Raphael Stevens

I traveled to Argentina for two weeks in February. While in Buenos Aires, the capital, I learned of a system of multiple exchange rates for Argentine pesos.
The “blue dollar” exchange rate set by the black market will extend U.S. tourists’ money twice as far as the officially quoted rate. You can legally access that rate by wiring yourself money.
The government introduced a preferential tourist rate — Dólar MEP — for some credit card transactions in November. But there are reasons to stick to cash when possible.

The author in Argentinian Patagonia in February 2023. Here, the Spegazzini Glacier cascades into Lago Argentino, the third largest lake in South America.

A legal exchange rate influenced by the black market

A worker lays out 500 Argentine peso note sheets on Aug. 14, 2020 in Buenos Aires. To cope with one of the world’s highest inflation rates, Argentina produces money 24 hours a day.
Ricardo Ceppi | Getty Images News | Getty Images

In Argentina, waiting for a cash transfer isn’t strange at all. In fact, it’s custom — and an oft-recommended way to stretch your dollar there.
There are two main drivers: While the broader world has become increasingly cashless, cash is king in Argentina. Hyperinflation has also distorted the nation’s currency market and led to the creation of multiple exchange rates.

When I visited in February, the “official” exchange rate — the one quoted by online currency calculators — gave U.S. tourists about 190 Argentine pesos per dollar. But the unofficial, “blue dollar” rate was nearly double that.

El Caminito, an “open-air museum” of colorful houses in the La Boca neighborhood of Buenos Aires.
Greg Iacurci

Put another way: Your money goes almost twice as far with the “blue dollar” exchange rate. This rate is set by underground exchange houses operating on the black market. Western Union is a legal workaround to get a similar rate.
You won’t get the better conversion when transacting at an airport counter and, depending on the situation, may not when withdrawing from an ATM or using a credit card.
I learned this the hard way, only discovering how to get the better rate after exchanging $150 at the airport — and getting about half the pesos I otherwise could have.
Hence my trip to Western Union a day later, where, after watching a short video on how it works, I exchanged $350 for about 128,000 Argentine pesos on Feb. 13 — a rate of 366 pesos per dollar.

The author’s digital Western Union receipt after picking up cash in Buenos Aires, Argentina. The exchange rate for the transaction was 366 Argentine pesos per U.S. dollar, almost double the official exchange rate (190 pesos per dollar) at the time.

These dual rates aren’t a new phenomenon in Argentina, or Latin America more broadly, economists later told me. But for me — a first-timer to South America who was unaware of this system— navigating them was curious and extraordinary.
“If you go back 40 years, you’d find multiple exchange rates in Argentina,” said Monica de Bolle, senior fellow at the Peterson Institute for International Economics and a professor of Latin American studies at Johns Hopkins University. “It’s just something that keeps coming back.”

Why Argentina has more than one exchange rate

Argentina’s national flag.
Greg Iacurci

To have multiple exchange rates is to, essentially, not be able to agree on a currency’s value — a perhaps strange concept for Americans, whose dollar is the world’s de facto reserve currency due to its stability.
But in contrast, Argentina has a long history of high inflation and hyperinflation that, experts said, largely stems from economic mismanagement.
In 2022, the nation’s inflation rate hit 95%, a three-decade high and among the most rapid in the world. For perspective, pandemic-era inflation in the U.S. peaked at about 9% — or a pace 10 times slower.
Argentina is now back in hyperinflation territory, de Bolle said. At the current pace, Argentines’ money loses about half its value in a year, which decimates savings held in pesos.
As a result, Argentines seek out a stable currency for their savings so it doesn’t lose value virtually overnight. And the U.S. dollar is that preferred store of value.

If you go back 40 years, you’d find multiple exchange rates in Argentina. It’s just something that keeps coming back.

