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business. Bank of America n a

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copyright twenty twenty three.

0:17

This is Planet Money from NPR.

0:23

In the nineteen seventies, professional orchestras

0:25

started holding blind auditions.

0:28

So if you're a young cellist or whatever,

0:30

you'd play your audition behind a curtain or

0:32

a screen so that theoretically, the

0:34

hiring people would evaluate you

0:36

solely on your musical ability. I

0:39

mentioned this because it sounds a lot

0:41

like the thing that Ibemasood wanted

0:43

to build just instead of evaluating

0:45

cellists, she wanted to evaluate software

0:48

developers. The idea is that, you know,

0:50

could we use like your existing

0:52

work to really, like, determine

0:55

your overall quality of code and your overall

0:58

quality of work. And so that was the research

1:00

that I was doing. And I felt very strongly about this

1:02

too because I'd never, you know, had the pedigree

1:05

that most Silicon Valley founders

1:08

have, frankly. IBA grew up in

1:10

the UAE and Pakistan, where her families

1:12

from. She was the first in her family to

1:14

finish college. And this kind

1:16

of software developer evaluation

1:19

idea if it earned her a last

1:21

second interview at maybe the most

1:23

prestigious incubator in Silicon Valley,

1:25

a program called y combinator

1:27

or y c. So she and her cofounder,

1:30

they scramble get flights to the US,

1:31

they go to the interview, they

1:33

leave the interview, and wait. We're

1:35

actually we're at the mall because we're

1:38

buying five dollars shirts from Old

1:40

Navy that say California because I'm like,

1:42

hey, if nothing, I can at least sell these shirts

1:44

back home to make some money. Very smart.

1:47

And that's when we get the phone call that

1:49

we got into IC.

1:50

This was a huge

1:52

deal. It meant Iba would get mentoring

1:54

from important people and start up lectures

1:56

from experts and seed

1:58

money for her new

2:00

company. It was a hundred and twenty thousand

2:02

dollars and I remember

2:04

just crying, like, it

2:06

was just It

2:09

felt like life changing money anyway.

2:11

So we had a really short period of time to open

2:13

a bank account and do everything.

2:15

Everybody at Y Combinator told IBA

2:17

there was this one bank that deals with this

2:19

all the time, Silicon Valley

2:21

Bank. So

2:22

we went to SVB, we

2:24

opened up the bank account, and

2:26

I just remember, like, we were so happy.

2:28

Like, we were really elated just at

2:30

the fact that we had this

2:32

business entity in

2:34

America because it just seemed so impossible.

2:37

Now this, of course, was the moment

2:39

that would eventually drag Ibe Masood

2:41

and her company, Tara AI, into

2:44

the second biggest bank failure

2:46

in US history. It

2:48

is worth mentioning, though, that before

2:50

starting this startup, IBA had

2:52

been working as a financial and

2:55

risk

2:55

analyst. Anything about Silicon

2:57

Valley Bank that, like, raised a flag for you

2:59

or anything like So

3:01

I'm someone that is you

3:04

know, my day to day is really involved in

3:06

product development, in

3:08

interviews, in hiring, in

3:10

supporting our team, and I've

3:14

never had the time to

3:16

pour through liquidity ratios for

3:18

SVB or to look at their

3:20

financials deeply I mean,

3:22

it's just not a priority. Yeah. Plus,

3:24

she says, this was the United States.

3:27

Why would she need to worry about an

3:29

entire bank collapsing? And maybe

3:32

pulling her entire industry down

3:34

with it. Hello,

3:36

and welcome to Planet Money. I'm Kenny Malone,

3:39

and Sometimes you hear these stories about

3:41

an airplane that suddenly knows

3:43

dives. Everybody on board thinks

3:45

this is it. And then it levels out

3:47

and everything is fine. Well, an entire

3:50

industry just went through that.

3:52

For about seventy two hours, Ibemasood

3:54

along with a huge chunk of her fellow tech

3:56

startup founders thought they had lost

3:59

absolutely everything to a bank

4:01

collapse. Now for now, things

4:03

have stabilized, but Because

4:05

this doesn't seem contained to

4:07

one bank, like, you know, just look at Signature Bank

4:09

and Credit Suisse and First Republic, we

4:12

wanted to understand the core

4:14

of financial panic. Today on

4:16

the show, we go inside that Silicon

4:18

Valley Bank run that happened just two weeks

4:20

ago. We get a close-up look from

4:22

the people who experienced it to

4:24

find the lessons you can only

4:26

learn when you think the entire world

4:29

is ending.

