Biden Administration 'Reacted Brilliantly' To Silicon Valley Bank Collapse, Venture Capitalist Says

Covenant Venture Capital Chief Investment Strategist Karl Douglas joined Benzinga Live Tuesday to discuss the fallout from Silicon Valley Bank’s collapse and said the Biden Administration’s response was “brilliant.”

Last week, Silicon Valley Bank failed to secure funding that would have allowed the bank to continue operating, and over the weekend the FDIC, the U.S. Department of Treasury and the Federal Reserve stepped in to make sure that depositors were “made full.” 

Watch the full interview here.

This means any company that had money at Silicon Valley Bank is now able to access its funds to pay employees or for other business expenses. Before the government intervened, many worried companies would go under without access to the capital held at SVB. 

“This crisis came out of nowhere,” Douglas said. “It really manifested from Tuesday of last week and hit its stride on Thursday when there was a massive amount of wires going out of the bank $45 billion or something. The Biden administration really reacted brilliantly in terms of the speed that they stepped in.” 

Covenant is a venture capital firm that focuses on late-stage private companies. Douglas said that once a company hits certain required criteria, Covenant will invest.

The company’s core focus is AI technology. Had the Biden administration not stepped in, technological advancements like AI could have been delayed, Douglas said. 

Douglas also shed light on how Silicon Valley Bank created a hole in its balance sheet. The bank was buying bonds at a time when interest rates were very low, and as interest rates have grown throughout the last year and a half, those bonds have lost value. 

Read Also: Silicon Valley Bank Creditors Purchased Bonds At Distressed Levels Anticipating Potential Bankruptcy Sale

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