Monica de Bolle
senior fellow at the Peterson Institute for International Economics

The government, however, imposes foreign currency controls on residents, who are restricted from acquiring more than $200 a month (in U.S. dollars) via a bank.
Anyone who wants to save more cash in U.S. dollars must turn to the black market, which sets the “blue dollar” exchange rate.
The “blue dollar” rate is the one received when buying and selling a physical dollar at a “cueva” — Spanish for “cave” — which is basically a clandestine exchange house. Some are readily advertised by people on the street yelling “cambio,” which means “exchange” in Spanish.
“It’s going to be some random office in a building and every Argentinian who has any money at all does this a few times a week,” Devon Zuegel, a writer and software engineer who lives part of the year in Argentina, said on a recent economics podcast.
Ultimately, the exchange rates are a story of supply and demand among Argentines, said Jonathan Petersen, a senior markets economist and foreign exchange specialist at Capital Economics.

A guitar player in the San Telmo neighborhood of Buenos Aires.
Greg Iacurci

The black market rate reflects the value residents place on stability. The peso premium they’re paying for U.S. dollars relative to the official exchange is the rough equivalent of a year’s worth of recent inflation, Petersen said — almost a no-brainer for any local intent on saving for the longer term.
“Every day, every week, every month, the peso will buy you less and less,” Petersen said. “I think the fact that there’s more than one exchange rate is the symptom of this monetary mayhem.”
While these cuevas (the private exchange houses) are technically illegal, the government largely seems to turn a blind eye. A big chunk of Argentina’s national debt is denominated in U.S. dollars, meaning that, in simple terms, the government needs a constant flow of dollars to be able to pay its debt, de Bolle said.
What’s more, a more favorable exchange rate attracts American tourists, who bring their U.S. dollars into the country, with the added benefit of spending locally and supporting the economy, she said.

Argentina is a ‘cash-demanding’ environment

Ricardo Ceppi | Getty Images News | Getty Images

Meanwhile, Argentines are distrustful of banks and financial institutions, economists said.
They fear another “corralito,” or a “little corral,” a period in the nation’s history when the government seized deposits during economic crises.
In 1982 and 1989, for example, it froze bank deposits and confiscated savings to finance operations and pay debt. In 2001, the government restricted access to deposits. The freeze lasted a year; when customers regained access to funds, they discovered their dollar deposits has been converted to pesos, which had depreciated significantly in value.
So, many Argentines like dealing in cash and stashing it away from banks, experts said. Sometimes, that influences behavior that might seem strange to a foreigner. For example, some lower-earning Argentines use part of their paychecks to buy a pallet of bricks; they can build a house brick by brick, which they view as a better store of wealth than holding on to pesos, Zuegel said.
For tourists, this distrust of financial institutions is important to know because many merchants may not accept credit cards as a result — meaning visitors should expect to need some cash for their purchases.
“Travelers from the U.S., Canada and Europe are incredibly accustomed to flipping out their debt card and tapping the credit card charge machine,” said Jed Rothenberg, director of LandingPadBA, a travel agency focused on Buenos Aires. “You come to Argentina and it’s the complete opposite.”
“You’re in a very cash-friendly environment,” Rothenberg said. “Cash-demanding, in fact.”

How to get a good exchange rate in Argentina

The author on a hike near El Chaltén in Patagonia. The town is known as the trekking capital of Argentina.

There are a few different schools of thought when it comes to exchanging money in Argentina.
Western Union is among the most common and best ways for tourists to access a favorable exchange rate for cash, travel experts said.
Here’s how the process works, in simple terms: Americans forward cash to themselves online — via a bank account, debit or credit card — and opt for pickup at a Western Union branch in Argentina. The cash is then acquired in Argentine pesos.
The exchange rate offered by Western Union has been similar to that of the “blue dollar” rate on the black market. Acquiring cash this way is legal.
A Western Union spokesperson was unavailable to comment by press time on how the company is able to offer an equivalent exchange rate.
Visitors should be aware of potential snags: Lines and wait times can be long — even a few hours, locals told me — depending on the branch and time of day. It also may take a few days to access funds once sent, depending on delivery method. And certain branches may impose a dollar limit per transaction and there will likely be transaction fees. You’ll also need to show your passport for pickup.

Every day, every week, every month, the peso will buy you less and less. I think the fact that there’s more than one exchange rate is the symptom of this monetary mayhem.