4:33

This message comes from NPR sponsor

4:36

Bank of America, from local business

4:38

to a global corporation. Partnering

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with Bank of America gives your operation

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access to exclusive digital tools,

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award winning insights, and business

4:46

solutions so powerful you'll

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make every move matter. Visit

4:51

bank of america dot com slash

4:53

banking for business to learn more. What

4:55

would you like the power to

4:56

do? Bank of America NA. Copy

4:59

right twenty twenty three.

5:02

What

5:02

is the future of the mind? And

5:04

how may technology change our

5:06

brains. No need for keystrokes or

5:08

voices. I created this tweet just by

5:10

thinking it. So this technology is

5:12

a way to put almost what is

5:14

a microphone right on top of the

5:16

brain. It's

5:17

part one of our series, mind,

5:19

body spirit, on the Ted Radio Hour

5:21

from NPR.

5:23

The timeline of the Silicon Valley

5:25

Bank run, the SVB run,

5:28

is equal parts fuzzy and

5:30

precise. It's it's impossible to get a clear picture

5:32

from just one person. And so today, we're

5:34

gonna talk to a few different people. Walk through the

5:36

beats of this from the early rumblings,

5:39

to the full stampede, to people making

5:41

hard decisions, and then the aftermath. It's

5:44

hard to say exactly what

5:46

started Silicon Valley Bank's spiral. Maybe

5:48

it was SVB's announcement that they liquidated

5:50

a bunch of their assets on Wednesday,

5:53

March eighth, or or maybe it was one

5:55

tech insider, Peter Teals Investment

5:57

Fund, advised its companies to

5:59

pull their money out of the bank.

6:02

But what we know for sure is

6:04

that by the time markets opened, at

6:06

nine thirty AM on Thursday.

6:09

The bank's stock was dropping, and

6:11

by Thursday afternoon, the fuzzy

6:13

whispers of a much bigger problem

6:15

at SVB or spreading across

6:18

Silicon Valley? Yeah. Let

6:20

me open it up. On Thursday

6:22

afternoon, in her home office in San Jose,

6:25

Ibe Masood gets this jargony but

6:27

direct, Facebook message from a friend.

6:30

This is this is what he messages me. Let's

6:32

see. Thursday, twelve forty four PM.

6:34

Hope you don't have your money in SVB

6:37

might be illiquid. Oh,

6:40

that's it. That's all I got. What does that

6:42

mean? What what does he know? What was it was supposed

6:44

to do exactly? And honestly, she

6:46

was so busy. She didn't even see that message

6:48

until an hour later. Now around the

6:50

same time, about forty five miles north

6:53

of

6:53

IBA, a different startup CEO

6:55

named Jordan Husney, was settling

6:57

in to an exclusive tech event,

6:59

which was sort of unusual for him.

7:01

My Thursday will

7:03

go down in my own recollection as one of

7:05

the most San Francisco or

7:07

Bay Area Tech Days I've ever had.

7:10

Jordan's company is called Parable. It

7:12

is a remote working platform he created

7:14

in twenty fifteen, and One of his early

7:16

investors was this influential fund

7:19

called SV Angel, which is

7:21

why Jordan's oh

7:23

crap moment about the Silicon

7:25

Valley Bank, it happened while he was

7:27

at this invite only tech

7:29

summit. The main speaker of which was

7:31

Barack Obama. I

7:32

showed up like

7:34

a couple hours early to the event

7:36

just because I wanted to sit up front

7:38

like an eighth student. And I

7:41

I was really interested in in listening

7:43

to the speakers. And it's not common for me to

7:45

be invited into a room

7:47

with with folks of that caliber.

7:48

And while Jordan was waiting,

7:50

his phone is buzzing stories about

7:52

Silicon Valley Bank's stock dropping

7:55

news that SVB needed to raise equity

7:57

to help buoy itself.

7:57

I wanted help in

8:00

understanding what that meant because

8:02

I I at some like I

8:04

felt a feeling in the bottom of my stomach,

8:06

like, oh, this could be really bad, but I don't

8:08

know how bad and I'm not a banker.

8:09

Now Jordan notices sitting next

8:12

to him is a pretty big deal tech

8:14

person. He won't say exactly who, but

8:16

But normally, Jordan stresses about

8:18

bothering a person like this because,

8:21

you know, big deal tech people

8:23

they probably assume everybody that

8:25

talks to them is just gonna hit them up for money.

