Wu’s dubious rent control spin | Fan of Contrarian Boston? Get your paid subscription now! | Epic bank failure, sleepy watchdogs | Picket line grandstanding | Big problem for biotech | Quick hits |
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A huge, growing mess: Life-science firms hammered by Silicon Valley Bank’s implosion
You wouldn’t know it by its name, but the California-based bank whose collapse has become a huge story is a major lender to the life sciences industry.
And the FDIC’s seizure of Silicon Valley Bank after an old-fashioned bank run could spell trouble for our local lab and biotech sector, the leading economic growth engine in Greater Boston.
Local media coverage of the bank’s meltdown has focused on its impact on the tech industry and startups, which is all nice and fine.
But that misses maybe the most important issue for the Boston area, for Silicon Valley Bank has been aggressively pursuing financing deals in the life sciences, and claims to count half of all companies in the sector as clients.
Silicon Valley Bank’s headquarters in sunny California/By Coolcaesar
Six of the bank’s 14 branches are in the Boston area, while Katherine Andersen, the head of SVB’s life science and health care lending practice - and a member of the bank’s board - is based in Boston as well.
The bank’s clients include Cambridge-based Editas Medicine, which specializes in CRISPR gene editing technology, and Zymergen, acquired late last year by Boston-based Ginko Bioworks.
The Silicon Valley Bank disaster comes as new lab projects face a tougher time landing financing, while biotech startups, which have been a driving force behind all that new construction, struggle to raise cash as well.
Ted Tye, managing partner and co-founder of National Development, believes other lenders will step up, despite what he calls a “tough market.”
“They were deeply involved in financing of the life science area,” Tye noted.
But even more damaging may be the potential loss of billions in cash stashed by both life science and tech executives and companies in SVB’s vaults, with the FDIC only covering up to $250,000 per account.
The average customer with deposits above the FDIC threshold has $4.2 million in the bank, writes Marc Rubinstein, a former hedge fund manager who publishes the Net Interest newsletter. Just $21 billion of the bank’s $173 billion in deposits are insured by the feds.
Even with plans by the feds to try and offer some compensation for that vast ocean of uninsured cash, we are still looking at a whole lot of financial pain and economic turmoil.
“I am more worried about those firms that may have lost money or lost financing in the collapse than those looking for new funding,” Tye said.
Here’s betting we will be hearing a lot more about Silicon Valley Bank and the fallout from its collapse in the weeks and months ahead.
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Message from top Silicon Valley Bank executive: Time to “roll up our sleeves”
Speaking of Katherine Andersen, SVB’s Boston-based life sciences lending chief took to LinkedIn to offer some inspirational words to colleagues and supporters of the beleaguered bank.
“I’m not ready to share what’s in my heart and mind around the happenings of the past 3 days,” Andersen wrote on Saturday afternoon.
“Rather, in true SVB fashion, we roll up our sleeves,” she wrote, while looking ahead to better days.
“How poetic would it be to rise through the ‘hard hard’ just as we’ve enabled so many of our incredible clients over the past 40 years?”
Where were the watchdogs? Silicon Valley Bank’s implosion raises big questions
We are not just talking about the feds here, but also the media and the ratings agencies as well.
Apparently, they were dozing, if not sound asleep, in the runup to the biggest bank failure since the Great Recession.
What’s startling is the lack of any warning signs that serious trouble might be brewing with the bank’s finances and the suddenness of its collapse.
On Tuesday, Silicon Valley Bank CEO Greg Becker was telling investors at a conference how he unwinds by riding his bike on the scenic byways of Northern California.
Did the FDIC drop the ball on Silicon Valley Bank?
On Wednesday, SVB filed plans to raise $1.25 billion through a public offering of its stock, talking up its experience at “navigating market cycles” and touting how the bank is “well positioned to service our clients through market volatility.”
Two days later, the bank was in receivership, the FDIC having seized control.
Bank runs are obviously unpredictable, but also pretty rare in modern times. But SVB’s sudden bellyflop into bankruptcy raises the question of whether federal banking regulators truly had a firm grasp on what was happening inside the bank.
The performance of the media and the ratings agencies was far worse. There are now a trillion articles on Silicon Valley Bank, but see if you can find any serious look at the bank’s finances before the feds seized the bank on Friday.
And what of the ratings agencies? Moody’s and S&P Global gave Silicon Valley Bank an investment grade rating right up until Wednesday, two days before the federal takeover, according to Forbes.
Sorry, but that’s pathetic.
Bitter debate: Wu’s plans for rent control board puts landlords on edge
Boston Mayor Michelle Wu’s proposal to slap a cap on rent increases has sparked furious debate.
But a key part of Wu’s plan to cap rent hikes at 10 percent or below has gotten little or no coverage in the local media - and that would be her plans for a rent control board to police the rental market.
Which then raises a key question: Are we looking at a bureaucratic nightmare in the making, or just a rent control bogeyman?
Wu’s plan, which just cleared the City Council, calls for the establishment of a rent control board which would have power to decide if a landlord’s planned rent increase meets a rather ambiguous “fair return” standard.
