Rep. Ro Khanna (D-CA) suggested during an interview on Sunday that the Biden administration was not grasping the true scale of how bad the situation is regarding the collapsed Silicon Valley Bank.
Silicon Valley Bank announced a $1.75 billion share sale on Wednesday after the financial institution suffered heavy losses from liquidating a $21 billion bond portfolio, raising concerns among venture capital firms and startups with ties to the company about the safety of their assets. SVB, the 16th-largest bank in the United States and the largest in Silicon Valley, lends to nearly half of publicly traded venture-backed technology and healthcare companies.
The Federal Deposit Insurance Corporation (FDIC) said on Friday that SVB was closed by the California Department of Financial Protection and Innovation. Insured depositors will have access to funds by Monday morning, according to a press release from the government-backed firm, while uninsured depositors can expect an advance dividend in the next week.
Khanna, whose district includes the Silicon Valley Bank’s headquarters, made the remarks during a Sunday interview on CBS News’s “Face The Nation.”
When asked about the Biden administration’s slow response to the crisis, Khanna said, “I think it’s just that right now things move at the speed of Twitter, and the government doesn’t move at that speed.”
“And I think they don’t realize what the problem could be and how fast money is moving and the challenge this could be,” he added.
WATCH:
Democrat Rep. Ro Khanna slams the Biden administration's inaction after the second-largest bank collapse in U.S. history:
"They don't realize what the problem could be and how fast money is moving and the challenge this could be." pic.twitter.com/lTDfsb3v5X
— RNC Research (@RNCResearch) March 12, 2023
TRANSCRIPT:
MARGARET BRENNAN: We’re joined now by Congressman Ro Khanna. He is a Democrat who represents the California District where Silicon Valley Bank was once headquartered. Good to have you here. I wonder what you make of the Treasury Secretary’s remarks, I know you’ve been in contact with the White House with Treasury and with FDIC.
REP. RO KHANNA: I have great respect for Secretary Yellen, but I think we need to have more clarity and greater strength in what Treasury is saying. First, the principle needs to be that all depositors will be protected and have full access to their accounts Monday morning. The–
MARGARET BRENNAN: All depositors meaning those with accounts bigger than $250,000, which is the cut off for insurance right now?
REP. KHANNA: Yes, all of them. There’s precedent for this. Chair Powell when he was at Treasury in 1991, the Bank of New England collapsed, and Chair Powell said that Treasury coordinated with FDIC and with the Fed, and they insured every depositor then. And why did they do it? They didn’t want a regional run on the banks. Here’s what I’m hearing from people in my constituency, they are getting notes to pull out of regional banks, and all of this will be consolidated in the top four banks. We don’t want that as a nation, especially if you’re progressive. The other thing is the payroll companies that are involved, some of them have 400,000, folks. They’re not going to be able to meet payroll, if they don’t have access to the deposits. And then, go ahead–
MARGARET BRENNAN: No, so- so you want- you wanted to hear from the Treasury Secretary a statement that said the U.S. government will guarantee all depositors?
REP. KHANNA: Yes, just- just like they did with the Bank of New England. Now, here’s the thing, it’s not going to cost taxpayers money is- because if you look at the financials of SVB, they have the assets- they have the assets, they don’t have the liquidity. What happened is, they had these long term treasury bonds, and then the Fed hiked interest rates very, very fast, we can debate the wisdom of that. And they were- this was the the cause those- those assets still have value. We need the liquidity. Now there may have been mismanagement, and we could get into that, but right now, the key thing is for the depositors to have access to those accounts.
MARGARET BRENNAN: So the Treasury Secretary also said that acquisitions are an option here. That indicates perhaps a private sector option with another bank or other banks, buying up these- these assets and taking these on. Are you comfortable with that?
REP. KHANNA: Yeah, and that would be the ideal situation. And our delegation that talked to the FDIC last night made that clear. But to have that happen–
MARGARET BRENNAN: Is that what FDIC is working on?
REP. KHANNA: That’s what we urged them to work on. They said they’re working on it. But to have that happen, you need FDIC and Treasury involved, because these assets are not liquid, and they may pay off 10 years from now. I don’t think you’re gonna get a private seller without the Treasury Department and FDIC being actively engaged in helping- helping liquidity with these treasury bonds.
MARGARET BRENNAN: And you know, that’s not happening?
