Reuters World News - The morning after in Silicon Valley

Episode Date: March 13, 2023

Sighs of relief after federal regulators step in to backstop Silicon Valley bank. Inside the scramble to save the tech region from fallout from the failed bank. And what comes next for financial institutions around the world. Plus the latest headlines from around the world. Including Trump's trip to Iowa after DeSantis. Learn more about your ad choices. Visit megaphone.fm/adchoices

Size of relief in Silicon Valley, after federal regulators step in to backstop the tech region's namesake bank. We're on the West Coast for the latest developments and across the world as financial markets digest the US government's moves. Plus, Trump goes to Iowa after DeSantis. It's Monday, March 13th. This is Reuters World News, bringing you everything you need to know from the front lines in 10 minutes. I'm Kim Vennel in London. A dramatic 72 hours as the U.S. banking system contemplated another systemic crisis, this time caused by the collapse of Silicon Valley Bank. Our tech correspondent Jeffrey Daston and Palo Alto

has been working through the night. There is so much relief here in Silicon Valley after the government's emergency action on Sunday. Now as a consequence of that, all these startup founders, these businesses will have access to their deposits from Silicon Valley. Valley Bank starting Monday, which means that they can make payroll and continue to operate their businesses. So I guess the question now is, will it be enough? I mean, there was a lot of concern of the wider risks to banking stability, and maybe also that the federal government shouldn't be bailing out venture capitalists?

This is a very delicate moment, not just because of the stakes involved for these companies who need to pay their employees and don't want to go under, but also for the politics of it, because no one is really excited for a bailout. No one wants to put more burden on taxpayers, particularly if the people being saved are viewed as by coastal lead or somehow different from the rest of the United States. But the government has been very clear to say this is not a bailout, and they are not using any taxpayer funds, and that this is essential to maintain confidence in the U.S. banking system that if you deposit your money in a bank, that it will be yours and you don't need to worry about what happened. The U.S. government said Sunday that it will protect depositors,

but it is not protecting the shareholders of SBB. So what that means is if you and put your money into a bank account, if you're a small business or a startup founder, you will get all that money back, not just the amount that is insured up to $250,000. You'll get everything above that back as well. But what the government is not doing is stepping in to recoup whatever investment that shareholders had made in SBB. So those individuals, those companies that had stakes in the bank will not get their money back, which would be a more politically fraught topic potentially. So it was a tense weekend of negotiations and frantic efforts by startups to avoid extinction. Jeffrey, tell us about some of the conversations you were having over the weekend. How bad

How did it get? I spoke to one startup founder who did not know how he would pay his about 65 employees who are spread out across the United States as a consequence of the bank's closure. He said he was so desperate that he reached out to Sam Altman, who is the CEO, one of the hottest tech startups now called OpenAI. And Sam, within an hour or two, after not even having spoken to this startup founder for years, offered to fill the gap, allowing this company called RAD AI to pay all its employees by Tuesday to ensure that they all got to maintain their livelihoods. And that sort of scramble to figure out

how are we going to pay employees? Are we going to use credit cards? Are we going to get emergency bridge loans? Are we reaching out to the venture capital investors? That's been happening at the same time as there have been emergency board meetings and just everyone trying to figure out what can we do to keep this place afloat. So why would be a lot? So why was there such a big risk? Why does it matter to so many in the tech industry that one bank is in trouble? This was not just any regional bank. This was essentially the hub of Silicon Valley and part of the venture finance system. So if you are a new startup, you are between fundraising rounds, you would go to Silicon Valley Bank to bridge that gap to help sustain you, help investing in new

innovations or paying employees while you're waiting to attract more venture investors to your company. And so it was the bank that everyone used. And now that it has closed, there is a question about the state of this important venture debt funding, where Silicon Valley Bank was the main player. So who, if anyone, is going to be providing that stopgap measure to finance these companies in between fundraising rounds? will they have enough capital to keep investing and making Silk Valley in the United States