That’s according to top real estate lawyer Richard Vetstein, who does a deep dive on Wu’s rent control plan in The Massachusetts Real Estate Blog.
Boston Mayor Michelle Wu
That means the city’s rent control board could override rent increases, even if they fall within allowed 6-10 percent. There are also “just cause” eviction protections that would make it either nearly impossible or prohibitively expensive to evict tenants for anything other than nonpayment.
“The Wu administration flat out misled and lied to the public about the details of her rent control plan. The devil is always in the details,” Vetstein writes.
No, no, no, a city official, who would only agree to talk on background, told Contrarian Boston.
Landlords would not have to go before the board to increase rents, as long as they stayed within the allowed range, the spokesperson said.
And the 6 to 10 percent cap could only be lowered through state legislation.
Well, if that is indeed the case, there is no better way for the Wu administration to make its case than by having the mayor, or Sheila Dillon, the city’s housing chief, to go on the record and say just that.
Consider it an open invitation here at CB.
By David Mancuso
One has come to expect headline chasing from Markey and Warren. But now it looks like Katherine Clark is getting in on the action as well.
Michael Jonas at Commonwealth Magazine reports that these prominent members of the Massachusetts congressional delegation spoke in support of the recent spate of illegal teachers’ strikes.
All of which leaves Gov. Maura Healey in an awkward spot, with our state’s new chief executive having shown clear leadership and responsible resistance to the walkouts.
Gov. Maura Healey
While it’s certainly entertaining to watch a group of pols throw one of their own under the bus for a national headline, there is a bigger issue at stake here.
Lest we forget, Markey is a U.S. senator. And he showed up to support a group breaking the law, and his congressional colleagues were more than happy leap onto the broken law bandwagon with him.
Few are naïve to the political reasons for such publicity seeking. Yet when it comes at the cost of constituents which, in this case are students, it’s reasonable to question motives.
Contrarian Boston reached out to the other members of our state’s congressional delegation to see what they thought of the teachers’ strikes and the picket line publicity grabs by Markey, Warren and Clark.
And we also asked what they thought about the Massachusetts Teachers Association’s push to legalize strikes by its members, and whether they somehow see these strikes as directly and tangibly benefiting the academic performance of students.
Let’s just say their assorted spokespeople weren’t tripping over themselves to get back to us.
To be fair, we also pinged Markey, Warren, and Clark too, asking them how they thought strikes helped students in the classroom. More crickets. But this time the silence seems to speak louder. Headlines are one thing, actually engaging in dialogue afterward is another.
The optics suggest Sens. Markey and Warren and Rep. Clark appear to have more interest in raising their profiles with progressive Dems than with the impact of the strikes on our state’s struggling school children; or, for that matter, supporting a ground-breaking governor of their own party who is, so far, defining herself as a leader on critical education issues.
Encouraging law breaking isn’t a trifle. Putting adults before students for political expedience is bad enough, but at a time of such deep political divisions it is even more concerning.
Our new governor seems to understand these points. Markey, Warren and Clark? Maybe not so much.
Why Contrarian Boston will require paid subscriptions to access all content starting March 15th
We launched Contrarian Boston in November 2021 with the hope of shaking things up a bit.
Tired of what we saw as conformist local journalism, we were intent on filling a void in our local media ecosystem by offering critical, consistent, common-sense, and fair coverage of our local corporate, governmental, and media institutions.
At Contrarian Boston, we have focused our coverage on the issues that demand more thoughtful reporting. Reflecting our journalistic background, Contrarian Boston has indeed focused on regional development, real estate and housing issues.
But we’ve also tackled other stories, such as our crumbling transportation infrastructure, our changing energy needs, our underperforming educational system, and the rise of ideological extremists in our state political parties.
What we have found has been heartening: An appetite for a new source of news, analysis and opinion that does its best to call things as they are, regardless of whether it annoys the players in our state’s insider-dominated political culture.
Our list of potential stories is overflowing with tips from readers, more than a few of whom we have gotten to know over the past 15 months. Our stories and reporting have been cited by The Boston Globe, Boston Herald, CommonWealth Magazine, and State House News Service.
To date, Contrarian Boston has been a labor of love, but like you, we need to pay the bills as well.
The reporting, writing and editing needed to produce Contrarian Boston two to three times a week has essentially become a full-time job.
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Sincerely, Scott Van Voorhis
Bank bailouts stink, but financial panics are worse: '“Bailout talk roils Washington after Silicon Valley Bank’s collapse” Washington Post
What a trio - China brokers deal between the Saudis and the Iranians: “Chinese-Brokered Deal Upends Mideast Diplomacy and Challenges U.S.” New York Times
Um, this doesn’t sound good: “MBTA leaning toward ‘new normal’ of lower ridership” CommonWealth Magazine
What kind of jerk robs the mailman? “Postal service offers $50,000 reward in search for man who allegedly robbed letter carrier in Randolph” Boston Globe
A lot to sort out here: “‘This is our community:’ Locals push back on messaging on community violence” Boston Herald
Only in Cambridge - city tries to revive some very ancient names: “You live in Anmoughcawgen” Cambridge Day