Jonathan Petersen
senior markets economist at Capital Economics

Some tourists also go to cuevas. While not legal, they largely operate in plain view and typically offer the best exchange rates — and, as stated earlier, are like the country’s worst-kept secret.
Tourists who opt for this route may be best served by asking their hotel, Airbnb host, tour operator or other trusted confidant for a recommendation on where to go, experts said. Tourists typically get the best exchange rates with crisp $100 bills; it may be harder to transact with worn-out or smaller bills.
I accompanied a friend to a cueva in El Calafate, a Patagonian town in the southwest that serves as a gateway to Glaciar Perito Moreno in Parque Nacional Los Glaciares. The cueva, recommended by our tour guide, was tucked away on the second floor of an upscale steakhouse, in a side room where a lone woman diligently traded bills from behind a fold-out desk.  
However, “the black market has risk,” cautions Sandra Borello, president of Borello Travel & Tours, a tour operator that specializes in travel to South America.

Glaciar Perito Moreno. The glacier, part of the Southern Patagonian Ice Field, is in Argentina’s Santa Cruz Province in the southwest.
Greg Iacurci

Aside from it being illegal, there’s a chance tourists may get pesos that are fake or out of circulation, for example, she said. It may also make some tourists uneasy to carry hundreds of dollars in cash on them.
“I wouldn’t recommend that at all,” Borello, who is from Argentina, said of the cuevas.
The exchange rate at a cueva also isn’t much better than at a Western Union, and likely wouldn’t make much of a financial difference for someone visiting the country for a week or two, Borello said.
When she travels to Argentina, Borello pre-buys as much as possible — whether tours, hotels or otherwise — to avoid needing too much cash on the ground. For everything else, restaurants and other merchants are typically receptive to accepting U.S. dollars as payment in lieu of pesos, and generally give customers a good exchange rate, she said. Ask if you can pay with U.S. dollars, what the dollar-equivalent cost will be, and what (if any) change you’ll get in pesos, she said. (Bear in mind: The merchant may not speak English. And, as with the cuevas, crisp bills are best.)
In addition, book an airport transfer ahead of time to avoid needing cash right away, she recommended.

Tourist credit cards have a new preferential rate

You may also not need as much cash as you may think, Borello added. The country is relatively inexpensive for U.S. tourists, she said.
Further, Argentina’s central bank introduced a preferential exchange rate — the Dólar MEP — for tourists in November. Known as the “foreign tourist dollar,” the MEP applies to credit card transactions. It’s currently only available for Visa and Mastercard purchases.
As of March 9, Dólar MEP was trading at 376 Argentine pesos per dollar, on par with the black market rate. The “official” rate was 200 pesos per dollar.
Aside from trying to boost tourism, the government likely sanctioned the preferential rate partly as a way to help increase transparency into business’ revenues — which is harder with all-cash transactions — and thereby increase tax collection, economists said.

Tango dancers in the San Telmo neighborhood of Buenos Aires.
Greg Iacurci

“To have a foreign-issued credit card give you a rate closer to the blue, we’ve been waiting for this for years,” Rothenberg said.
However, taxis don’t accept credit cards, and many other merchants may not. You’ll also need cash for restaurant tips. Credit card transactions also generally come with steep fees that can run users an additional 15% to 25%, though it’s at merchants’ discretion, Borello said.
As with all international travel, credit card users would be well served to consider a card without foreign transaction fees, too.
It’s somewhat unclear as to whether tourists are getting the preferential Dólar MEP rate for ATM cash withdrawals. Locals offered conflicting reports. A Visa spokesperson confirmed ATM withdrawals would get the better exchange rate. A Mastercard spokesperson didn’t respond to a request for comment.
The money situation is dynamic and rules could change quickly, travel experts said.

The cruel irony of the black market

There’s a cruel irony to Argentines’ use of the black market.
They turn to cuevas to convert their pesos to U.S. dollars out of financial necessity — but they may also be exacerbating hyperinflation, Petersen said.
All things equal, if many people are selling Argentine pesos to buy dollars, the dynamic puts downward pressure on the peso. Currency depreciation makes imports a bit more expensive, which then pushes up the inflation rate for those imported goods, causing Argentines to then worry more about inflation and nudging them to buy dollars with even more frequency.