8:27

But in this case, Jordan

8:29

turns to this person. And I said, Can

8:32

I ask you a question, like, what's your read on

8:34

this SVB? And all of a sudden,

8:36

like, two rows of people

8:38

leaned in. You know, like, I just saw a whole bunch

8:40

of heads kind of lean in when I asked the

8:42

question. And this

8:45

individual said to me, are your assets

8:47

there? How exposed are you? And they said,

8:49

well, we're fully exposed. And

8:53

he said,

8:53

like, without hesitation, he was, like,

8:55

get everything out now. Jordan's

8:56

stomach drops, the interlopers

8:59

start weighing in. The person immediately to my

9:01

left who is founder goes, oh, thank god, I don't

9:03

have my money in SVB. And then

9:05

the person to the left of

9:06

me, all of sudden starts furiously

9:09

thumb typing on their phone. The thing

9:11

about a bank run is it's impossible to know

9:13

the exact tipping point. You know, if some people

9:16

pull their money out of Silicon Valley Bank, like,

9:18

that's fine. If more and more and

9:20

more start pulling out, That is less and

9:22

less and less fine and for Jordan,

9:25

for lots of people. Thursday afternoon

9:27

feels like the moment. There

9:29

is a run on Silicon Valley

9:31

Bank.

9:31

You just enter that that moment

9:33

of free fall where you start to think,

9:36

oh, this is a a serious

9:38

problems. The moment that you you

9:40

know bank run is happening.

9:42

You're smart enough to understand,

9:44

like, there's only one

9:44

way to stop a bank run, and it's if people don't

9:47

pull their money out. Yeah.

9:49

It's classic game theory.

9:52

It's classically prisoners dilemma

9:54

in that case, where if

9:57

I stay the entire

9:59

system benefits. If I leave,

10:01

it benefits myself and

10:03

my employees. And What

10:07

feeds into that are

10:09

two things. What's likely to happen in the

10:11

world? And what

10:13

is the risk to being wrong?

10:16

And the risk to being wrong in this

10:18

case was losing almost

10:21

everything. And my

10:23

incentive to save the bank is

10:25

not great, and my incentive to

10:27

save the other companies and the

10:29

investors in that moment is

10:32

not great. And it doesn't seem

10:34

practical. It doesn't seem like

10:36

that's even within the realm of possibilities.

10:40

Given the information that I had, it

10:42

was clear that with everybody

10:45

else saying it

10:45

out, just like I heard a buffalo, we

10:49

all had Jordan and his head

10:51

of operations have an understanding. In an emergency,

10:54

forget email, forget Slack, go straight

10:56

to text message.

10:56

And when it goes to text, that's

10:59

that's the backbone. Did you say bat

11:01

phone? Bat phone. Like, the the phone you pick

11:03

up and goes directly to

11:04

Batman? That's right. The mayor of Gotham City

11:06

picks up the bat phone. He got the red phones.

11:09

And I

11:09

sent a text

11:12

saying, we have

11:14

to mitigate risk

11:17

at SVB. Like, I propose we

11:19

move our our money out is what I said.

11:21

Transfer

11:21

initiated millions of dollars.

11:24

This is happening all over the tech

11:26

industry. On Thursday and even into Friday,

11:28

everybody is having their own, this is

11:30

a bank run moment. And because

11:32

this is the first, like, truly online

11:34

bank run. People are dramatically

11:37

initiating wires or transfers from

11:39

anywhere.

11:39

And we're here to talk about longevity,

11:42

aging, dogs, so I hope you all

11:44

are excited about the conversation. At

11:47

the South by Southwest conference in

11:49

Austin, Texas, startup founder, Celine

11:51

Hollywood, and venture capitalist,

11:54

Laura Deming, are being interviewed on

11:56

stage. Deming is answering a a

11:58

totally normal tech

11:59

question. But, like, keeps keeps checking

12:01

her phone. And also quick apology. Waiting

12:04

to do a wire transfer out with the

12:06

whole SVB situation. So that's

12:08

why I'll be checking my phone every once in while

12:10

during the panel. So apologies if that comes up. Yeah. If

12:12

you notice the anxiety that's emanating from

12:14

us too, it has to do

12:16

with the fact that silicon valleys as of

12:18

this morning is melting down. We're

12:21

in the car. We're speeding. This

12:23

is around, I want to say, two

12:24

ish, PM. We're

12:26

speeding. This again is Ibam Assoud,

12:29

former risk analyst, now current

12:31

bank run participant. And her,

12:34

this is a bank run moment, happened sometime

12:36

around two fifteen on Thursday. And what

12:38

Evan knew was this. Her company's only

12:40

bank account was with Silicon Valley

12:43

Bank. And so if she wanted to

12:45

wire money out, she needed

12:47

a whole new account at a new bank,

12:49

which was why she was speeding to and

12:51

now arriving at a Bank of America.

