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Global Financial Crisis: From Wine Country to London, Bank Failure Rattles The World

by Gabriel Martinez
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Last Friday, Silicon Valley Bank closed its doors which has caused lots of problems. From California winemakers to businesses overseas, people are trying to figure out what to do without this bank’s help. It also means that their employees might have trouble getting paid on time. So now many companies and workers around the world are in distress because of this bank’s sudden closure.

California’s Governor, Gavin Newsom, said he is speaking with the White House to help protect jobs and people’s livelihoods. He wants to make sure that businesses that have been important for the economy are safe.

The government also has insurance protection plans so if someone has less than $250,000 in a bank account they will be covered. Authorities are trying to find somebody who can replace the bank so people with more money will also be ok.

Circle is a major business in the cryptocurrency market who oversees around $3.3 billion from a total of $40 billion saved up for their USD Coin (USDC). This caused the USDC’s value to suddenly drop below 87 cents on Saturday, despite it usually being one dollar. However, it quickly jumped back to above 97 cents later on according to CoinDesk.

On the other side of the ocean, some businesses got a huge shock on Saturday morning. They knew that Silicon Valley Bank UK will no longer allow people to make payments or deposits through them. The British government declared that this bank has become insolvent and they stated that it will provide up to 170,000 pounds for joint accounts as fast as possible.

Lots of businesses and investors have a big investment with the SVB UK. Dom Hallas, the leader of an organisation that works with British Startups stated that there is now ‘concern and panic’ among them. The Bank of England declared that in order to pay off all people who are owed money, the assets belonging to SVB UK will be sold.

The consequences of a bank’s collapse are affecting an important industry in California – fine wines. This failing bank has been offering aid to wineries since the 1990s, and this sudden shift away from their help is not something any of them expected.

Jasmine Hirsch, the general manager of Hirsch Vineyards in Sonoma County remarked: “This is really bad news”.

Hirsch said her business should be okay. She is more worried about the other companies such as small winemakers who need money to plant new vines. According to Hirsch, these people are experienced in the wine industry and the closing of this big bank will have a negative effect on them since now interest rates have gone up.

Yesterday, the CEO of Shelf Engine in Seattle Stefan Kalb had to attend some very important meetings about making sure the workers get paid, instead of looking after normal business activities.

He said that to run the business and pay everyone, they’ve put all their money into Silicon Valley Bank which is a lot of millions of dollars.

He is asking for $250,000 from somewhere in order to keep paying the salary of Shelf Engine’s forty workers. If he does not get enough money, he might have to take away workers’ jobs until the problem gets fixed.

Kalb said that he is hoping someone will buy the bank soon and save them from this dilemma.

Tara Fung is the leader of a tech organization called Co:Create that helps people create digital loyalty and rewards programs. This company works with many different banks, such as Silicon Valley Bank, so that it can easily pay its workers and vendors on Fridays.

Fung’s company chose Silicon Valley Bank as its partner because they are the best at helping tech companies and managing banking. She was sad to see people celebrating when it failed, since it wasn’t really related to cryptocurrency ventures. One of these depositors that pulled their money out quickly was Confirm.com from San Francisco.

Confirm’s co-founder, David Murray, knew they had to take their money out of the bank after one of their investors emailed them telling them to do it “right away.” But this caused a lot of people to want to pull out their cash too, which led to the bank failing.

Murray thinks that most founders felt like taking their money out was the best way to stay safe – and everyone did it which started the ‘bank run’.

Martín Varsavsky, a businessman from Argentina with investments in the tech world and Silicon Valley, says that the U.S. government must act quickly to prevent more harm.

One of Martín’s companies, Overture Life, has around $1.5 million saved in a troubled bank; however, they can still pay their workers since they have money stored somewhere else.

Many businesses keep their money in Silicon Valley Bank, but they need access to a bigger amount than the one protected by the FDIC. Varsavsky believes that if the government allows them to withdraw at least half of the cash stored in Silicon Valley Bank next week, everything will be OK. But without this permission, it could cause huge disaster because many companies won’t have enough money to pay their staff.

Andrew Alexander is a calculus teacher at a high school in San Francisco that gets their money from Silicon Valley Bank. He isn’t too worried because he won’t get his paycheck for two more weeks and he believes the problems will be solved by then. But, he’s concerned about his friends who work in the technology industry connected with Silicon Valley.

Alexander said “I have a lot of friends in the startup world who are feeling really scared and worried right now. It’s a difficult situation for them.”

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