Of course, this is just one factor that might feed into runaway prices in Argentina. But it helps illustrate the bind residents are in.
“These things are ultimately costly, because they create a lot of distortions in the economy,” de Bolle said of multiple exchange rates.
“It’s a shame, because it’s such a great country.”
To that, I can wholeheartedly attest.

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The company’s downward spiral began late Wednesday, when it surprised investors with news that it needed to raise $2.25 billion to shore up its balance sheet.
“This was a hysteria-induced bank run caused by VCs,” Ryan Falvey, a fintech investor of Restive Ventures, told CNBC.
All told, customers withdrew a staggering $42 billion of deposits by the end of Thursday, according to a California regulatory filing.
Now, those who remained with SVB face an uncertain timeline for retrieving their money.

A Brinks armored truck sits parked in front of the shuttered Silicon Valley Bank (SVB) headquarters on March 10, 2023 in Santa Clara, California.
Justin Sullivan | Getty Images

On Wednesday, Silicon Valley Bank was a well-capitalized institution seeking to raise some funds.
Within 48 hours, a panic induced by the very venture capital community that SVB had served and nurtured ended the bank’s 40-year-run.

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Regulators shuttered SVB Friday and seized its deposits in the largest U.S. banking failure since the 2008 financial crisis and the second-largest ever. The company’s downward spiral began late Wednesday, when it surprised investors with news that it needed to raise $2.25 billion to shore up its balance sheet. What followed was the rapid collapse of a highly-respected bank that had grown alongside its technology clients.
Even now, as the dust begins to settle on the second bank wind-down announced this week, members of the VC community are lamenting the role that other investors played in SVB’s demise.
“This was a hysteria-induced bank run caused by VCs,” Ryan Falvey, a fintech investor at Restive Ventures, told CNBC. “This is going to go down as one of the ultimate cases of an industry cutting its nose off to spite its face.”
The episode is the latest fallout from the Federal Reserve’s actions to stem inflation with its most aggressive rate hiking campaign in four decades. The ramifications could be far-reaching, with concerns that startups may be unable to pay employees in coming days, venture investors may struggle to raise funds, and an already-battered sector could face a deeper malaise.

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Shares of Silicon Valley Bank collapsed this week.

The roots of SVB’s collapse stem from dislocations spurred by higher rates. As startup clients withdrew deposits to keep their companies afloat in a chilly environment for IPOs and private fundraising, SVB found itself short on capital. It had been forced to sell all of its available-for-sale bonds at a $1.8 billion loss, the bank said late Wednesday.

The sudden need for fresh capital, coming on the heels of the collapse of crypto-focused Silvergate bank, sparked another wave of deposit withdrawals Thursday as VCs instructed their portfolio companies to move funds, according to people with knowledge of the matter. The concern: a bank run at SVB could pose an existential threat to startups who couldn’t tap their deposits.
SVB customers said CEO Greg Becker didn’t instill confidence when he urged them to “stay calm” during a call that began Thursday afternoon. The stock’s collapse continued unabated, reaching 60% by the end of regular trading. Importantly, Becker couldn’t assure listeners that the capital raise would be the bank’s last, said a person on the call.

Death blow

All told, customers withdrew a staggering $42 billion of deposits by the end of Thursday, according to a California regulatory filing.
By the close of business that day, SVB had a negative cash balance of $958 million, according to the filing, and failed to scrounge enough collateral from other sources, the regulator said.
Falvey, a former SVB employee who launched his own fund in 2018, pointed to the highly interconnected nature of the tech investing community as a key reason for the bank’s sudden demise.
Prominent funds including Union Square Ventures and Coatue Management blasted emails to their entire rosters of startups in recent days, instructing them to pull funds out of SVB on concerns of a bank run. Social media only heightened the panic, he noted.
“When you say, `Hey, get your deposits out, this thing is gonna fail,’ that’s like yelling fire in a crowded theater,” Falvey said. “It’s a self-fulfilling prophecy.”
Another venture investor, TSVC partner Spencer Greene, also criticized investors who “were wrong on the facts” about SVB’s position.
“It appears to me that there was no liquidity issue until a couple of VCs called it,” Greene said. “They were irresponsible, and then it became self-fulfilling.”