12:53

And

12:53

it's raining. It's pouring rain.

12:55

I'm I'm drenched and I

12:57

get into the branch, and I'm like, I need to

12:59

open a bank account urgently because I

13:01

am worried there is a bank run. That's what I

13:04

remember saying. I was like, it's Silicon Valley Bank.

13:06

And I need to make sure that

13:09

our company exists in the next few

13:11

days.

13:11

What

13:11

did the receptionist say when you said that?

13:13

Let's

13:13

get you seated twenty minutes. Yeah.

13:16

An account manager meets her and asks for ID.

13:19

Eva digs around in her bag and Eva

13:21

had just become a US citizen

13:23

and she pulls out her phone to

13:25

show a photo of her brand new passport.

13:28

Which I was very proud to show them. So

13:31

that was the first time I ever used my

13:33

American passport.

13:34

To try and open a bank account during a bank run?

13:36

Yes. And then she said that,

13:39

oh, ownership. Much ownership do you have?

13:41

Like like you're opening an account for your

13:43

company, you need

13:43

to own at least twenty five percent to

13:45

do this on the company's behalf. And

13:48

said, like, I don't have twenty five percent

13:50

ownership for sure. And so at

13:52

that point, I'm thinking, okay, what do I do?

13:54

Do I get our I can't get our investors here?

13:57

And by the way, my husband, he's

13:59

also our cofounder and CTO. And

14:01

luckily enough, say that I both

14:03

together met the threshold. But

14:06

my husband had a dental

14:09

procedure. And so and I called

14:11

Saeed while he was at the dentist,

14:13

mouth open, obviously. And, you know, just like

14:15

get here now, take a number, you

14:18

have ten minutes. During

14:20

a bank run, your husband had chosen

14:22

to go to the dentist though? We

14:26

did talk about it after, and we

14:28

were like, you know, should

14:30

we have just not done the dentist thing?

14:32

It's that's what I'm saying. It's like there's so many regrets

14:35

afterwards. Because it's like, oh, you know,

14:37

like, should we just let truth decay happen?

14:39

Should we not you know, worry about

14:41

the

14:42

root. You should be I don't know. Like, it's just so

14:44

many questions. Say it rushes

14:46

out of the dentist. Meanwhile, Iba has her

14:48

operations manager standing by waiting

14:50

for the new bank account so she can wire

14:52

money out of Silicon Valley Bank. Once,

14:55

say, it gets to Bank of America in eight minutes,

14:57

The bank manager hands them the paperwork for

15:00

their new account.

15:00

I took

15:01

a picture of the account

15:04

number and routing number, like,

15:06

underlined

15:06

it. And I was like wire to

15:08

hear and she did. Panic

15:10

in twenty twenty three is fast

15:13

and confusing. It's its dozens and

15:15

dozens of Facebook and WhatsApp messages,

15:17

its emails from investors with conflicting

15:20

advice and a tsunami of

15:22

takes on Twitter. But It is

15:24

also insular. Because on

15:26

Thursday, this was the biggest story for

15:28

Silicon Valley start

15:29

ups, but other people also

15:32

had money in Silicon Valley Bank. When

15:34

I tried going into my account, it was

15:36

like locked, but I didn't

15:38

think anything of it.

15:39

I was like, maybe they're going undergoing

15:41

maintenance. Paris Chandler is three thousand

15:43

miles away from Silicon Valley in Boston

15:46

where she runs a small startup called Black

15:48

Tech Pipeline. It's a job board,

15:50

a newsletter, a recruiting platform, and

15:52

it's basically just her. She doesn't have big

15:55

investors or networks in Silicon Valley,

15:57

but Silicon Valley Bank did

15:59

have a branch in

16:00

Boston, and Paris appreciated that

16:02

SVB took her seriously. I loved

16:04

them because I literally met with them in person.

16:07

If I wanted to grow my business or had ideas

16:09

for my business, I could literally go on a call with

16:11

them, and we'd brainstorm together.

16:13

And they would help me. I could literally be

16:15

like, hey, let's let's go grab lunch. Let's go

16:17

grab drinks. They basically

16:18

were treating you like some hundred

16:20

million dollar company. Right.

16:21

I felt like Beyoncé with them.

16:24

On Thursday, Paris, like most of

16:27

us, had no idea this bank meltdown was

16:29

happening. In fact, while everyone else

16:31

was pulling money out of Silicon Valley Bank,

16:33

Paris was trying to get in touch to put money

16:35

in. She'd just been awarded a ten

16:37

thousand dollar grant, a huge deal for her,

16:39

like she's got sixty thousand dollars in the bank.

