creating a fund to insure account holders in the event of another collapse.
Khanna’s proposal is designed to protect the tech businesses, nonprofits, and startups that could otherwise be at risk. “I think (this legislation) is promising if I can get a Republican to sign on,” Khanna told San Jose Spotlight. “Right now you basically have large accounts acting as uninsured drivers. The government ends up covering them if they fail, but they’re not paying for the insurance beyond $250,000, so we need to have some fees and some insurance.”
The sudden closure of Silicon Valley Bank on March 10th sent shockwaves through the valley as companies and individuals began to realize the implications of not having access to their funds. To restore trust in the banking system, the Federal Reserve Board announced that all account holders, including those over the FDIC insurance cap, would have access to their money within the next few days.
The repercussions of the collapse are still being felt in Silicon Valley. Marie Bernard, CEO of homeless prevention organization Sunnyvale Community Services, is worried about their loan taken out to pay for their new office space. Austin Sendek, co-founder and CEO of climate-tech startup Aionics Inc., is concerned about the difficulty of receiving investments for companies in technology fields deemed “risky”. Nico Pinkowski, CEO of Nitricity Inc., a startup that creates nitrogen fertilizer from water, air, and solar, is anxious about the trust lost in regional banks.
Khanna answered criticism that the government’s efforts are created to aid billionaires by reminding people that his bill is designed to help small businesses, nonprofits, and startups. “These were climate tech startups. These were startups at biotech. And these were a lot of organizations that were actually serving the community.”
The effects of the Silicon Valley Bank collapse may be prominent, but with Khanna’s proposed bill, small businesses, nonprofits, and startups may soon have the protection they need to safeguard their funds.
Silicon Valley Bank is a tech-centric commercial bank in the San Francisco Bay Area that serves over 6 million people. It was founded in 1983 with a mission to serve the innovators in the Bay Area. It offers a wide range of services and resources that include lending, leasing, wealth management, and technology services. In 2021, prior to its collapse, the Silicon Valley Bank was the 10th largest bank in the United States, providing customers access to more than $209 billion in assets.
Ro Khanna is a Congressman in California’s 17th district who is serving his second term. He serves on the House Budget Committee, the Education and Labor Committee, the Science and Technology Committee and the Oversight and Reform Committee. Khanna has focused his attention on issues such as technology and climate change. He is also committed to ending gun violence and reducing income inequality. By pushing for legislation to help protect deposits of businesses located in Silicon Valley, he is hoping to secure the economic viability of the region and those living and working in it.
