Why SVB’s failure could be a very big deal

Make Me Smart March 10, 2023 Transcript

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Kai Ryssdal 

We don’t start until Charlton starts. Those are the rules

Kimberly Adams 

Those are the rules. Just theatrically shake my cocktail shaker.

Kai Ryssdal 

Charlton is in charge of all things. All things is what Charlton Thorpe is in charge of. Hey everybody I’m Kai Ryssdal! How about we do that? (puts on a kid’s show voice) Hey, everybody! I’m Kai Ryssdal! Welcome back to make me smart where we make today make sense. How about that?

Kimberly Adams 

It was great. You did a wonderful job. I’m Kimberly Adams. Thank you for joining us everyone on the YouTube live stream. And on the podcast. This is our weekly happy hour. We call it economics on tap. We’ve got drinks, I’ve got a drink, who knows what Kai has. We’ve got the news fixes and then we’re going to take a quick break and then we’re going to play a game of half full half empty. It’s going to be loads of fun and we’ll have a surprise guest host for half full half empty. I don’t know who it is.

Kai Ryssdal 

Oh my. Well, that’s fascinating. Alright, so what are you drinking?

Kimberly Adams 

Okay, so I’m trying out a new cocktail. Because I’m me, I’ve decided to start experimenting with shrubs, which are like vinegar based flavored things.

Kai Ryssdal 

Like bushes?

Kimberly Adams 

Sure? No, they’re like liquids.

Kai Ryssdal 

That was a legit question I have no idea.

Kimberly Adams 

It wasn’t legit question. It was good. No, it’s it… They’re like vinegar based flavor flavored things that you add to cocktails or mocktails or cleverages or whatever, or sometimes just sparkling water, and they come in all sorts of different flavors.

Kai Ryssdal 

Hmm. I think we’ve had this conversation before. This one is blueberry and rosemary. Blueberry and rosemary, right. I believe we’ve had this conversation before. But have you ever worked as a bartender? Or do have you considered like moonlighting as a bartender? Because clearly you take a lot of pleasure and pride in your work in this regard.

Kimberly Adams 

Funny, you should ask that. I did attempt it when I was living in Egypt to be a bartender for a little while. And I ended up being a bartender at these like private parties for like the super rich on like the rooftops of hotels overlooking the Nile. And they just stayed up too late. And I was like, Yeah no. And it was like, it got to be like one or two am. It was like, it was fun in the beginning and I’m like handing out cocktails and everyone thought it was so cool that a foreigner was doing the the cocktails and the mixing and then I was just like, “yeah, it’s too late. It’s too late. I need to go to sleep.” Alright, so I am drinking a blue Manhattan, which has a rye whiskey, blueberry, rosemary shrub from a local company called “Element” and vermouth and a cherry garnish. So that is what I’m drinking.

Kai Ryssdal 

Have you tried it yet? Have you? Is this a fresh concotion? Let us know how it goes. (Kimberly coughs a lot and Kai cracks up)

Kimberly Adams 

I swallowed wrong. It’s actually good though.

Kai Ryssdal 

Okay. All right.

Kimberly Adams 

It’s actually good. I just swallowed wrong. It’s it’s the vinegar.

Kai Ryssdal 

Oh my god that is funny.

Kimberly Adams 

No, it’s actually tasty. I really like it. I just swallowed wrong. That’s all/ What’s everybody else drinking?

Kai Ryssdal 

Oh, that’s so funny. Right? So your sister is in the chat. And she says “she bartends when she visits me.” And then she says “that’s why the visits are so short.” So I have a cup of coffee because number one, it’s really cold in here in LA and I’ve got dinner plans tonight. And if I start drinking at 3:30 in the afternoon, I will not make it to dinner and that would deeply irritate my wife. I’m using my Pewabic coffee mug again, my favorite coffee mug in the world. I get no kickbacks from Pewabic by the way, they’re just good stuff. All right, should we move on here? Should we?

Kimberly Adams 

Yours is the big news story of the day and oh my goodness. I didn’t understand it until I listened to Sabri’s story today.

