Mark Cuban Urges Fed Action on Bank Trust Issues During SVB Bankruptcy
Billionaire investor Mark Cuban has called on the US Federal Reserve to intervene and take action on Silicon Valley Bank (SVB) amidst concerns of a potential banking crisis. Cuban urged the Federal Reserve to purchase all of SVB’s securities and debts at face value, warning that failure to do so could undermine the public’s confidence in the banking system. Cuban himself has approximately $10 million deposited with SVB.
Taking to Twitter, Cuban wrote, “If the Fed doesn’t own it, trust in the banking system becomes an issue. There are a ton of banks with more than 50 pct uninsured deposits. What would be best practices to protect from a future run if your company writes millions in checks weekly?”
A couple SVB thoughts. 1. 250k is too low. It’s insane that a small company with say 2.5m in payables and payroll at the end of the month should be “prudent” and split their cash across 10 banks in case of a run. The fees and admin would be crazy. But great for banks
— Mark Cuban (@mcuban) March 11, 2023
Cuban also questioned the effectiveness of the current financial system in protecting the funds of investors, citing his own transactions with online pharmacy Cost Plus Drug as an example.
Meanwhile, the Federal Reserve announced an emergency meeting of its board of directors on the morning of the 13th of March. Some observers believe that the meeting will discuss the SVB issue and adjust discount rates. Lowering discount rates between the Federal Reserve and commercial banks can supply liquidity to the banking system. The Federal Open Market Committee (FOMC) which determines the benchmark interest rate is set to convene on the 21st and 22nd of March.
Aside from the FOMC, the Federal Reserve board of directors also has the authority to set the discount rates necessary for transactions between the central bank and commercial banks.
The call for intervention from a high-profile investor like Mark Cuban highlights the potential risks to the banking system and the importance of swift action to prevent a financial crisis. The Federal Reserve’s response to this issue will be closely monitored by investors and analysts alike.
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