Billionaire Mark Cuban’s portfolio of companies was among many companies (particularly those in the technology sector), investors and lenders affected by the March 10 closing of Silicon Valley Bank.
Cuban took to Twitter in a long thread to express his thoughts on the bank’s collapse and what he believes should be enforced as a solution, which is the Federal Reserve stepping in.
Related: “Everyone’s Crazy.” What’s going on with Silicon Valley Bank? Federal government takes control.
5. The Fed should IMMEDIATELY buy all the securities/debt the bank owns at par, which should be enough to cover most of the deposits. All losses are paid in equity and new debt from the new bank or whoever buys it. The Fed knew this was a risk. They should own it
— Mark Cuban (@mcuban) March 11, 2023
“The Fed should IMMEDIATELY buy all the securities/debt the bank owns at par, which should be enough to cover most of the deposits,” he said. “All losses will be paid in equity and new debt from the new bank or whoever buys it. The Fed knew this was a risk. They should own it.”
Cuban clarified that this would not be the same as a “bailout,” and that this action would result in the agency “providing funds to end the run, and in return receiving long-term assets that will be paid at maturity, and for the risky assets, should also yield a positive return”, noting that SVB’s problem was not that it was buying failing assets.
The ‘Shark Tank’ star estimated he has about $8-$10 million in SVB from the companies in his portfolio and said he had the opportunity to “help them,” while also noting that none of his personal funds managed through the bank.
The tragedy of SVB is that it is not the rich who take the hit. These are the thousands of companies that borrowed from the SVB and had to keep their money with the SVB. Those entrepreneurs and their employees and suppliers feel the pain. And they are the ones the Fed should be protecting
— Mark Cuban (@mcuban) March 11, 2023
Cuban later took one Twitter space to discuss the matter further, revealing that his drug company CostPlusDrugs.com had run about $3.1 million through SVB.
“We scramble and open accounts and stay up late talking to bankers to open accounts at other banks,” he said. “And you know, I write checks first thing on Monday morning, to make sure the payroll is getting paid and, you know, because this CostPlus Drugs.com is my baby.”
Late Sunday, the U.S. Treasury Department, the U.S. Federal Reserve and the Federal Deposit Insurance Corporation released a joint statement that they would jointly allow all SVB depositors access to their funds, despite Friday’s collapse.
“Today we are taking decisive action to protect the US economy by strengthening public confidence in our banking system,” it reads. joint statement read. “This move will ensure that the U.S. banking system continues to fulfill its vital role of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.”
This follows the FDIC’s decision on Friday to take over SVB, which only covered depositors with funds of up to $250,000 in insured funds that were significantly less than what most had deposited, let alone those who were uninsured.
Access to funds went into effect Monday morning and it was noted that US taxpayers would not help fund the situation. However, shareholders and unsecured debt holders were not protected.