Kai Ryssdal 

So yes, so Sabri did a great great piece on Silicon Valley Bank which has as of this morning cease to exist and is now under state receivership and being managed by the Federal Deposit Insurance Corporation. So it is the first FDIC backed backed bank to go under, since 2020. And this one is a biggie, because a lot and I mean, a lot of Silicon Valley does business with SVB, or did business with SVB until this morning. It affects payroll, and the company’s deposits and the personal accounts of company executives. It’s a very big deal. The specific…. So watch this space, because I’m sure we’re going to be talking about it more. It’s going to be a very busy weekend for the Fed and for Treasury, before the banking system opens up again on Monday. The specific thing I want to talk about, though, is what Silicon Valley Bank did, which doesn’t get almost any press, and that is venture debt. We talk a lot about venture capital, right? Venture, venture capital is people gathering money together, or using their own money and investing in a company and getting equity, getting shares of that company, right. And they gain on the upside, and they lose on the downside. Silicon Valley Bank and some other really specialized banks do this thing called venture debt, where after getting venture capital investments, these companies, which will need more money, because these startups run through capital at an astonishing rate, they need more money, they get venture debt, which is which are loans made by the specialized banks which then sustain these companies. And part of the reason that SVB went under, um, there’s a whole long bond market story as to why they went under. But part of the reason they went under is because of this venture debt and the way interest rates have been going. And we’re gonna be talking about more about this Marketplace and probably on this podcast in the days and weeks to come if SVB turns into a very big deal. But it’s a really interesting look at the innards of finance, specifically venture finance, and even more specifically, Silicon Valley startup venture finance. Fascinating. Could be a big deal. We don’t really know yet.

Kimberly Adams 

Not at all, could I all I could think of when you said if it turns out to be a really big deal. A very big deal was is f, what is it? S-V-B going to be a V-B-D.

Kai Ryssdal 

There you go. That’s right. Look, we’ll take initials, FDIC SVB. You know?

Kimberly Adams 

All of the alphabet soup.

Kai Ryssdal 

It’s amazing that we are back here with a major bank going under. This is for the record, the second largest bank failure in this country ever after Washington Mutual, which was my bank by the way, back in the financial crisis. So this is a big deal. Hundreds of billions of dollars in assets.

Kimberly Adams 

Unbelievable. I saw this like flying by because I was running around all day today. It’s I saw it flying by. And I was like what is happening? And so I had to go back and listen to Sabri’s story. And I was like, “Oh, this is worse than I thought it was.”

Kai Ryssdal 

Yeah he did a great job. He did a great job. Did really well.

Kimberly Adams 

Yeah, yeah. Okay. Yeah. Well, mine is also somewhat tech related. This is really bad. So there are data leaks and breaches and data stolen all over the country all the time, you know, we had that big, big Equifax data breach years ago. But this one is particularly bad. There is a health data breach that has gone down in here in DC. And it’s a company called let’s see, where did it go? I think it’s DC Link. But basically, it has more than 100. Yeah, DC Health Link, which runs a basically an exchange that has about 100,000 participants on it. But about 11,000 of those people work in the House and the Senate in the in here in DC, in the district offices across the nation, or they’re relatives of people who work for the federal government. And this is a very, very bad data leak. It’s got like social security numbers, it’s got health information, it’s got people’s names and addresses. And it seems like real information. And so the AP started the so basically, these hackers posted a sample of some of the files to prove that this was real, and the AP called some of those people to see if it was real. And it turns out, it’s someone who one of our colleagues knows very well.

Kai Ryssdal 

Oh is that right?

Kimberly Adams 

That’s Yes. And that’s how they found out that their information was out there. And this is really scary. And members of Congress are freaking out, their staffs are freaking out. Because, you know, you can just imagine the nefarious things that people can do with not just somebody’s identity for identity theft, but their health information. Like that’s that’s really bad. So I I’m mine, I’m wondering what we’re gonna see as a result of this in terms of some not reputable news organization probably is going to take that stuff and do all sorts of stories and the rest of us are going to have to talk about it once it’s out there. And it’s not great. But yeah

Kai Ryssdal 

No. The news today is not great, today is not great news day.

