Mark Cuban, the mercurial Jewish billionaire, is one of many people in danger of losing large sums of money after, on Friday, Silicon Valley Bank (SVB) collapsed in what was described as the largest failure of a US bank since Washington Mutual in 2008 and the Federal government was forced to take over. Mark Cuban has as much as $10 million in funds deposited with SVB, but these are not his personal funds and belong to several of his portfolio firms.
And so, Mark Cuban is pushing the US Federal Reserve to take stronger action, and not just for his own sake. “The Fed should IMMEDIATELY buy all the securities/debt the bank owns at near par, which should be enough to cover most deposits,” Cuban tweeted. “Any losses paid for in equity and new debt from the new bank or whoever buys it. The Fed knew this was a risk. They should own it.”
In the U.S., depositors are insured by the Federal FDIC program for up to $250,000. Federal authorities pledged that all such deposits will be secured and small depositors will get all of their money back, while it is working on how to disperse the bank’s funds to larger depositors. Some companies have hundreds of millions deposited in SVB. But investors who hold stock in the bank will lose a fortune.
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Mark Cuban also said that he expects to be reimbursed on his “Advanced Dividends” writing, “The FDIC says they will pay one within a week. The amount is based on what they feel will be the percentage of recovery from SVB assets. Hopefully, given the quality of the assets, this will be more than 50 pct this week.”
The owner of the NBA’s Dallas Mavericks also expressed concern for the little guy who could lose his shirt.
“The tragedy of SVB,” explained Mark Cuban, “is that it’s not the wealthy taking the hit. It’s the thousands of companies who borrowed from SVB and were required to keep their cash in SVB. Those entrepreneurs and their employees and vendors are feeling the pain. And they are who the Fed should protect.”
Mark Cuban went on to ask “Where were regulators?” He said that they were supposed to watch and warn people about things like this.
Speculating on who may have known about what was happening at SVB before it was too late, Mark Cuban asked, “Can’t wait to see how many people yanked their money, told others to, and shorted the stock.”
Mark Cuban also said that the Fed’s intervention is not a bailout but that the “Fed effectively is providing cash to end the run, and in return getting long dated assets that will pay at maturity, and for the risk assets , should offer some positive return as well. SVB didn’t buy failing assets. No run, and they survive.”