Silicon Valley Bank has been funding Silicon Valley innovation for decades. With a total valuation of more than $200 billion, the bank collapsed on Friday after running out of money from huge losses in its bond portfolio and with venture capital drying up.
"This is a seismic shock into the Bay Area economy," Johnson said. "If all these companies are limited to deposit insurance of $250,000, you are going to see a collapse of a generation of startups here in Silicon Valley."
Johnson says the FDIC has tremendous powers to come up with emergency solutions. He says the FDIC is actively trying to sell pieces of bank's businesses and other assets this weekend, hoping to generate liquidity, so companies can get their deposits out. But Johnson adds, the FDIC has to tread carefully.
"I think it's hard to get a national consensus on rescuing Silicon Valley and Californians. The East Coast media is blaming technology on crypto. People in the middle of the country are mad at the wealth they perceive, that Californians took all this risk with their Silicon Valley Bank," Johnson said.However, he says there is still the potential of an even greater risk if the contagion spreads to other regional or smaller banks, come Monday.
"I trust that Governor Newsom, and that Janet Yellen, and the FDIC and the White House, can recognize what a big problem this could be, and step in with the right solutions," says Johnson. "This is a big bank. It's a big failure. And it's a big problem. But the solution is going to have to be clever and it's going to have to be fast."
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