In an unexpected move, the U.S. government has recently stepped in to save one of Silicon Valley’s most well known banks. On Wednesday, the Securities and Exchange Commission announced that it is taking the unusual step of using emergency powers granted under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to prevent the collapse of Silicon Valley Bank.
Silicon Valley Bank (SVB) is not only a major lender to venture capital firms, but is also a major lender to high-profile tech companies like Google, Apple, and Facebook. This institution has long been known for its willingness to lend to startup companies even when traditional banks would not make a loan. With the collapse of several startups over the past few years, SVB was struggling to stay afloat despite its success in the tech world.
The SEC’s intervention will reportedly involve the infusion of $500 million of debt capital to be used to stabilize the bank’s balance sheet. The debt will be secured by assets held by SVB and is expected to provide additional liquidity to the bank’s portfolio. The SEC believes the intervention is necessary to protect investors and preserve the stability of the financial system.
In a statement, SEC Commissioner Robert J. Jackson Jr. stated that, “Our intervention here is designed to support Silicon Valley Bank’s mission of providing capital to technology-driven industries. Silicon Valley Bank is essential to the success of the tech economy, but it has recently been hindered by an uncertain operating environment and capital shortages. We are stepping in to ensure that this great banking institution remains open and viable.”
The SEC’s move to save Silicon Valley Bank is a welcome surprise to the tech industry – and a sign of how important SVB is to the success of these companies. While the move may help stabilize SVB in the short-term, it is unclear what the long-term effects will be. Nevertheless, techies and investors alike are thankful that the U.S. government is stepping up to ensure that this key player in the industry does not flounder during a particularly volatile economic time.
