After California state and federal regulators took over Silicon Valley Bank (SVB) in the wake of its collapse on Friday, the Federal Reserve, Treasury Department, and Federal Deposit Insurance Corporation (FDIC) assured insured depositors they would still have full access of up to $250,000 of their funds by Monday.
In a joint statement, the federal agencies promised taxpayers wouldn’t be responsible for any “losses associated with the resolution” of the bank. The Fed will also create a special loan program that protects other institutions from the fallout.
SVB’s collapse may not affect its clients and employees equally, especially when it comes to immigrant workers, many of whom rely on their jobs to maintain legal status in the U.S.
For example, if you’re employed on an H-1B visa, in addition to other common work visas, your immigration status and ability to remain in the U.S. depends on your employer.
Immigrant workers with H-1B and similar work visas are considered “out of status” in the U.S. if they are unemployed — even if they lose their jobs due to layoffs or hiring freezes. U.S. immigration law requires visa holders to be actively employed to maintain lawful status. And in most cases, these visa holders have a 60-day grace period to find a new job or change their visa type into a student or a tourist visa, before leaving the country. If they don’t leave, they’re at risk of being undocumented.
Tedi Konda, founder of the startup Top Challenger – a fitness social network – is one immigrant whose livelihood has been impacted, as have the livelihoods of his employees.
In a twitter thread, Konda explains that most of his team are “self-made immigrants […] who have risked everything” into Top Challenger. “The SVB situation has put everything we have built in jeopardy,” Konda tweeted, because they put their own money and fundraised from friends and family before even approaching any venture capitals/capitalists.
“We were of the mindset that we would get this as far as possible with our current means before bringing on any institutional capital,” tweeted Konda. It’s unclear how many people involved with Top Challenger were using work visas tied to their jobs at the company, however.
This collapse has also hit John Q. Koshravi’s immigration clients.
A California-based immigration lawyer, Koshravi posted a YouTube video detailing the impact of this fallout. “We have clients who had investments, for example, a scientific institution who had a huge grant and was bringing foreign researchers here” to work for them, said Koshravi. “They lost that money. Now the researchers don’t know what to do.”
“So, if you’re one of those people who are the investors, or the scientists, or workers who came here, you got to see what’s going on with your company,” and whether they’re going to continue running, said Koshravi. “If not, can you transfer your visa to another job? Or if needed, could you go back to school? Or just change status to a tourist visa that holds you over, if you don’t want to leave until you make a decision on what’s happening.”
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With SVB employing more than 4,000 people - many of whom were immigrants - its collapse also affects the overall job market within the venture capital sector. Fears of further financial turmoil, like the shutdown of Signature bank, could lead to hiring freezes and more layoffs in the tech industry, risking many immigrants’ legal statuses.
Amid SVB’s crisis, major tech companies like Meta are laying off 10,000 people and cutting 5,000 open roles as part of a “larger plan to flatten the company’s structure,” CEO Mark Zuckerberg said on Tuesday.
This is the second round of layoffs to hit Facebook’s parent company in the past few months. Meta cut 13% of its staff in November 2022.
Silicon Valley Bank was the 16th largest bank in the U.S., with over $200 billion in assets. It was one of the largest lenders to startups in the country. Many venture-backed companies also relied on SVB’s services to hold their operating cash, including payroll, in amounts that amounted frequently totaled more than the $250,000 that is typically insured by the FDIC. The agency said it will provide uninsured customers who deposited more than $250,000 a “receivership certificate” - which is pretty much an I-owe-you certificate – guaranteeing clients will get their money back as SVB’s assets are sold.
This lack of access to SVB’s banking services signal trouble for tech startups that relied on them. Some companies worry they will not be able to provide pay and services that support their employees and customers, including immigrants.
The bailout itself is facing bipartisan criticism from those who feel this move is really only benefiting the rich, as many high-profile start-up companies used SVB, including Airbnb, Square, Fitbit and Pinterest. Center for Economic and Policy Research Senior Economist Dean Baker said “we’re basically bending the rules to help out, in this case, these large uninsured depositors,” in a statement to Business Insider.
Despite the backlash, SVB may soon take on a new life if it finds a buyer.
As of today, regulators may make a second attempt to sell SVB after PNC financial group, who was initially interested to rescue-buy SVB, backed out. After conducting initial due diligence, PNC informed FDIC that it wouldn’t proceed to acquire SVB.