Some venture capitalists on Twitter are convinced that they saved the U.S. economy in the wake of the Silicon Valley Bank (SVB) collapse this weekend.
Others, though, think their frantic tweets and claims may have helped incite the initial run on SVB and aided in its collapse.
On Friday, SVB, which catered to many high-profile tech companies, experienced a bank run after it announced that it was short on capital and would need to raise $1.75 Billion. After many of its wealthy clients withdrew their cash, the $200 Billion company went belly up.
Despite the fact that many had been warning of such a scenario for the last five years—including Sen. Bernie Sanders (I-Vt.), who argued in 2018 that banking deregulation would ultimately lead to disaster—venture capitalists who only began raising the alarm this weekend were quick to credit themselves with both predicting the current predicament and saving the financial system.
Angel investor and Elon Musk confident Jason Calacanis, who is best known for vigorously defending Musk on Twitter, was accused of attempting to take credit for the U.S. Treasury Department’s decision to reimburse all the bank’s customers despite initially suggesting that a financial armageddon was all but certain.
When regulators descended on the bank on Thursday, March 9, Calacanis called the event “Defcon 1.”
On Friday night, Calacanis issued an all-caps warning, predicting financial doom.
“YOU SHOULD BE ABSOLUTELY TERRIFIED RIGHT NOW — THAT IS THE PROPER REACTION TO A BANK RUN & CONTAGION,” Calacanis wrote. “[President Joe Biden] & [Treasury Secretary Janet Yellen] MUST GET ON TV TOMORROW AND GUARANTEE ALL DEPOSITS UP TO $10M OR THIS WILL SPIRAL INTO CHAOS.”
He also predicted, again in all-caps, that a massive, nationwide back run was about to occur and that most people would not be able to get their money.
A number of people claimed the shouting online wasn’t conducive to an already panicked environment.
Prior to the U.S. government’s announcement that all deposits would be available, Calacanis breathlessly asked his followers if they too would be buying “GUNS, PROVISIONS, AND GASOLINE.”
Calacanis also tweeted videos of people lined up at banks over the weekend.
After SVB collapsed, the government stepped in to ensure that not just FDIC-insured deposits, but all money in the bank would be covered.
Calacanis patted himself on the back afterward, stating his “work here is done.”
Another venture capitalist, David Sacks, who hosts a start-up podcast alongside Calacanis, also posted frenetic SVB tweets that spread widely.
Sacks was adamant that absent a government intervention, the entire financial section was in peril.
“The Fed needs to bearhug the situation,” Sacks wrote. “Announce that all deposits are safe. End the crisis. It will cost very little, if anything, because SVB actually has plenty of assets to pay off depositors. The costs on the banking system and economy will be far greater if they under-react.”
He also called it a potential extinction event for start-ups.
The pair were widely mocked outside of their circle of followers after the government stepped in and swiftly stabilized SVB.
“This weekend was an opportunity for people to learn that @Jason and @DavidSacks are out of their minds,” an investor named Austin Lieberman wrote. “At best they panicked and at worst they intentionally tried to spread [Fear, uncertainty, and doubt]. Either way your mental health and $$ is better off without their nonsense in your feed.”
In response, Calacanis said he was right to be screaming from the Twitter mountaintops.
“My intention was to highlight the issues I was seeing 12 hours before they broke on Twitter,” he wrote. “I have no equity shares in any bank & no exposure to the impacted bank (couple of my portfolio companies did). Happy this is over, my work here is done!”
Lieberman, however, didn’t appear willing to let the issue slide.
“You literally had 0 influence over the fed,” Lieberman added. “The only thing you potentially did was scare the shit out of tech twitter and possibly incite the beginnings of a bank run. Genuine question, did you lend to any companies this weekend and if so on what terms?”
Calacanis said that he’d had initial discussions about funding companies.
Nevertheless, supporters of the pair continued to lavish praise and credit them with helping to avert further financial chaos.
“Plot twist: @Jason and @DavidSacks saw the impeding doom and rushed to a public platform to voice concerns and make sure our gov’t officials saw the 2nd and 3rd order effects,” another Twitter user wrote. “They and other VC’s might’ve saved us all.”
Many made memes praising Calacanis for his effort, which he retweeted.
But with more praise came more condemnation and mockery. One user even jokingly claimed to work for the Treasury Department before praising the duo’s tweets and podcast.
“I work in the Treasury and we were waiting for their emergency pod to drop so we could get direction on next steps,” @JoeBenjamin_ sarcastically said. “President Biden asked me to print out Jason’s tweets and read them aloud. The screaming was awkward but the President was convinced!”
Another user summed up the entire incident more succinctly: “Igniting a match in a room full of gasoline and then claiming you used the subsequent fire to signal to the fire department where to go.”
The issue so far has led not only to the collapse of SVB but has resulted in the shuttering of the Signature Bank of New York by the federal government in order to protect depositors.
While much of the financial crowd appears happy with the decisions, most everyday Americans continue to oppose the bailouts of irresponsible banks and major corporations.