House Financial Services Committee Chairman Patrick McHenry, R-N.C., on Sunday called the Silicon Valley Bank collapse "the first Twitter fueled bank run," after one theory has surfaced that the run was sparked by "one email newsletter and an accompanying tweet, and the Twitter reaction that followed," as reported by Fortune.
According to Fortune, Evan Armstrong, lead writer of the business-focused newsletter Napkin Math, tweeted on Friday: "This is the first time we've seen a social media induced bank run — if your customer base is active on twitter, this can happen to you just as easily."
Armstrong tweeted:
Kinda insane that this entire debacle was potentially caused by @ByrneHobart's newsletter. Here's how the butterfly effect happened.
1) Byrne posts this article/Tweet calling out SVB's risk. 2) Pretty much every VC I know reads this newsletter 3) They all start to pay very, very close attention to SVB earnings 4) Absolutely massive earnings miss by SVB 5) Peter Thiel, USV, and Coatue are first to send out messages/mass emails to portfolio co's to pull out funds 6) Tech Twitter catches word of this 7) Bank Run 8) Collapse 9) If FDIC/Buyer doesn't come in, in the next 7 days, potential 20%+ collapse of entire startup industry.
"This was the first Twitter fueled bank run," McHenry said Sunday in a statement. At this time, "it is important to remain levelheaded and look at the facts — not speculation — when assessing the right path forward."
He added that he has "confidence in our financial regulators and the protections already in place to ensure the safety and soundness of our financial system."
Greg Valliere, chief U.S. policy strategist for AGF Investments, said Monday morning in his Capitol Insights newsletter to expect hearings on how regulators overlooked "the flashing red signals" that Silicon Valley Bank was in shaky shape.
"Were officials seduced by the chummy relationships between the regulators and the San Francisco Fed?" Valliere wondered. "There will be lots of congressional hearings to come on that."
Rep. Maxine Waters, D-Calif., ranking minority member on the committee, said Sunday that she was "alarmed by the failure of Silicon Valley Bank."
Waters and Sherrod Brown, D-Ohio, said in a joint statement that: "As we work to better understand all of the factors that contributed to the events of the last several days and how to strengthen guardrails for the largest banks, we urge financial regulators to ensure the banking system remains stable, strong and resilient, and depositors' money is safe."
Waters said she's "closely monitoring and convening Committee members with regulators so myself and members can understand the latest around the SVB's closure" by the California Department of Financial Protection and Innovation (DFPI) and the Federal Deposit Insurance Corp. appointed as receiver.
President Joe Biden said Monday morning in televised remarks that "thanks to quick action by my administration, Americans can have confidence that the banking system is safe."