16:42

The thing was she needed some paperwork to

16:44

get that ten thousand dollars wired over.

16:46

But her account is acting a little weird

16:49

because she's at the middle of a bank run. Paris

16:51

doesn't know this and calls Silicon Valley

16:53

Bank customer service.

16:54

I think I waited like thirty minutes.

16:56

And then hung up. And then I decided to call

16:58

back and I got on, I think, fifteen minutes

17:01

after. But it was like, everything was peachy and clean,

17:03

like, everything's totally fine. Just go on your

17:05

account

17:05

and, you know You didn't

17:06

detect like any panic in

17:08

this SVB representative's voice or anything

17:11

like that. No.

17:11

They're always so nice. Like

17:13

they sound really happy. So I mean,

17:15

that

17:15

is

17:16

impressive. Yeah.

17:16

Paris gets her paperwork figured

17:19

out, goes on with her day, ends the day even

17:21

with movie and an Instagram review

17:23

of that movie.

17:23

So we saw a scream.

17:26

Was it good? There's like ten

17:29

thousand scream movies that can only

17:31

get so much

17:32

better. You know what I'm saying? But It

17:34

is while Paris is scrolling on Instagram

17:36

that she first sees a headline. Venture

17:39

firms are advising portfolio companies

17:41

to move money out of SVB.

17:43

And I was

17:45

like, why is that happening? SVB. Like, I love

17:47

SVB. What's going on? A full on

17:49

bank run, of course. And at the end of the

17:51

day, on Thursday, SVB's stock

17:53

price had dropped sixty percent.

17:55

It dropped even further Friday morning

17:58

Trading was halted before markets even

18:00

opened. Word was clearly spreading

18:02

that SVB was in trouble. But

18:04

if you were privy to all of this early,

18:06

and we're able to transfer your money out, but

18:09

disaster averted.

18:09

Good morning

18:10

from San Francisco, everybody, this

18:12

situation. First thing Friday morning, Jordan

18:15

Husney, that CEO from earlier, the one

18:17

with the the bath phone, sent this video

18:19

to his employees. A

18:20

couple of you had written mediums this

18:22

morning asking if the Silicon Valley Bank situation

18:25

affects us. And I wanted to send a general

18:27

update to

18:27

everybody. I was reading through it yet. And who

18:29

is the who is the intended target of the video?

18:31

It was

18:31

actually only employees when I recorded

18:33

that video. Oh,

18:34

only employees. And the first

18:36

video recorded at, you know,

18:38

a few minutes past eight in

18:40

the morning on Friday Pacific time

18:43

was that

18:45

SVB is under

18:47

serious financial strength and

18:51

that we believe that we have

18:53

mitigated the situation. As

18:55

in, they were on top of this. They transferred

18:57

money yesterday, they should be okay.

18:59

SVB going out business was not on my Bingo

19:01

sheet for twenty twenty three. So

19:04

we had to come up with a mitigation plan

19:06

last night and this

19:07

morning, and we're in the middle of of executing

19:09

it. So that video came out

19:12

around eight AM on Friday. In

19:14

the ninety minutes that followed,

19:15

two key things happened.

19:17

Number one, Jordan and his colleagues

19:20

noticed, oh, no. The

19:22

money that we moved yesterday It

19:25

hasn't actually moved yet. And

19:27

that was an awful feeling.

19:29

Yeah. And then news

19:31

broke that the FDIC had

19:33

pros in the assets.

19:35

We

19:35

do some breaking news. Bank regulators

19:37

have seized Silicon Valley Bank in

19:39

the largest bank failure since the

19:41

great recession back

19:43

in just I just remember interpreting that

19:45

word wording is, oh,

19:47

god. We're screwed. And

19:50

then you record the second video. And

19:53

then I record the second video. Good morning,

19:55

everybody. I'll post a link to the press

19:57

release if you hadn't caught it from Silicon

19:59

Valley

20:00

Bank, but the US regulators actually

20:02

ceased operations of the bank this

20:04

morning. You

20:05

sound rough in that video, man. I

20:07

felt rough. It is one

20:10

of the worst videos that

20:13

a CEO can record

20:16

for people that have given you

20:18

their blood sweat and tears, which is

20:20

We don't know how it happened, but we just

20:22

ran out of money. I don't know what this

20:24

means. Our plan is we're working with our

20:26

current investors to see if I can get basically

20:29

an emergency line of credit for us to continue

20:31

to make payroll, etcetera.

