“There’s a contagion effect,” says said Ken Rosen at UC Berkeley. “This could be the beginning of something bigger. It’s all about confidence.”
. Tax collections from high earners that drive revenue are falling as the stock market flounders, with Gov. Gavin Newsom projecting a $22.5 billion budget deficit in the coming fiscal year.
The Bay Area is now facing a broad correction to the over-exuberance of the free-money era that fueled explosive growth in Silicon Valley, the tech sector and speculative investments like cryptocurrency, said Ken Rosen, chair of the real estate department at UC Berkeley. While he expects the problems at SVB and Silvergate Capital Corp.
Those concerns drew together an unlikely alliance of politicians and venture capitalists — from Representative Ro Khanna, a Bernie Sanders acolyte whose Silicon Valley district includes SVB, to Kevin McCarthy, the pro-Trump Republican who leads Congress. They ultimately got what they wanted from the Biden administration: a plan on Sunday night that will enable Silicon Valley Bank customers to get back all their money, easing concerns of a cash crunch rippling through the state.
Beyond the shakeout for the technology industry, the collapse of Silicon Valley Bank could still have broader ramifications for industries such as real estate, where office landlords are already facing falling demand and property values. In many cases, SVB provided letters of credit as substitutes for renters’ deposits.
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