When the Federal Reserve System began raising interest rates to battle inflation, the bank’s portfolio of bonds lost value. The bank’s owners prospered by deeply immersing themselves into that culture but that narrow focus made it vulnerable to outside economic factors. Even if a buyer emerges, however, the new owner would not have an intimate relationship to the region’s yeasty culture of aggressive innovation. The coronavirus pandemic permanently destroyed our property rightsĭespite the emergency action, however, Silicon Valley Bank’s failure is a serious blow to the tech industry because of its pivotal role in financing innovation as a direct lender, as a financial service provider and as a midwife for attracting venture capital.įederal authorities are looking for a buyer to absorb Silicon Valley Bank, quite possibly one of the nation’s larger banks. That was happening before Silicon Valley Bank, which was founded in 1983 as the region began to boom and rode the wave into becoming one of the nation’s largest financial houses, suddenly collapsed last week. “Tech is going through a painful period,” Russell Hancock, president of the organization said, adding hopefully that “there is no way to construe what is happening as a crisis” for the tech sector. A few weeks ago, a local industry organization, Joint Venture Silicon Valley, issued its annual report on the region’s economy, stressing a transition from a cauldron of start-up companies to dominance by a few giants. In recent months, Silicon Valley’s corporations have been laying off workers and venture capital activity has slowed. However, there’s reason to wonder whether Silicon Valley has reached its peak.
Silicon Valley’s mega-corporations, such as Apple, Google and Twitter, sucked in immense amounts of money from every corner of the globe – not only making investors very rich, but creating countless jobs and pumping hundreds of billions of dollars into the state treasury as high income tax rates tapped into the new wealth.
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