Tech libertarians changed their tune when SVB collapsed

Many tech and Wall Street luminaries with a long track record of championing small government have been singing a different tune in recent days amid the collapse of Silicon Valley Bankthe second largest bank failure in history.

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

“Where’s Powell? Where is Yellen?” + David Sacks, a conservative Silicon Valley founder PayPal and now a tech investor, tweeted at Friday. “Stop this crisis TODAY. Let all depositors know that they are safe. Place SVB with Top 4 bank. Do it before Monday opens or there will be a contagion and the crisis will spread. “

Tech and venture capital circles were devastated by the collapse of the 40-year-old Silicon Valley Bank last week. The founders and investors of the startup on the edge how fast it snowballed all the way to the Federal Deposit Insurance Corporation seized SVB properties on Friday.

Techies and investors lost a lot. Without a bank bailout, or raising the federal insurance limit on customer accounts from $250,000, most Silicon Valley Bank clients will lose money. That includes many startups that techies and investors have plowed into millions of dollars. Without government intervention, many of the companies will have trouble staying afloat, or at least paying their workers and other bills in the near term.

That’s why prominent advocates of small government and less regulation are vociferously urging both government and regulators to save the sinking ship of SVB.

Bill Ackman, head of the hedge fund Pershing Square Capital Management and a promoter of self regulation in the crypto industry with defied the regulations in his investment fund, was one of the first investors to sound an alarm on Thursday. He is a registered Democrat but has pushed back against what he described as excessive government regulation and, in 2016, said he “very strong” about Republican presidential candidate Donald Trump. He argued that the fall of SVB’s collapse could “destroy a long-term driver of the economy” as many venture-backed companies park their money in SVB. He also said that the government should consider a bailout or guarantee of all deposits, and that regulatory intervention will be important to avoid a greater banking crisis.

The face share of tech and investment luminaries has not gone unnoticed. In response to Sacks’ urgent tweets for regulators to help, one said the user, in disbelief: “I’m sorry, sir. Suddenly the government is the answer?!?”

Silicon Valley has long been home to a kind of tech libertarianism. Top executives have often pushed against regulations in favor of letting the market decide, arguing that doing otherwise would harm innovation. on recent years, that’s what happened with topics like antitrust, privacy and safety. As the back-and-forth between lawmakers and tech experts continues, the SVB meltdown highlights how when there’s a dire need for a rescue, Silicon Valley is more than willing to let regulators step in.

On Sunday night, the federal government announced that it will guarantee the deposits of all SVB depositorswhatever the value, marks a major departure from the norm.

The relief from the investors was evident afterwards. Ackman said the government is “doing the right thing.” Meanwhile, Sacks shared a line from the regulators’ press release and said: “And just like that, the crisis was averted. It’s very easy to do and it shouldn’t have this outcome of doubt.”

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