REP. KHANNA: Whether they’re engaged? I think they need to be engaged. They say they’re engaged. But they need to resolve this by Monday morning. And I think the way to resolve it is to say depositors will have access to the accounts. Look, the bargain in our country, from FDR, has always been investors, shareholders lose. I have no sympathy for the executives, no sympathy for people who have stopped there. But the depositors are protected. And let’s talk about who these depositors are. They- they’re not just the payroll companies, these are climate startups. These are startups that are helping cure cancer. These are companies in the wine industry. These are companies that are dealing with AI and defense to keep us ahead of China, 50,000 of them, and they’re employing Americans across the country. And all they’re- they didn’t take risks. They just had their money in a bank, and we’re saying those need to be guaranteed.
MARGARET BRENNAN: Well, the- the President apparently spoke with the governor of California last night. Do you think the President understands the gravity of what you’re laying out here? If you don’t think the Treasury is speaking to this, or that the Fed is- is addressing it?
REP. KHANNA: I think they understand the gravity but they need to take decisive action.
MARGARET BRENNAN: Because time is ticking here. And market’s about to open–
REP. KHANNA: Time is ticking. By Monday morning– and I would just urge them and Chair Powell to look at what he said in his own speech in 2013. And the question I’d ask Chair Powell is, if it was good enough for the Bank of New England, and you understood what was going to happen with a regional run? Look, I think the US banking is secure. I don’t think this is a systemic risk. Here’s what’s going to happen. Every person in these tech companies is getting emailed, pull your money out of the regional banks, put them in the Big Four.
MARGARET BRENNAN: What’s the problem? Is it a is it political will, is it concern that there will be blowback for the administration? I mean, why wouldn’t there be the immediacy? Are you indicating it’s Chair Powell that you know is opposed?
REP. KHANNA: No, I don’t think I think it’s just that right now things move at the speed of Twitter, and the government doesn’t move at that speed. And I think they don’t realize what the problem could be and how fast money is moving and the challenge this could be it there is no systemic risk, but there is a risk on consolidation and by the way progressives should be the most concerned about this and you don’t want banking sector to be JP Morgan, Citibank Bank, of America and Wells Fargo–
MARGARET BRENNAN: Well it may have to be–
REP. KHANNA: Yeah.
MARGARET BRENNAN: –right, is what you’re saying? If the government’s not going to–
REP. KHANNA: That’s going to happen if the government doesn’t doesn’t step up here and it’s not going to cost taxpayers because the assets are there.
MARGARET BRENNAN: The assets are there, so, which is why you’re saying a government bailout is not what you’re talking about–
REP. KHANNA: No.
MARGARET BRENNNAN: –just to be- just to be clear here. You tweeted yesterday that government also needs to investigate short sales by corporate executives that’s betting a stock price is going to go down. Bloomberg also reported that the CEO of SVB bank, Gregory Becker sold $3.6 million of stock the day before the company collapsed. What exactly do you think occurred here?
REP. KHANNA: Well, first of all, we need all the facts. I do think that money should be clawed back and used for places like Silicon Valley Community Center in my district that has money that–
MARGARET BRENNAN: Clawed back from the CEO, who you know?
REP. KHANNA: Clawed back from the CEO who I’ve known. But whether there was something nefarious or not like, you know, 10 B fives where they have to make the sale years before or months, before–
MARGARET BRENNAN: Regulatory filings, I see what you’re saying.
REP. KHANNA: So I don’t want people to jump to conclusions. But I do think all that money should be clawed back and given to the depositors
MARGARET BRENNAN: To the- to the depositors insured or otherwise?
REP. KHANNA: Insured or otherwise.
MARGARET BRENNAN: So what do you think the big picture impact is or could be on on the heart of American innovation? I mean, the tech sector is very important to American competitiveness.
REP. KHANNA: It’s it means that the companies that are looking for cures to cancer, the companies that are doing the climate work, the companies that are keeping us ahead of China on AI and defense technology, all of them are at risk. Some of them will go under, some of them are going to be laying people off, it’s going to mean people aren’t going to be able to make their rent. It- here’s the point. All of the legislation we passed in Congress, the IRA to tackle climate, the chip sector bring semiconductors back, it relies on the innovation pipeline, it relies on the tech pipeline, and that is why this is such an important issue. What is being- what is hurting it is the rapid rise of interest rates, as well as now this systemic risk and it’s going to hurt the innovation pipeline, and it’s going to hurt ordinary people.
MARGARET BRENNAN: Well, we are going to watch carefully what’s happening in your district. Congressman, thank you for coming on and giving us insight. We wish you luck. Thank you.
Ben Zeisloft contributed to this report.
Related: No Bailout For Collapsed Silicon Valley Bank, Yellen Says