After Credit Suisse fell victim to a social media storm last fall, a new one is brewing which is now generating chatter about another Lehman moment. Industry and regulators alike appear powerless to stop it.
«Most people don't realize how crucial Silicon Valley Bank is. Billions of dollars in venture debt. Untold amounts of warrants and convertible notes in early-stage firms. If SVB fails, this could be the Lehman moment for the startup world,» mused the «Peruvian Bull» on Twitter at the end of last week.
The warning of bankruptcy similar to that of the American investment bank Lehman Brothers in 2007, which ignited the financial crisis, was also featured by «CNBC».
Credit Suisse Withdrawals
For now, the danger of contagion emanating from Silicon Valley Bank seems to have been averted. The institution, which made a name for itself as the financier of the tech mecca in California, has been placed under regulatory supervision. The Fed, along with the Treasury Department and the deposit insurance industry, said Sunday both insured and uninsured deposits at the institution would be fully protected.
To be sure, that is a powerful signal, but a conventional one. Will it be enough to stop the murmurs and scaremongering on social media?
A social media storm played havoc with Credit Suisse last fall when wealthy private clients, to a large extent outside of Switzerland, moved their holdings to safety with competitors. Within a few weeks, over 80 billion francs ($86.9 billion) flowed out of the bank with Twitter & Co recognized as clear drivers of the withdrawals.
One can understand if that raises the question of whether the same can happen to another institution.
Elon Musk Takeover?
As finews.com reported at the time, banks and regulators alike are relatively powerless in the face of such a phenomenon. That the industry has a social media problem is now recognized not only by communications professionals. Andreas Dombret, a former bank manager and central banker warned in an essay on «Financial News» (behind paywall) the «Twitterati» could spread panic and that the bankruptcy of Silicon Valley Bank could lead to a banking crisis after all.
Tesla CEO and Twitter owner Elon Musk openly speculated about taking over Silicon Valley Bank with the hope of forming a digital finance group out of Twitter. Musk naturally expressed his interest in the bankrupt company on Twitter.
