'Silicon Valley tech cronyism in its ugliest form': Indian-origin US presidential candidate Vivek Ramaswamy slams ‘special treatment’ for SVB

Indian-American entrepreneur Vivek Ramaswamy made headlines recently when he announced his bid for the US presidential elections in 2024. However, he has also been in the news for his opinions on the recent collapse of Silicon Valley Bank (SVB) and its subsequent bailout by the American government.

Ramaswamy, who is a US presidential candidate from the Grand Old Party (GOP), criticised the bailout as an example of crony capitalism and argued that any regulatory change should be applicable to all, not just a select few. In a tweet, he stated that if the Federal Deposit Insurance Corporation (FDIC) wanted to raise the deposit insurance limit above $250,000, it should do so prospectively for all.

“Don’t retroactively change the rules on the fly after the fact, especially for SVB which itself lobbied for years for loose risk limits claiming it wasn’t systemically important,” Ramaswamy tweeted.

“Would Biden have bailed out the uninsured depositors of a no-name oil-&-gas bank in Oklahoma? Absolutely not. Silicon Valley tech cronyism in its ugliest form,” he added.

Furthermore, Ramaswamy criticised start-ups that had deposited large sums of money with SVB, calling it an "irresponsible" decision. SVB, a subsidiary of SVB Financial Group, was shut down by the California Department of Financial Protection and Innovation on March 10 after depositors rushed to withdraw their funds.

“History will not look kindly on the Silicon Valley Bailout,” Ramaswamy said in another tweet.

Ramaswamy also talked about how there is an alliance between wokeness and cronyism.

“It’s a key part of how the game is played. Same reason that Silicon Valley Bank made a crazy $5 *billion* commitment to “sustainable finance” for a “healthier planet” last year. If you wonder why Silicon Valley got a special bailout, wake up,” he said.

The Treasury Department, Federal Reserve, and FDIC announced on March 12 that all SVB clients would be protected and able to access their money. They also unveiled measures to protect customers and prevent additional bank runs.

As of today, the FDIC transferred all deposits, insured and uninsured, and assets of the former SVB to a newly created bridge bank. This move aimed to protect all depositors of SVB.

Also read: FDIC takes control of collapsed Silicon Valley Bank, retains employees for 45 days at 1.5x salary

Collapse felt worldwide

The collapse of Silicon Valley Bank has sent shockwaves throughout the tech start-up world, with entrepreneurs in Europe and Asia now feeling the impact of the bank's demise.

It all started when California-based start-ups began pulling money out of the troubled bank, causing a ripple effect that quickly spread across the globe. As news of the bank's collapse began to emerge, tech start-ups in other parts of the world woke up to the reality that they too had been relying on Silicon Valley Bank for their day-to-day operations.

"Around 90 per cent of our cash was in SVB," said Sam Franklin, 28, a London-based chief executive whose recruitment firm Otta specialises in tech talent. He ditched weekend "life admin" to figure out how to pay his employees at the end of the month.

In Hong Kong, Florian Simmendinger, co-founder and CEO of Hong Kong wearable company Soundbrenner, missed the start of the panic in California over SVB Financial Group last week, but he caught on quickly.

For many tech start-ups, Silicon Valley Bank was more than just a financial institution. It was a symbol of the tech industry's success and innovation, and its name carried a certain cachet that appealed to entrepreneurs around the world. The bank's specialised financial services were also a major draw for start-ups that needed tailored financial solutions to help them grow and succeed.

Now that the bank has collapsed, many tech start-ups are scrambling to find alternative financial services. Some are turning to traditional banks, while others are exploring new fintech startups that offer innovative financial solutions tailored specifically to the needs of tech start-ups.

(With Agency inputs)

Also read: Silicon Valley Bank fallout: Nazara Technologies' subsidiaries hold Rs 64 crore in cash at collapsed lender