20:35

I recognize that this was not the

20:38

Friday news that you all wanted. During

20:40

the bank run, people had tried

20:42

to take at least forty two billion

20:44

dollars out of Silicon Valley Bank.

20:46

Now we don't know how much actually got

20:48

out, but what didn't get out was either

20:50

frozen or didn't exist at all.

20:53

Like in Jordan's case, and also in

20:55

Iba Masood's case, whose wire never went through

20:57

either. And the problem is

20:59

the bank accounts are only insured

21:02

up to two hundred and fifty thousand dollars. Lots

21:04

of these accounts at Silicon Valley Bank

21:06

had millions and millions of dollars.

21:10

After the break, what you learn

21:13

when the plane stops crashing?

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22:10

Hey, it's Erica Berris. Planet Money became

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p r slash shop planet money.

22:42

It's Friday evening.

22:44

Silicon Valley Bank has officially collapsed,

22:46

taken over by the US government, and no

22:48

one has any idea what happens now.

22:51

Paris Chandler, who banked with Silicon

22:53

Valley Bank because they made her feel like Beyoncé

22:56

is now freaking out because

22:58

of that big ten thousand dollar grant she got.

23:01

Like, that ten thousand dollars has

23:03

theoretically

23:04

already been sent and is headed

23:06

to her SVB account. So

23:09

I I was like, what happens if that

23:11

account closes? Right. Does it go

23:13

back? Does it get lost? And these are questions

23:15

I was asking on Twitter and people are like, it's

23:17

gonna get lost. Yeah. I'm

23:19

like, oh my god. It was

23:21

horrible. So Paris is trying to

23:23

call SVB customer service. No

23:25

luck. She gets in touch with some company

23:27

associated with the

23:28

grant, and they're just confused. Like,

23:30

they didn't understand that I said, like, the

23:32

bank that I signed as grant to go

23:34

to is closed. Like, what's gonna happen to my money?

23:36

Like They're like

23:37

that. It's closed. What do you mean? Yeah.

23:39

They didn't get it. And I was like, SVB is,

23:42

like, closed, and they didn't know VV, what like,

23:44

they didn't understand. I'm

23:45

like, oh my god. I'm gonna lose this money.

23:47

Like, I need the money. Paris

23:50

lays

23:50

down on the couch. Today

23:52

has been a day. Fears up Instagram

23:54

again. My business bank, it

23:57

got shut down by the

23:59

government today. I

24:02

can't move my money because

24:04

the federal government is trying to figure

24:06

out what they're gonna do, I guess. Like, I

24:08

don't know. I don't know. I don't

24:11

know. I'm stressed. Eventually, Paris

24:14

does hear from somebody about

24:16

her grant. The grant then got restricted

24:18

because SVB was a vendor of theirs or

24:20

something. And so the grant

24:22

ended up getting locked. Oh,

24:24

no. Yeah. They

24:25

were like, you have to wait for the grant until this gets lifted.

24:28

was like, okay. The ten

24:30

thousand dollar grant was a big deal

24:32

for Paris, but For a company

24:34

her size, she was actually pretty safe here.

24:36

She had about sixty thousand dollars in the bank, which

24:39

is a small enough amount that every cent

24:41

would be covered by FDIC insurance

24:44

eventually. But on the other

24:46

hand, any amount over two hundred

24:48

and fifty thousand dollars could just

24:50

evaporate. It could be gone. And so

24:52

for bigger companies, with millions and millions

24:54

of dollars locked up at Silicon Valley

24:56

Bank, Friday and then Saturday,

24:59

become a more existential crisis.

25:01

In an apartment in New

25:03

York, there is a kind of end

25:05

of the world last meal happening.

25:07

Over a bottle wine with some

25:09

dinner, and just

25:13

being okay with things as we

25:15

know may end.

25:17

ISO Watson founded a social messaging

25:19

startup called squad. She was sitting with

25:21

a few founder friends. And, you know,

25:23

when I tell you that we

25:25

were hanging out this weekend and, like, practically just,

25:28

like, crying together and being like, you know,

25:30

this might be end of the world, but I love you.

25:32

And I know it sounds dramatic,

25:33

but that was that was

25:35

the level of emotions. Going

25:38

on. ISIS company has seven employees.

25:40

She has more than a million dollars locked

25:42

in a Silicon Valley bank account, and she's

25:45

now watching her company sort of

25:47

shut down piece by piece. It

25:49

starts with declined payment alerts.