‘Business as usual’

Thursday evening, some SVB customers received emails assuring them that it was “business as usual” at the bank.
“I’m sure you’ve been hearing some buzz about SVB in the markets today so wanted to reach out to provide some context,” one SVB banker wrote to a client, according to a copy of the message obtained by CNBC.
“It is business as usual at SVB,” the banker wrote. “Understandably there may be questions and I want to make myself available if you have any concerns.”
By Friday, as shares of SVB continued to sink, the bank ditched efforts to sell shares, CNBC’s David Faber reported. Instead, it was looking for a buyer, he reported. But the flight of deposits made the sale process harder, and that effort failed too, Faber said.

A customer stands outside of a shuttered Silicon Valley Bank (SVB) headquarters on March 10, 2023 in Santa Clara, California.
Justin Sullivan | Getty Images

Falvey, who started his career at Wells Fargo and consulted for a bank that was seized during the financial crisis, said that his analysis of SVB’s mid-quarter update from Wednesday gave him confidence. The bank was well capitalized and could make all depositors whole, he said. He even counseled his portfolio companies to keep their funds at SVB as rumors swirled.
Now, thanks to the bank run that ended in SVB’s seizure, those who remained with SVB face an uncertain timeline for retrieving their money. While insured deposits are expected to be available as early as Monday, the lion’s share of deposits held by SVB were uninsured, and it’s unclear when they will be freed up.
“The precipitous deposit withdrawal has caused the Bank to be incapable of paying its obligations as they come due,” the California financial regulator stated. “The bank is now insolvent.”

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As Silicon Valley Bank was shuttered by the FDIC on Friday, investors and companies with money locked up expressed dismay at how it went down.
Many venture capitalists likened the collapse to a Twitter-led bank run, based more on unjustified fear than reality.
Investors were urging their portfolio companies to allocate money to other banks so they could pay their employees on time.

Nikolas Kokovlis | Nurphoto | Getty Images

Venture capitalists and technology executives are scrambling to make sense of and account for the potential repercussions of the sudden implosion of Silicon Valley Bank on Friday.
The Federal Deposit Insurance Corporation, or FDIC, said Friday that U.S. federal regulators shut down Silicon Valley Bank, the premier financial institution for Silicon Valley tech startups for the past 40 years. The collapse of SVB represents the biggest banking failure since the 2008 global economic crisis.

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Numerous venture investors and technology executives expressed shock to CNBC, some comparing SVB’s debacle to that of Lehman Brothers, which filed for bankruptcy in 2008. Many of the investors and execs requested anonymity as they were discussing matters that might affect their firms and employees.
The general sentiment is that SVB did a poor job communicating to clients when it announced Wednesday that it would be raising $500 million from venture firm General Atlantic while also unloading holdings worth roughly $21 billion at a loss of $1.8 billion. One VC said that SVB announcing that it’s raising money while at the same time essentially saying that everything is “fine” seemed to trigger people’s memories of Lehman Brothers, who they remember acted similarly at the time.
“So, unfortunately, they repeated mistakes in history, and anyone who lived through that period said, ‘Hey, maybe they’re not fine; we were told that last time,'” the VC said.
SVB attempted to quell fears that it was financially unsound as late as Thursday evening.
In one email that SVB sent to a customer, a copy of which CNBC obtained, the bank characterized the rumors about its problems as “buzz about SVB in the markets” and attempted to reassure the customer that it “launched a series of strategic actions to strengthen our financial position, enhance profitability and improve financial flexibility now and in the future.”

“It is business as usual at SVB,” the bank said in the email to startups. It added toward the end of the email, “Moreover, we have a 40 year history navigating bear and bull markets and have developed leading risk mitigation capabilities to ensure our long term financial health.”
Another venture capitalist said that a representative from SVB called their firm on Thursday to assuage their fears but that the firm’s CFO “didn’t feel that it was reassuring, to say the least.”
However, one tech CEO was sympathetic to the bank’s plight, asking, “What message would ever reassure you that your money is safe when other people are telling you that there’s a fraud happening? There’s no message, because it’s not a messaging thing. It’s the prisoner’s dilemma thing … Everybody at that moment now has to try and imagine what everybody else is going to do.”
When asked for comment, a representative from SVB referred CNBC back to the FDIC announcement, adding, “The FDIC will share additional information when it is available.”