Kimberly Adams 

So somebody asked in the chat: is it a really bad leak just because it involves DC folks? No, it’s a really bad leak, because it involves health information, which is particular, which is worse. But the reason it matters that it includes DC folks, is when you talk about politicians and staffers having their information leaked, that means it can be weaponized for political purposes, not just by somebody running campaign ads, but also by outside actors, maybe foreign governments or people who want to blackmail a member of Congress or their families.TT

Kai Ryssdal 

You know, it’s interesting, and this is my naïveté for being a zillion miles away from the beltway for which I am grateful every single day. But my initial reaction was, it’s it’s a big deal in DC, because, “oh, this will definitely get people paying attention to this really critical problem in our data information infrastructure, and we’ll certainly find legislation to take care of this.” Oh, well,

Kimberly Adams 

Maybe we’ll finally get a federal privacy law now.

Kai Ryssdal 

Yeah, I’ll take the under here.

Kimberly Adams 

But remember, very recently, the Biden administration put out an announcementm I don’t think it was an executive order, but basically a cybersecurity strategy. And one of the things they said was that companies need to have more responsibility for keeping people’s information private, as opposed to putting the onus on the users to protect their information. And so this is kind of a classic example.

Kai Ryssdal 

Yeah, it is a classic example. But nothing’s gonna happen until the penalties to companies are real and substantial, right?

Kimberly Adams 

Yep. All those things are true. All right. Yes.

Kai Ryssdal 

All right. We’re gonna, we’re gonna do a news fix. We’re gonna take a quick break. We already did the news fix. Hello Kai. Okay. Yeah, so here’s what we’re gonna do. Now. We’re going to take a quick break, come back, round a half full half empty, here we go.

Kimberly Adams 

You know I didn’t think I was going to like this, but I I really do. It’s it’s quite different.

Kai Ryssdal 

All right. Why would you… Alright, wait, hold on. Stop. Why would you make a cocktail you’re not sure you’re gonna like?

Kimberly Adams 

Because I want to experiment and try it. I won’t know if I like it until I try it and if I only try things I know I’m gonna like I’ll never expand my palette.

Kai Ryssdal 

Fair enough. Fair enough.

Kimberly Adams 

Says the creature of habit who never wants to try anything new.

Kai Ryssdal 

Yes. Yes. Yes

Kimberly Adams 

All right, all right. Now we are going to do something new. We’re gonna play a game of half full half empty. The game is not new but the topics are. We’re gonna go through some news topics from the week and tell you how we are feeling about them, positive or negative half full/half empty. And Drew is out today. But we have a surprise surprise guest host. I don’t know who it is. So hello, strange person.

Francesca Levy 

Hello Kimberly and Kai. It’s Francesca

Kimberly Adams 

It’s Francesca!!

Kai Ryssdal 

Oh my god lordy-b. Alright so this is the big boss people. We should people who Francesca is.

Kimberly Adams 

You hear her in the credits at the end of the show all the time, Francesca Levy, our Director of Digital. Is that your exact right title? You seem to do a lot of things.

Francesca Levy 

Executive Director of something but I I’m needed.

Kai Ryssdal 

There we go. And today, you know, here are you!

Francesca Levy 

Allright. Are you ready to play? Okay. Are you half full or half empty on the possibility that companies could start bringing back pension plans?

Kimberly Adams 

I heard this story, did you hear this?

Kai Ryssdal 

I did not. And please tell me it was not on the show that I host.

Kimberly Adams 

No, no, it wasn’t. It wasn’t? No, I think it was on David’s show, it was on Marketplace Morning Report where basically, some companies as a way to try to lure workers because we are still, you know, in a tight labor market, and companies are trying to figure out what they can do. Some companies are starting to offer pension plans, again, not like full old school pension plans, but versions of it. And I’m gonna go half full on it because, you know, we’ve heard for years companies complaining about workers just hopping from place to place to place and it’s like, well, if you don’t make a commitment to your employees, they’re not going to make a commitment to you. And a pension is a real incentive to stay in one place for some period of time.