25:51

These are from companies that help run

25:53

her software So she switches those expenses

25:56

to a personal credit card, a few thousand dollars

25:58

here, a few more thousand there,

26:00

and then there's the biggest expense for most

26:02

startups, payroll. Paying the

26:04

human beings who work for you. You know,

26:06

my CTO has a family

26:09

of four in Maryland. I have a woman on my engineering

26:11

team who was a single mom base in

26:13

Indiana. You know, I have to pay my UnitedHealthcare

26:16

premiums every month and their kids

26:19

rely on our ability to

26:21

fund those healthcare premiums. And so

26:24

my biggest concern first was for

26:27

my employees.

26:27

Like payroll

26:28

is not like, you're not gonna put payroll on your credit card

26:30

or something. No. My payroll every month is

26:32

six figures. So I

26:34

don't I don't have a six figure limit on my credit

26:36

card, so I I wouldn't be able to do that.

26:38

But one of the things I did do

26:41

was I pulled up the report of my 401K

26:43

to figure out what would be the timing

26:46

for me to require for me to pull

26:49

out enough money on my 401K

26:51

to run payroll

26:53

because that was kind of my backup plan. I

26:55

mean,

26:55

how quickly would it zero out your entire

26:57

retirement?

26:58

Like in one month. Yeah.

27:01

Yeah.

27:01

All the way across the country

27:03

back in California, Ilim has sued is

27:05

also trying to figure out how to keep paying her

27:07

employees and she's just

27:09

thinking back on the week about, you

27:12

know, literally running to a bank, interrupting

27:14

her husband's dental appointment. Not

27:16

moving fast enough to actually get her company's

27:18

money out and possibly

27:20

losing everything.

27:20

One of the first things that

27:22

came to my mind was MY

27:25

MOTHER WOULD KEEP SOME AMOUNT OF MONEY UNDER

27:27

HER

27:27

MATTERESS. THIS WAS

27:28

BACK GROWING UP IN THE UAE AND

27:30

POCKISTON. AND MY FAMILY

27:33

JUST we didn't have money

27:35

growing up. And so I guess in

27:37

some way, I was just thinking back to

27:39

why didn't I just, you know, do

27:42

basic

27:42

principles, which is have some money under

27:45

my mattress. Like, literally

27:46

under your mattress? Literally.

27:47

Like, I Really? I don't I don't even

27:49

know in the literal sense or, like, It's just

27:52

so many questions. Why

27:53

why hadn't you done those things?

27:55

Yeah. And it's really interesting because

27:59

when you're operating as a founder,

28:01

there are certain infallible principles

28:04

that you just believe in. Like, I'll give

28:06

a really good example of this. Right? I've

28:08

operated in developing economies and

28:10

developed economies. So when

28:12

you're in a developing economy, there's

28:15

medium trust in the banking system,

28:17

medium trust in the government. So

28:19

for me, operating developing economy

28:22

was more like I would

28:24

always have these things in

28:26

the front of my mind versus I feel like

28:28

being in America, it was more like

28:30

If people with hundreds of millions

28:33

of dollars are banking with

28:35

SVB, and if all of our investors

28:37

are banking with SVB, it's just It's not

28:39

even a question. It's it's a given status

28:42

quo. But but I can tell you those on Thursday,

28:45

I feel like I operated like a developing

28:47

economy founder. Versus a developed economy

28:50

founder. So it kind of went back

28:52

to that level of operation. After

28:54

this weekend of despair,

28:57

distrust, bit of existential

28:59

self reflection. The treasury,

29:01

Federal Reserve, and FDIC, announced

29:04

on Sunday at six fifteen PM

29:06

eastern time a complete bailout

29:09

of SVB depositors. The

29:12

FDIC was gonna cover every single

29:14

deposit at Silicon Valley Bank

29:16

They said it wouldn't be taxpayer

29:18

money. It would come from insurance fees paid

29:20

by other banks, but all the money

29:22

would be there. Once they made that announcement and

29:24

I saw it in

29:25

writing, Honey,

29:29

I could breathe again. Again,

29:29

ISO Watson who had prepared

29:32

to drain her 401K. You know, think

29:34

for me, one of the things

29:37

that I learned is the

29:39

power of the echo

29:41

chamber and kind of telephone effects in my

29:43

industry. I think because

29:45

our industry is a

29:47

little bit it's it's homogenous. You

29:49

know what I'm saying? The

29:52

power of that was intense. And

29:54

I think that, you know, keep in mind, WAMU,

29:57

when that bank run happened back in two thousand

30:00

eight, There was seventeen billion dollars

30:02

of withdrawals in ten days.

