In California, not enough liquidity, and a lot of water
There’s been plenty of panic, but perhaps not a full-blown meltdown just yet over the collapse of Silicon Valley Bank — the 16th largest bank in the U.S. known as a cornerstone of the start-up economy.
The toppling of the Santa Clara-based bank has meant companies and employees haven’t had cash for some expenses and payroll — a major hit at any time, but especially as the tech industry has struggled over the last year. It also prompted fears of a potentially massive blow to California’s economy, and the nation’s overall. By Sunday evening, though, federal officials allayed the worst of those fears by guaranteeing that all customers of the felled bank will have full access to their money.
- U.S. Treasury Secretary Janet Yellen: “Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”
That doesn’t include shareholders and certain unsecured debtholders, the press release states. Federal officials also removed the bank’s senior management.
But let’s back up a step. What happened? Depositors began withdrawing money just as the bank’s investments began to tank, CalMatters’ Ben Christopher reports.
That led to a California state agency shutting down the bank Friday and then that agency — the California Department of Financial Protection and Innovation — handing the bank over to a federal regulator, the Federal Deposit Insurance Corp.
Gov. Gavin Newsom welcomed the federal intervention, saying in a statement that it will have “profoundly positive impacts on California … ensuring our innovation economy can continue to grow and move forward.”
Meanwhile, a spokesperson for the Newsom administration’s Department of Finance said it was still far too early to say what the bank failure and its attendant economic impact might have on the state’s already dragging budget picture.
And while the FDIC insures deposits of up to $250,000, most of the bank’s accounts exceeded that. Garry Tan, president and CEO of the startup incubator Y Combinator in California, told NPR that the bank’s closure and no subsequent rescue would mean “a whole generation of startups will be wiped off the planet.”
That’d be a devastating blow for California, where state revenues are largely dependent on high earners, many of whom come from Silicon Valley.
And while the worst of the crisis seems to be averted, at least for now, finance watchers worry that other specialty banks might experience a run from depositors, too. That could lead to more small and mid-sized banks closing.
As one protection, the Fed also said Sunday that it’s creating a new “Bank Term Funding Program” that offers loans to banks under easier terms than are typically provided by the central bank, to protect uninsured deposits in the wider U.S. banking system.
For the record: Friday’s newsletter misspelled the name of Democratic Assemblymember Esmeralda Soria of Merced.
CalMatters covers the Legislature: With the state Legislature back in session, CalMatters has you covered with guides to keep track of your lawmakers, explore its record diversity, make your voice heard and understand how state government works. We also have Spanish-language versions for the Legislature’s demographics and the state government explainer.
We’re also celebrating Sunshine Week — a week devoted to renewing interest in making public records available, keeping government meetings open and increasing public participation in government. Read more about that here.
Other Stories You Should Know
1 Atmospheric rivers continue
It’s been a rainy weekend throughout California — and more is on the way.
Heavy mountain snow is expected, as well as another atmospheric river and snowmelt that could cause “considerable flooding below 5,000 foot elevation,” according to the National Weather Service.
That could batter towns already struggling with weather impacts, like Pajaro, in Monterey County, where a levee failure led to massive flooding and prompted hundreds of evacuations and dozens of rescue.
On Sunday, Gov. Gavin Newsom added six counties to the state of emergency declaration. That followed his Friday signing of an executive order that aims to make it easier to capture floodwater and store it underground for the future.
The declaration temporarily suspends some regulations, including California Environmental Quality Act reviews, to allow water suppliers and farmers to divert flood runoff, and allows some users to capture flows without water rights permits.
- Newsom: “This order helps us take advantage of expected intense storms and increases state support for local stormwater capture efforts.”
The order comes after Newsom has been repeatedly criticized, especially by Republican legislators, for not doing enough to divert water from recent storms for future use.
The State Water Resources Control Board also approved a request by the U.S. Bureau of Reclamation to take more than 600,000 acre-feet from the San Joaquin River to replenish groundwater that has been depleted by heavy agricultural pumping during three years of record drought, the Los Angeles Times reports. Some of the water will also be routed to wildlife refuges along the San Joaquin River starting next week.
But capturing water isn’t the only issue. The enormous snowpack in the Sierra Nevada also threatens more severe flooding in the coming months.
According to Daniel Swain, a climate scientist at UCLA’s Institute of the Environment and Sustainability, as of this weekend, the Southern Sierra appears to have its largest snowpack in recorded history.
- Karla Nemeth, director of the California Department of Water Resources: “We are really at the start of what will be a significant flood season as all of that snowpack, historic snowpack, begins to melt.”
2 Californians on DeSantis v. Trump
Republican voters in California, like party faithful across the country, are swinging rapidly toward favoring Florida Gov. Ron DeSantis in next year’s presidential primary — even though he hasn’t officially declared he’s running. That’s according to a February poll from the UC Berkeley Institute of Governmental Studies.