Kai Ryssdal 

Yeah, I agree with that. I also would just offer that that much as you were talking about companies having to bear some responsibility for data breaches, there is an element of corporate citizenship here, right that companies have an obligation to some degree to help their workers survive and keep going through their old age. And pensions are one really good way to do that, as opposed to putting the burden entirely as it’s, not entirely, mostly as it sits right now on 401k and other retirement plans. So yeah, I’m half full.

Kimberly Adams 

On the other hand, though, I do have to give the caveat. We are reading more and more stories about these pension plans that are just insolvent. And I remember, I was at some DC event, and there was a guy who worked on, you know, research on pension plans, and he was like, “one day, somebody is going to crack open the lid on all of these state pension plans and they’re going to run screaming into the night because they’re in bad shape.”

Kai Ryssdal 

Yeah, all y’all should look up something called the Pension Benefit Guaranty Corporation and then look up how badly underfunded it is, but anywho.

Francesca Levy 

All right, half full or half empty on Oscar parties?

Kimberly Adams 

Like, I’m half full on the party component, half empty on the Oscars. Like I have zero intention of watching them but if somebody invited me to an Oscars party, I would go. I just won’t pay attention to the Oscars. I’ll pay attention to the people there. So I’m gonna go half empty. What about you?

Kai Ryssdal 

So I I watch them in the breech while I’m doing other stuff, right. I mean, it happens like at five o’clock here in LA time, right. And you know, you got other stuff. You gotta run kids around you got, you know, whatever. So I watched them in the breech, party smarty. You know, can I be neutral? I’m going to be neutral, I’m going to be half half. I’m going to be neutral. There we go.

Francesca Levy 

All right, half full or half empty on business schools, loosening their admissions requirements for laid off tech workers.

Kimberly Adams 

I saw that story. I’m half full. Although… God I always have to have a caveat, don’t I? There’s no universals in this world. Half full, although I’m very curious how much these tech workers really need a business degree to get a job in this economy. And so yeah, yeah. Is it? Is it just a way to get people to spend money that they probably don’t have to spend? But sure, I’ll go half full. Why not?

Kai Ryssdal 

Yeah. And I think I think also, it’s, you know, now’s a convenient pausing time in your career and you could take a couple of years maybe, and go back to school, if you want to. I don’t think anybody needs an MBA, especially if they were already on some kind of track in technology. But if they want to, that’s fine. The root of the story, though, is business schools lowering their their admissions requirements. That is very interesting, because that goes through standardized tests, it goes to elite schools getting first crack at the most elite students. And so I think, you know, a general lowering of the bar, across higher education and up into graduate degrees, would probably benefit us as a society let me just say.

Kimberly Adams 

I’ve been doing along with a couple of our colleagues, some reporting on the inflation Reduction Act and all the money kind of filtering out into the economy. And I’m just seeing more and more of these jobs that make six figures out the gate with no college degrees, and they cannot fill these jobs. They are desperate for people to do these things. So all right, I think the next one is the one for the pole. So everybody in the YouYube chat, get ready. We’re going to wait on y’all to weigh in before we give our takes on this next one Francesca go.

Francesca Levy 

Are you half full or half empty on the rise in revenge reviews?

Kai Ryssdal 

Oh, so this is a story that Matt Levin did for Marketplace yesterday. And apparently the deal is that, what’s it called, like the National Consumer Rage Survey, or whatever it is, points out that there’s been a huge rise in revenge reviews on social media and Yelp, and all those things, since the pandemic. That people are just venting their spleen whenever they are not getting what they felt they paid for, roughly translated. So that’s the story. That is the story. And we’re going to let the poll play

Kimberly Adams 

One of the more challenging things about working at Marketplace is that we can’t bash companies that do us wrong wrong publicly. And so sometimes, and my sister in the chat will recall this very well, from when we went on our cruise, sometimes, I really want to say angry things publicly that I’m not allowed to say because of our ethics policy, which is just a good one, because we may end up covering these companies, and we shouldn’t be out publicly doing that. But um, you know, so there’s a lot of like, in my little notes sometimes or like my, you know, the Notes app in your phone, I will sometimes write out the angry review just so it gets out my system. Because I know I can’t post it. But yeah, so I hope everyone is writing their revenge reviews on my behalf if they are. Let’s see. We’ve got 150 votes, they are still coming in.

