Kevin O’Leary weighs in on Silicon Valley Bank Crisis

Following last week’s collapse of Silicon Valley Bank, businessman and reality TV star Kevin O’Leary said poor management was the leading reason for the bank’s downfall.

“Let me explain what happened last week. This is a combination, a powerful one, of idiot management with a board above them that was incompetent, or at least asleep at the wheel, because what happened here was just plain bad management,” Shark Tank star O’Leary told Yahoo Finance. “To make the bets they made means they know nothing about banking.”

Silicon Valley Bank confirmed that following the sale of securities, they had made a $1.8 billion loss as rising interest rates depreciated the value of their bonds.  The news led to the largest bank run in nearly a decade.  Investors attempted to withdraw $42 billion from the bank, which they could not cover.

“Basically, they took 90% of the depositors’ money and bet it long on 10-year Treasuries right when the Fed was raising rates. Yes, only an idiot banker would do that. But that’s what they did, massive risk,” said O’Leary, who is sarcastically nicknamed “Mr. Wonderful” for his abrasive persona on Shark Tank.

According to the FDIC, as of December 31^st 2022, Silicon Valley Bank was the 16^th largest bank in the United States with assets totaling $209 billion.  Silicon Valley Bank’s filings also confirmed that over 85% of Silicon Valley Bank deposits were uninsured at the end of 2022.

O’Learly strongly disagreed with regulators stepping in to save the bank.

“They blew themselves up. Let them fail,” O’Leary said.

O’Leary went on to say that the bank’s management should understand risk management and should have had a plan in place for a potential crisis. O’Leary also stated that “sophisticated investors” such as “hedge funds and venture capital firms” that could have handled the losses held the assets and would have gotten back 95 cents on the dollar from their uninsured deposits.

“They’re big boys. They understand risk mitigation. And either they were, or they weren’t doing their jobs,” O’Leary said.