But at this weekend’s gathering of the California Republican Party’s most dedicated activists, volunteers and local officials — the biannual convention, which took place in Sacramento — former President Donald Trump is still unquestionably the man to beat as he seeks his party’s nomination for a third time, reports CalMatters’ Alexei Koseff.
Trump’s name and slogan were everywhere to be seen, on signs and apparel and campaign paraphernalia.
- Deborah Baber, a delegate from Ventura County: “Nobody comes up to me and says, ‘What about DeSantis?’”
For some in attendance, though, it was more about when DeSantis should run.
- Napa County Republican Party chairperson Doris Gentry joked: “When he went to the bathroom” at the Reagan Library “Reagan whispered, ‘It’s not your turn. Wait until 2028. Then in 2028, he’ll be jet fuel.”
Rep. Kevin McCarthy, the Bakersfield-area Congressmember who, after some party in-fighting, was elected Speaker of the U.S. House, gave the keynote speech on Saturday. He criticized Californians like Rep. Adam Schiff, a Democrat from Burbank who is running for US Senate next year, and Rep. Eric Swalwell, from Dublin, for their tenure on the House Intelligence Committee.
McCarthy also told California Republicans that he will not buckle in negotiations with President Biden about raising the government’s debt ceiling. The speaker said he will not support a tax increase, as Biden has proposed. Instead, he said if the president will cut spending, “I’m all ears.”
In other convention news: the California Republican Party voted to officially, and permanently, recognize the Log Cabin Republicans, which advocates for equal rights for LGBT+ Americans. The 38-year-old organization has unsuccessfully sought a charter from the state party several times in the past.
In other Golden State views of the federal government: Californians are increasingly at odds with decisions by the U.S. Supreme Court, according to surveys conducted by the Public Policy Institute of California (PPIC) in February 2023 and July 2022.
After the Dobbs decision that ended the constitutional right to abortion last June: 68% of Californians surveyed in July disapproved of the court overturning Roe v Wade. Californians also largely disagree with efforts to protect gun ownership — in February, 65% of California adults stated that controlling gun ownership was more important than protecting gun ownership rights.
PPIC said the growing divide between Californians and the court “has resulted in a steep drop — and record low — in the court’s approval rating.” Just 37% of California adults approve of the way the Supreme Court is handling its job, representing a 20 percentage-point drop in approval since PPIC last asked this question in 2017.
3 Reducing the textbook burden
College students in the state spend an average of $938 per year on course materials, according to a 2022 California Student Aid Commission survey.
Now, California Community Colleges hopes to ease that burden with $115 million in state funds set aside, report CalMatters’ College Journalism Network reporters Alyssa Story and Carmen González.
- Rebecca Ruan-O’Shaughnessy, a vice chancellor for educational services and support at California Community Colleges: “We really see textbooks as almost a symptom to a bigger issue around students’ financial stability, right? Especially the students we serve that come into our colleges, many of them are already at a deficit without sufficient financial resources.”
Each college would get $20,000 to design zero-textbook-cost programs and an additional $180,000 to implement them — plus some larger, competitive grants. But more detailed plans for how to best spend the money to help students is still up for debate. One idea: funding community colleges’ ability to produce their own textbooks.
Many community colleges already have some classes that use open educational resources. But those courses often fill up fast, Ruan-O’Shaughnessy said.
More on your money: California law now requires many businesses to add pay ranges to job descriptions. It also allows employees to ask for the salary range for their current job, and has some new requirements around how companies keep pay records and report pay information to the state.
But just because a law has taken effect doesn’t mean everyone understands how it’s supposed to work, or who it applies to.
CalMatters’ Grace Gedye answers some of the pressing questions we’ve gotten from readers, such as who can ask for a range, and how big a range can be.
CalMatters columnist Dan Walters: Gov. Gavin Newsom wants to tweak the state’s program for improving educational outcomes of at-risk students, but his proposal doesn’t fix its fundamental flaws.
It will cost California at least $150 billion to fully transition to zero emission vehicles — and without Proposition 30 it falls on state leaders to figure out how to pay the bill, write Mary Creasman, CEO of California Environmental Voters, and Irene Kao, executive director of Courage California.
Other things worth your time
8 people dead after two panga boats capsized near San Diego’s Black’s Beach // ABC News 10
Why some progressive groups are staying out of this L.A. City Council race // Los Angeles Times
Before disastrous flood, officials knew Pajaro River levee could fail but took no action // Los Angeles Times
San Diego County built fewer homes last year. Some cities built hardly anything // San Diego Union Tribune
Executive wants greater oversight powers for civilian board amid jail deaths — including over medical staff // San Diego Union Tribune
San Diego business groups balk at city’s new climate policy guide // Voice of San Diego
Found documents reveal history of local World War I veteran who lived in Bakersfield // Bakersfield Californian
Oroville Dam: DWR slightly increases release rate // KRCR
How fast did Fresno apartment rents rise in February? Faster than most big U.S. cities // San Luis Obispo Tribune
SF police buy from gun makers that broke federal law // San Francisco Standard
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