30:04

But with SVB, it was forty two

30:06

billion dollars of withdrawals in

30:08

two days. In other words,

30:10

when the Silicon Valley Echo

30:12

Chamber did a bank run, they

30:14

super did a bank run. In

30:17

the end, thanks to the US government, the

30:19

Silicon Valley bank run and collapse

30:22

was just a seventy two hour

30:24

nose dive that leveled out. Everybody

30:26

in this story. They're little shaken up, sure,

30:28

but they're relatively fine. So

30:31

you may recall Paris Chancellor. Today has

30:33

been a day. Her ten thousand dollar

30:35

grant came through after a few days.

30:37

And Jordan Husney, just like I heard of

30:39

Buffalo. And ISO Watson pulled up

30:42

the report of my 401K. They now

30:44

have access to their money. They can make payroll

30:46

in time, keep their companies going, and

30:48

Eva has sued. Well, Eva

30:51

also made payroll, kept her company going,

30:53

but she told us this story.

30:55

So the bailout was announced

30:57

on Sunday evening.

30:58

The first day people could get

31:00

their frozen money back was Monday

31:02

morning. So Monday

31:05

morning, we decided to go to the Silicon

31:07

Valley Bank branch. The

31:09

HQ opened at ten AM, so we're like,

31:11

let's go all the way to Palo Alto because

31:14

it opens at nine AM.

31:15

IBA was relieved, yes, that the FDIC

31:17

had stepped in and said everybody's money

31:20

is at the bank and safe But

31:23

to be extra safe, Iba wants

31:25

to move a good chunk of her company's money

31:27

out of Silicon Valley Bank. She

31:29

also doesn't entirely trust money

31:31

wiring after it failed her during the bank

31:33

run, and so she decides to

31:35

go in person.

31:36

At that point, we had decided that

31:38

we would have our

31:40

ops manager come in in

31:42

her car and us coming in hours.

31:44

So at least we would have, you know, two cars

31:46

with two cashier's checks, in case,

31:49

you know -- Yeah.

31:49

-- being held at gunpoint. That

31:52

was that was real fear. Wait,

31:53

really? I I this

31:55

is story that keeps coming back to me.

31:57

You know, just thinking about like getting a cashier's

32:00

check from SVB kept reminding me

32:02

how I was held at gunpoint when was three years

32:04

old in Karachi in Pakistan. Was it

32:06

a was it a robbery? Yes. It was a robbery.

32:08

Oh my god. Yeah. I mean, look, between

32:10

Thursday and

32:11

Monday, you know, it was a developing

32:13

economy founder. Right? Like, that that was the

32:15

locomotives of operations. And so

32:18

that is the plan. They drive over

32:20

in two cars. This would let them

32:23

take out their money in two different cashiers'

32:25

checks, so if somebody takes one of

32:27

those at gunpoint, the company still

32:29

has money left to operate from the

32:31

other check. And then

32:34

Ibap pulls up at the bank. And it is

32:36

complete order, a line of

32:38

about dozen people patiently waiting

32:40

to talk to this incredibly well dressed

32:43

FDIC employee.

32:43

Yeah. He looks very young. Can

32:45

I say someone probably in his twenties? He's

32:48

wearing a collared shirt, blue

32:51

pants, And and so

32:53

when we talk to him, the first

32:55

thing he says is, are you an

32:57

SVB customer? We say yes. And then

32:59

he says something that frankly

33:02

like shocks me. He says, Silicon

33:05

Valley Bank is now one of

33:07

the top two safest banks in the country

33:09

because it is one of the only two banks

33:11

in the country where a hundred percent of your

33:13

deposits are insured. Whoa.

33:16

What do you think? A,

33:19

seeing the line wasn't very long, B,

33:21

hearing that from the FDIC agent,

33:25

seeing that the online system was,

33:27

you know, sort of functional, not fully

33:29

functional. My confidence

33:31

is definitely improving. I'm

33:34

feeling a sense of just

33:37

I mean, I don't know. Like, I've

33:40

I I haven't felt a strong

33:42

sense of pride for a department

33:44

in the government as I did for the FDIC at

33:46

that point of

33:47

time, just seeing you know,

33:49

the bank takeover. To

33:51

be fair, big FDIC fan may

33:54

be, but Eva still transferred

33:56

most of her company's money out

33:59

of the new FDIC version

34:02

of Silicon Valley Bank. Today's

34:05

episode was produced by Alyssa Jun Perry

34:07

with help from Dylan Sloane and engineered

34:09

by Brian Jarbo. It was fact checked

34:12

by Sierra Juarez and edited by Jess

34:14

Chang, who is planet money is acting executive

34:16

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