Governor Phil Murphy responded to a question from Margaret Brennan of CBS News about the collapse of Silicon Valley Bank (SVB).
Two days earlier, on March 10, a shocking and sudden meltdown followed a runaway institutional investor runaway as depositors raced to withdraw their funds. The governor said the state is monitoring the situation to determine how New Jersey will be affected.
This is especially true in the innovation and start-up sectors, as SVB works closely with venture capital-backed start-ups and calls itself the ‘financial partner of the innovation economy’.
“Depositors and workers of companies that have deposits in that bank need to be top jobs,” Murphy continued. “New Jersey has a big innovation economy, so we spent the weekend trying to get ahead of this. There are a lot of tech companies, so our Economic Development Authority (NJEDA) has a package focused mostly on liquidity ready in case we need it.”
Just hours after that “Face the Nation” debuted, the governor and NJEDA announced a package of support for entrepreneurs and businesses in New Jersey affected by the SVB crisis.
- Reopening of NJEDA’s Entrepreneur Support Programis a $5 million initiative to provide guarantees to support the repayment of investor loans that have been prepaid for working capital purposes, helping investors to support businesses within their portfolios during this liquidity crisis. designed to encourage It provides his NJEDA guarantee of up to 80% on qualified new loans or convertible bonds to qualified businesses in New Jersey by qualified investors.
- Start of Angel Match Programis a $20 million program that helps early stage companies close funding gaps as they scale their operations and improve their products. The program accommodates direct investments of up to $500,000 and is designed to accelerate the growth of early stage companies. Funds can be used for product development, marketing, research and development, and other working capital needs.
- Special Board Meeting Scheduled to Consider Creation of $10 Million Emergency Liquidity Facility It reviews requests for financial assistance to New Jersey-based companies with deposits of $250,000 or more with the SVB. Supports affected businesses with loans of up to $500,000 and provides short-term financing options for up to 12 months. According to NJEDA, the meeting is scheduled for next week, with more details to be announced at a later date.
“All programs are designed to provide much-needed financial support to businesses facing liquidity problems due to the collapse of the SVB, allowing businesses to pay salaries, pay rent and continue day-to-day operations. ,” NJEDA said in a press release. “Both programs will launch on his NJEDA website earlier this week. Angel Match will begin on Monday, March 13th, pre-qualification will begin at 9am, and the Entrepreneurship Assistance Program will begin on March 15th. It will start on Wednesday.”
“More than ever, it is imperative that the state supports companies that contribute to the economy, innovation ecosystem, and urban dynamism,” Murphy said in a statement. program, we will keep our residents employed and continue to support businesses that are vital to the innovation ecosystem.”
NJEDA CEO Tim Sullivan said, “Today’s announcement is a testament to New Jersey’s commitment to entrepreneurial sector success, as the state faced economic uncertainty almost overnight. We are launching a program that will provide entrepreneurs with much-needed support during this time.
Kathleen Cobiero, NJEDA’s Chief Economic Transformation Officer, said: “Entrepreneurial businesses are important to the state’s economy as a whole. The suite of programs announced today will connect them with the working capital needed to keep businesses running and keep the innovation economy moving forward.”
TechUnited and NJEDA have partnered to determine how to help Garden State’s tech community. The effort includes research published on social media to determine how many New Jersey startups and VCs have been affected and exposed.
“NJ Startups/VCs Affected by SVB Issue: We are working with @APstartup. [Aaron Price, TechUnited president and CEO] @WeAreTechUnited will hold a forum as soon as possible to identify critical issues and how we can help,” NJEDA CEO Tim Sullivan tweeted on Friday. “Stay tuned. @GovMurphy and our team are committed to our entrepreneurial arm.”
Sunday’s announcement was praised by the New Jersey Chamber of Commerce.
“New Jersey is home to many startups and technology companies in need of assistance as a result of the events of last week. We applaud you for acting swiftly on , and creating a program that will serve as a lifeline for these businesses during these difficult days,” Tom Bracken, president and CEO of the New Jersey Chamber of Commerce, told NJBIZ in a statement. “These actions will ensure that New Jersey remains an innovative state with an economy focused on the jobs and industries of the future.”
During that “Face the Nation” appearance, Murphy reiterated concerns about potential fallout.
“Like when a bank of this size goes bankrupt,” Murphy said. “But I don’t think there’s any need to panic, and I’m sure authorities at the federal level are working hard to come up with some sort of solution sooner or later.”
Announcements from federal officials sooner or later actually happened. Shortly after the governor’s announcement, Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell and Federal Deposit Insurance Corporation Chairman Martin Gruenberg said Sunday night that the FDIC could complete the Silicon Valley Bank resolution. announced a series of actions, including the launch of a new Bank Term Funding Program (BTFP), which will provide a one-year loan to address liquidity pressures in banks. Up to $25 billion will be provided by the Exchange Stabilization Fund as a backstop for BTFP.
Yellen, Powell and Gruenberg said in a joint statement, “Depositors will have access to all funds beginning Monday, March 13.” Losses related to the Silicon Valley Bank resolution will be borne by taxpayers. There is nothing to do.”
‘A clear concern’
Friday’s SBV crackdown prompted the California Department of Financial Protection and Innovation to step in and shut down banks, using the FDIC to protect depositors.
The FDIC has established the Santa Clara National Deposit Insurance Bank (DINB) to facilitate these efforts.
FDIC protects customer deposits up to $250,000. However, many of his SVB clients, including tech companies and wealthy individuals, had far more assets in their accounts, which was part of the cause for great anxiety.
SVB is the 16th largest bank in the country, with total assets of approximately $209 billion and deposits of approximately $175.4 billion at the end of 2022.
Prior to Sunday evening’s announcement, Yellen also appeared on “Face the Nation.”
“Whenever a bank fails, especially a bank like Silicon Valley Bank with billions of dollars in deposits, that is clearly a concern.” They rely on access to their own funds to be able to pay the bills they have and employ tens of thousands of people across the country. and other parties have contacted us, so we’ve been working with banking regulators all weekend to develop appropriate policies to address this situation.”
Yellen was asked if he thought something similar could happen at other regional banks around the country.
“We want to ensure that problems that exist at one bank do not contagion to other healthy banks,” Yellen said, adding that the goal is always to use supervision and regulation to avoid contagion.
Brennan also asked the Treasury Secretary whether a government bailout was possible at all.
“I want to be clear that during the financial crisis, there were investors and owners of large organized banks who were bailed out,” Yellen said. “And the reforms that have been implemented mean that we are not going to do it again. But we care about our depositors and are focused on meeting their needs. “