Kai Ryssdal 

Let’s call it let’s call it

Kimberly Adams 

Okay, let’s call it

Kai Ryssdal 

We can only kill so much time. Come on, right? There’s got to be some lag there. All right I mean look.

Kimberly Adams 

Peg says “there’s far too much anger in this world.” Yes, you’re right, Peg.

Francesca Levy 

So Kimberly, that’s a half. That’s half full from you.

Kimberly Adams 

That’s a half full from me, yeah, I’m gonna go half full.

Kai Ryssdal 

So here’s the poll, 158 votes. Half empty, 68, half full 31. I think I’m kind of half empty. I think I’m kind of half empty on that. I appreciate the need to, you know, feel better. But I just don’t think you should go public with like, one bad experience. You know what I mean? I mean, if you get like a repeat offender, well, first of all, why are you going back to that business? But I say, you know, praise in public and criticize in private. That’s what I say.

Kimberly Adams 

Most of the time, I would agree with you. But if it’s someone or a company that really does something egregious, you want to also like, yes, it’s getting it out of your system, but it’s also warning other consumers. You know, in the circumstance that we had, like, there was something that was done that like we really thought that other people should know about it. And it was pretty bad. And so some of it is revenge, some of it is like punishment, if that makes any sense. Like if you do this, you should be held accountable. And if I don’t have the power to hold you accountable, at least let other people know to give you some accountability. So

Kai Ryssdal 

Yeah, that’s fair.

Kimberly Adams 

Yeah. Although yeah, but especially for small businesses, though, I might, I would be much less likely to write a bad review on a small business, because that’s the difference between like somebody having a bad day, and you can destroy their business with a couple of bad reviews versus like a huge corporation that should have infrastructure in place to not allow that to happen. Okay I’m done off of my soap box.

Kai Ryssdal 

Charlton. Before we go, though, very, very quick shout out to Francesca Levy, the boss coming in, hanging with us a Friday afternoon. Thank you. And we’re done. Back on Monday. Before we go, though, a couple of quick things. Number one, it was like three years ago, this weekend that COVID became a pandemic. And that’s when this podcast went daily. And we did it because we, me and Molly at the time, but the staff and I think the listeners too, needed a place. We needed a place to just be and that’s what this became. And it’s evolved since then. And times are, while still uncertain, way less bleak, but we are still here trying to do what we do every single day. And this being our March fundraiser, you know what’s coming next. We are aiming to raise $150,000 We are less than 10% of the way there and here we are on the 10th of March. So we got a ways to go. Marketplace.org/givesmart. There’s a link in the show notes as well. Obviously if you can help us, we’d appreciate it because we’re here every day whether you give or not, but If you gave it would be better, you know? I probably shouldn’t say that we’ll be here whether you give or not. Development’s gonna yell at me for saying that. Make Me Smart is produced by Courtney Burgieker. Today’s episode was engineered by Charlton Thorpe. Drew Jostad wrote the theme music for half full/half empty. Although he took the day off today I guess. Antonio Barreras is our intern.

Kimberly Adams 

He deserves a day off. The team behind our Friday game is Mel Rosenberg, Emily Macune and Antoinette Brock who checked out our video early today. Marissa Cabrera is our acting Senior Producer. Bridget Bodnar is the director of podcast and you all know who Francesca Levy is, the Executive Director of Digital.

Kai Ryssdal 

Boom! Hey guys, I’m David Spade. applause I’m Dana Carvey. Are we the host of something Oh fly on the wall. Now, Dana and I would never say this one of Apple Spotify and Amazon’s top podcasts at 2022 I’m just reading that I would never say that we both got our break on a little thing called saronite live each week we sit down with friends of the show and share stories and Bs about the good old days of SNL. You can find fly on the wall of presentation of cadence 13 on the Odyssey app or wherever you get your podcast