The now-defunct Silicon Valley bank was a “struggling hedge fund,” according to banking consultant Chris Whalen, president of Whalen Global Advisors.
“Why did they make long mortgage payments,” Whalen said in an interview on CNBC THURSDAY. “Because they knew that warrants and the things they really depended on for their income, which was tech companies, were going to have a bad year and knock one out of the park.”
“That’s not how you’re supposed to run a bank,” Whalen continued. “They deserve what they have.”
Most banks did the right thing, Whalen said.
“They bought risk-free stocks and then the Fed buried them,” Whalen added. “I think Elizabeth Warren, by the way, is absolutely right to criticize Powell.”
Whalen’s comments came ahead of a report from Bloomberg on Sunday that the Federal Deposit Insurance Corp. heads for a breakup of Silicon Valley Bank after being unable to find a suitor for the entire company. The agency is now looking to sell the defaulting lender in at least two parts, Bloomberg reports, citing people familiar.
Bloomberg reported Saturday that First Citizens BancShares (FCNCA) is considering an offer for Silicon Valley Bank.