Tech libertarians who want nothing to do with the government changed their tune big time when it came to Silicon Valley Bank’s epic collapse

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Many tech and Wall Street luminaries with long track records of championing small government sang a different tune in recent days amid the meltdown of Silicon Valley Bank, the second-largest bank failure in history.

Instead of calling for the government to stay away, as they typically do on Twitter and in public statements, they demanded that the government intervene in a big way.  

“Where is Powell? Where is Yellen?” David Sacks, a Silicon Valley conservative who co-founded PayPal and is now a tech investor, tweeted on Friday. “Stop this crisis NOW. Announce that all depositors will be safe. Place SVB with a Top 4 bank. Do this before Monday open or there will be contagion and the crisis will spread.”

The tech and venture capital circles were jolted by the meltdown of 40-year old Silicon Valley Bank last week. Startup founders and investors were on edge over how rapidly it snowballed until the Federal Deposit Insurance Corporation seized SVB’s assets on Friday. 

Techies and investors stood to lose a lot. Without a bank bailout, or a raising of the federal insurance limit on customer accounts from $250,000, most Silicon Valley Bank’s clients would lose money. That included many of the startups the techies and investors had plowed millions of dollars into. Without government intervention, many of those companies would have trouble staying afloat, or at least with paying their workers and other bills over the near term. 

So prominent advocates of small government and minimal regulation loudly urged the very same government and regulators to save SVB’s sinking ship.

Bill Ackman, chief of hedge fund Pershing Square Capital Management and an advocate of self-regulation in the crypto industry who has resisted regulations at his investment fund, was among the earliest investors to sound an alarm on Thursday. He is a registered Democrat but has pushed back against what he describes as excessive government regulation and, in 2016, said he was “extremely bullish” about then-Republican presidential candidate Donald Trump. He argued that the fallout of SVB’s collapse could “destroy a long-term driver of the economy” since many venture backed companies had their money parked at SVB. He also said the government should consider a bailout or guarantee all deposits, and that regulatory intervention would be important to avert a larger banking crisis.

The risk of failure and deposit losses here is that the next, least well-capitalized bank faces a run and fails and the dominoes continue to fall. That is why gov’t intervention should be considered.

— Bill Ackman (@BillAckman) March 10, 2023

The about face by the tech and investment luminaries didn’t go unnoticed. In response to the urgent tweets by Sacks for regulators to come to the rescue, one user said, incredulously: “Excuse me, sir. Suddenly the government is the answer?!?”

Silicon Valley has long been home to a strain of tech libertarianism. Top executives frequently push back against regulations in favor of letting the market decide, arguing that doing otherwise hurts innovation. In recent years, that’s been the case with topics like antitrust, privacy and safety. While the back-and-forth between lawmakers and tech experts is ongoing, the SVB meltdown highlights how when there is a dire need to rescue, Silicon Valley is more than willing to let regulators step in. 

By Sunday evening, the federal government announced it would guarantee the deposits of all SVB depositors, irrespective of the amount, marking a major departure from the norm. 

The relief from investors was palpable thereafter. Ackman said the government “did the right thing.” Meanwhile, Sacks shared a line from the regulators’ press release and said: “And just like that, crisis averted. So easy to do and so unnecessary to ever have this outcome in doubt.” 

“Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

And just like that, crisis averted. So easy to do and so unnecessary to ever have this outcome in doubt.…

— David Sacks (@DavidSacks) March 12, 2023

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