broadly a center for tech innovation? And that question remains to be answered. Thanks, Jeffrey. The SVB fallout has investors around the world on the ropes. Many worried, it's a sign of the wider financial industry about to crack. Here to talk how global markets are reacting as our resident financial expert on the podcast, Carmel Crimmons. How are we doing this morning, Kammel? Markets are relieved, Kim. It looks like those government moves to shore up the financial system are getting the thumbs up from investors. U.S. stock futures have jumped, and short-dated treasuries have had their biggest rally since the Black Monday crash of 1987. Investors are now betting that the Fed will be put off from hiking rates by a supersized 50 basis points next week.

Goldman Sachs doesn't even think there will be a rate hike. Why is that? Investors think the Fed won't want to put the financial system under any further pressure. Because, and here's the problem, There are still fears about problem banks lurking in the system. Investors are jumpy. But it's a tough path for the Fed to navigate. Consumer price data is out on Tuesday and a high reading will put them under pressure to hike rates, even with the financial system under strain.

I'm Carmel Crimmons in Dublin. Now to the rest of the headlines. And the Oscar goes to everything, everywhere. All of them. Hollywood's Night of Nights went, Exactly how it was scripted. Yes, everything, everywhere, all at once, won the best picture Oscar. It was back to basics for the five-hour awards ceremony

that celebrated the films that brought people back to the box office post-pandemic. Host Jimmy Kimmel, of course, couldn't resist a couple of jokes about last year's melodrama. It was some year for diversity and inclusion. We have nominees from every corner of Dublin. Five Irish actors are nominated tonight, which means the odds of another fight. on stage just went way up. You can read about all the winners

and of course check out the fashion on Reuters.com. In India, the government of Narendra Modi pushing back against attempts to recognize same-sex marriage. In a filing to the country's Supreme Court seen by Reuters, the government says it has a legitimate interest

in maintaining marriage as legal recognition for heterosexual relationships. The court is considering cases lodged by at least 15 people seeking to recognise same-sex marriage. India's Ministry of Law, however, says that's incompatible with the Indian family unit concept

of a husband, wife and children. Supreme Court lawyer Karunanandi disagreeing in this earlier interview. Indian culture is one with open windows and is not so easily threatened. These are all people who arise from this culture. In California,

the sound of golf ball-sized hail dropping on a vineyard in Fresno. A prelude to one of the atmospheric river storms that have drenched the already sodden state. In Monterey County, a levee broke, forcing residents to flee. A state of emergency is active across the state as dense streams of Pacific moisture sweep the skies.

On the other side of the Pacific, Australia once again underwater, thanks to the prolonged Laninia effect. Flood water's spruce. peaking in rural Queensland with swathes of farms, homes and highways submerged. And in the Indian Ocean, Cyclone Freddie continues to break records, making landfall for the second time in a month. The last time it made landfall in Mozambique, over 171,000 people were displaced. Swirling for 35 days between Madagascar and Mozambique, it has already killed 27 people.

Donald Trump is expected in Iowa tonight to give a speech on education. The term woke is likely to be bandied about a lot. But Trump isn't the first Republican to this party. Our state is where woke goes to die. Florida governor Rhonda Santas, who hasn't jumped into the presidential race yet in Iowa on Friday. Our political correspondent, Jim Oliphant, is on the ground. Trump is giving an address in Davenport, Iowa,

that's basically supposed to be centered on education. This is not a topic that Donald Trump has shown much interest in. He's definitely following the footsteps of people like Ron DeSantis and Greg Abbott in Texas. In Trump's case, he's going to vow to cut federal funding for any school or program, pushing critical race theory or gender ideology. Really, you know, the Republican Party has sort of shifted since Trump lost the presidency. and these culture wars now over education have really become predominant. And so in a way, Trump is going to be playing catch-up in this speech

and trying to get where the Republican Party is right now. And that's it for this edition of Reuters World News. We'll be back on Tuesday. In the meantime, you can find more trusted news at Reuters.com.