Big tech has long thought itself above the state. Silicon Valley Bank’s meltdown is stark proof that it isn’t

theguardian.com:

S ilicon Valley Bank (SVB) became one of the 20 largest banks in the US by being the darling of west coast tech startups, but it transpires that it expanded at the expense of managing its exposure to risk.

The bank provided services to more than 2,500 venture capital firms (VCs) – companies that invest in startups with the hope that they’ll achieve long-term growth – and nearly half of the US’s venture-capital-backed technology and life-science companies.

VCs and startups were allowed to keep multimillion-dollar balances with the bank when only $250,000 per account is insured by the federal government. The bank had done virtually nothing to hedge itself against increasing interest rates (even as the whole world anticipated them), and had successfully lobbied Congress for deregulation, reducing its regulatory oversight.

As interest rates increased, investing and running companies became more costly and clients began to withdraw cash. SVB began to look for ways to cover these withdrawals, sold some of its bond portfolio at a loss, and then failed to find a buyer. Its collapse came in the same week as the Signature and Silvergate banks failed, raising concerns that it would lead to a wider run on the banks. There were also concerns that viable businesses would take a hit. Early-stage startups often make virtually no revenue, but use investors’ money, held in their bank accounts, to fund their operations. Beyond the shores of the US, SVB’s UK subsidiary had billions in deposits, again focused in the tech sector. Inevitably, calls came in for someone to step in and do something. In the UK, HSBC bought up SVB UK. HSBC has a strong enough balance sheet to reassure everyone it can absorb SVB and as a result of the purchase has