In a recent episode of “The Problem with Jon Stewart” podcast, Mark Cuban and Sheila Bair discussed the reasons behind SVB’s collapse and the broader implications for the tech industry.
One of the main issues that faced Silicon Valley Bank is the changing landscape of the technology industry. As Bair noted on the podcast, the traditional model of venture capital has shifted, with more funding coming from larger institutional investors rather than individual angel investors. This means that SVB’s niche as a bank that caters specifically to startups is becoming less relevant. Additionally, there are now many more options for startups to obtain funding, including crowdfunding and initial coin offerings (ICOs).
Another factor contributing to SVB’s struggles is its exposure to risky investments. Cuban noted that the bank has a significant amount of its portfolio invested in cryptocurrencies, which are notoriously volatile and unpredictable. Additionally, SVB has invested heavily in real estate, which has also proven to be a risky asset class in recent years. This combination of risky investments and a changing market has left SVB vulnerable to significant losses.
During the podcast, Jon Stewart expressed concern over the role of deregulation in SVB’s potential collapse. Stewart argued that deregulation, particularly in the financial sector, had led to risky investment strategies, putting banks like SVB in a precarious position. Stewart criticized the federal reserve for their lack of oversight and failure to act, stating that “the federal reserve’s job is to step in and prevent this kind of thing from happening.”
Mark Cuban, a well-known entrepreneur and investor, agreed that deregulation was a mistake. Cuban stated that the deregulation and rollback in 2018 led to excessive risk-taking and that banks like SVB had become seemingly too big to fail. However, Cuban also noted that the situation was more complex than just blaming deregulation. Cuban pointed out that SVB had made significant investments in cryptocurrencies and real estate, both of which are risky asset classes.