Social media helped speed up the demise of SVB and its rescue. Investors and regulators should take note.
short order, is in part due to the power of social media, and the speed with which information travels across it.Indeed, there were arguably several network effects in operation as part of this collapse.
But when the bank revealed it had sold assets at a loss last week, and was raising capital to reinforce its balance sheet, its customer network became a major weakness.Countless tech industry participants have recounted – on Twitter, of course – how whispers of problems at SVB in venture capital sector chat groups quickly migrated online, where analysis of SVB’s financial position and rumours about its solvency were being traded in real time.
“There was no time for investigation, no time for nuance, it was time to move, and move fast. Pull out your phone, check Twitter quick to verify, switch to your SVB app and conduct a wire transfer,” mused one tech founder, who goes by the name of Professor Stam. The decision to guarantee SVB’s uninsured deposits and prevent contagion across the banking sector similarly reflects the power of social media.– spent the weekend tweeting almost non-stop about the need for action from the Fed. On Sunday night, that’s exactly what we got.Peter Atwater, president of Financial Insyghts, argued the SVB episode has been a reminder that “power now rests with the crowd, not the regulators.
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