Chokepoint 2.0 Victims: SilverGate, Signature, SVB, & You
“This was just a way to tell people, ‘We don’t want you dealing with crypto,’”
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“This was just a way to tell people, ‘We don’t want you dealing with crypto,’” Frank said in an interview. Frank, a Democrat who served in Congress from 1981 until 2013, coauthored the Dodd-Frank act that boosted government oversight of banks following the 2008 financial crisis.
He was a director at Signature Bank until the New York Division of Financial Services took it over Sunday and gave control of it to the FDIC, the federal agency that insures bank deposits, until the bank can be sold.
Crypto-focused bank Silvergate Capital Corp (SI.N) became the latest casualty of a meltdown in the industry after announcing plans to wind down operations and voluntarily liquidate.
Founded in 1988, Silvergate ventured into crypto in 2013. The bank in December said it would shut its mortgage warehouse business amid rising interest rates and declining mortgage volumes.
Matt Levine sums up the situation well: “When interest rates are low everywhere, a dollar in 20 years is about as good as a dollar today, so a startup whose business model is “we will lose money for a decade building artificial intelligence, and then rake in lots of money in the far future” sounds pretty good. When interest rates are higher, a dollar today is better than a dollar tomorrow, so investors want cash flows. When interest rates were low for a long time, and suddenly become high, all the money that was rushing to your customers is suddenly cut off.”
FBBA Special Notice
Web3 Day At The Capitol May 2nd 2023
The Florida Blockchain Business Association will be hosting its Third Annual Blockchain Day at the Capitol on May 2nd, 2023 in Tallahassee. Stay tuned as more information will be presented in coming news letters. If you are interested in attending please click here and type "Blockchain Day At The Capitol" in the message. This event is limited.
The collapse of Silicon Valley Bank had political leaders in Florida grasping at a variety of topics to explain the bank’s downfall. Rep. Matt Gaetz, a Panhandle Republican, blamed a rapid shift away from technology that grew in use during the pandemic. He made the remarks on podcaster Tim Pool’s show. Gaetz blamed pandemic policies under President Joe Biden, though those started under former President Donald Trump.
“The financial arm of Silicon Valley has just been severed before our very eyes, and I also think that the Biden policies around COVID had something to do with this because it created an investment bubble in Silicon Valley in tech,” he said. “Once we got past those policies, the American people rose up and said we won’t be locked in our homes, we will not have our local retail and our local industry shut down and live our life in our pods getting mail products delivered to us and play on our apps all day.” Gaetz said he won’t support a federal rescue of the bank.
“If there is an effort to use taxpayer money to bail out Silicon Valley Bank, the American people can count on the fact that I will be there leading the fight against such a bailout,” he said. Rep. Cory Mills, a Winter Park Republican, also opposed the use of U.S. taxpayer dollars to help the bank. Gov. Ron DeSantis, meanwhile, blamed investment in diversity, equity and inclusion (DEI) programs.
“I mean, this bank, they’re so concerned with DEI and politics and all kinds of stuff. I think that really diverted from them focusing on their core mission,” DeSantis contended. Rep. Maxwell Frost noted that when the Governor served in the House, he voted to ease regulations on banks. “When Gov. DeSantis was in Congress, he voted to ease and lessen regulations for regional banks,” he said. “Now he wants to blame the SVB Financial collapse on Diversity, Equity and Inclusion?” Frost tweeted.
Rep. Jared Moskowitz, a Parkland Democrat, also questioned the motives of such criticisms. “We're really only moments away from them (Republicans) telling us wokeness killed the dinosaurs,” Moskowitz told MSNBC host Medhi Hassan. Florida is among 26 public pension funds invested in part in the SVB Financial Group. That makes any potential response consequential both to the national economy and the state government.
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