Mark Cuban called on the Federal Reserve to step in and buy Silicon Valley Bank’s debt ‘to end the run’
Silicon Valley Bank #SiliconValleyBank
Mark Cuban called for Fed action on SVB.John Lamparski/Getty Images
Mark Cuban pleaded with the Federal Reserve to buy the debt of SVB Financial Group.
The “Shark Tank” investor said failure to do so would affect confidence in the financial sector.
Investor Bill Ackman called Friday for a “highly dilutive” government bailout of SVB.
Billionaire investor Mark Cuban has pleaded with the Federal Reserve to step in and buy Silicon Valley Bank’s debt to save thousands of startups and prevent banking contagion.
SVB was shut down by regulators Friday after a $2.1 billion stock sale failed following a $1.8 billion loss on a fixed-bond offering.
In a Twitter thread, “Shark Tank” star Cuban called on the Fed to step in and buy any debt belonging to SVB to prevent a run on deposits.
“The Fed should IMMEDIATELY buy all the securities/debt the bank owns at near par, which should be enough to cover most deposits. Any losses paid for in equity and new debt from the new bank or whoever buys it. The Fed knew this was a risk. They should own it,” he wrote.
Cuban added that if the Fed didn’t act, trust in the banking system would become an issue.
SVB’s collapse is one of the most significant events in the sector since the 2007/08 global financial crisis.
The bank fell victim to the rapid rise in interest rates in the past 12 months, which hurt SVB’s bond offering. Meanwhile, higher rates have hamstrung fundraising attempts among its startup customer base, sparking withdrawals.
The lender had funded nearly half of US startups, according to its website.
Cuban’s tweet added to calls from Bill Ackman for the US government to commit to a “highly dilutive” bailout of the failed bank to prevent a domino effect on the rest of the banking sector.
Cuban said a Fed purchase of SVB debt wouldn’t constitute a bailout.
“The Fed effectively is providing cash to end the run, and in return getting long-dated assets that will pay at maturity, and for the risk assets, should offer some positive return as well,” he tweeted. “SVB didn’t buy failing assets. No run, and they survive.”
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In a later tweet, Cuban said the Fed should be mindful of the thousands of companies that borrowed from SVB and were required to keep their cash with it.
“Those entrepreneurs and their employees and vendors are feeling the pain. And they are who the Fed should protect,” he wrote.
Cuban added in another tweet: “And for the record I have zero personal funds there , although several of my portfolio companies do. Probably all in about 8 to 10m dollars. So I can help them. But it’s the other 200b and how many employees and vendors ? I’m concerned about them.”
Read the original article on Business Insider