‘A Twitter-led bank run’

Several venture capitalists quickly told their portfolio companies to move money out of Silicon Valley Bank to other banks, including Merrill Lynch, First Republic and JP Morgan, so they could pay their employees on time next week.
One AI startup executive said the company’s chief financial officer was quick to handle the situation and it had enough money to pay employees on time. Still, the collapse of SVB left a poor taste in the mouth of the executive, who said the bank’s collapse feels like “unnecessary hysteria.”
“It makes me disappointed in our ecosystem,” the startup CEO said.
Many venture capitalists echoed the startup CEO’s sentiment that the SVB collapse felt like a self-fulfilling prophecy created by unnecessary panic. Some likened it to a “Twitter-led bank run,” as the tech community took to social media to spread information, and, often, panic. One prominent technology CEO told CNBC that numerous startup founders were using Twitter and Meta’s communication service WhatsApp to send each other rapid-fire updates.
One venture capitalist said it was as if someone screamed “fire in a crowded theater where there is no fire.”
“And then when everyone rushes to the door, they knock over the oil lamp and there is a fire and it burns down the building,” the venture capitalist said. “And then that same person [is] standing outside being like, ‘See, I told you so.'”

‘Everyone is scrambling’

As the panic spread and the FDIC stepped in, companies with funds locked up were reporting problems getting cash out and making payroll.
One startup founder told CNBC that “everyone is scrambling.” He said he has talked to more than 30 other founders, and that both big and small companies are being affected.
The founder added that a CFO from a unicorn startup has tried to move more than $45 million out of SVB to no avail. Another company with 250 employees told the founder that SVB has “all our cash.”
Another founder said her company’s payroll provider moved from SVB to another bank on Thursday, which meant payroll did not run for employees as planned Friday morning. She said she has been over-communicating with employees to alleviate their concerns as much as possible, and she is expecting payroll to hit by the end of the day Friday.
In case it doesn’t, the company is planning to wire employees who need immediate spot coverage the funds directly, according to an internal memo viewed by CNBC.
“A lot of people live down to the dollar in terms of budgeting, and they cannot afford 24-hour delay in their payroll,” the founder said.
Payroll service provider Rippling notified some customers Friday that their payments would be delayed due to the bank’s “unexpected solvency challenges,” CEO Parker Conrad wrote in a tweet. The company accelerated a plan to switch from SVB to JPMorgan Chase but not in time to avoid stalled payments. 
Aaron Rubin, CEO of e-commerce logistics startup ShipHero, said he was forced to manually pay some employees Friday, as his company relies on Rippling for payroll services. 
“We found out this morning that no one got paid,” he said. “We started to manually pay our warehouse employees because we didn’t have time to manually send payments to everyone.” 
Warehouse staffers make up roughly a third of ShipHero’s 600-person headcount, Rubin said. Remaining staffers, which mostly include customer service and tech employees, will get paid next week.
“Our concerns are longer term,” Rubin added. “Could some of our customers have liquidity issues? I don’t think we know those ripple effects yet. Are we going to have issues getting paid from our customers because they’ll have issues?”
On Thursday, Jean Yang, the founder and CEO of monitoring company Akita, attempted to complete an online wire transfer to ensure she could make payroll for her seven-person team, but she found that she couldn’t make that sort of transaction by then. She drove to the SVB location on Sand Hill Road in Menlo Park, a street populated by venture-capital offices. 
There, she asked a teller for a bank transfer and was told the branch couldn’t do it. So she asked for a cashier’s check for $1 million. After 20 or 25 minutes the bank handed it over.
Others in line were taking out their entire balance. “I regret not taking out our entire balance now,” she said.
On Friday, Yang returned to the Silicon Valley Bank branch 15 minutes before it opened to remove the remaining money. A line of about 40 people had formed. Gossip spread among those waiting. One person showed a tweet on their phone suggesting that bank employees had been instructed not to come to work. (Reuters reported on a company memo to this effect.)
Then an employee came out of the office and offered about 15 copies of an article from the FDIC on the agency’s response to the bank’s situation. The line disbanded as people realized the bank’s fate.
Later on Friday one of the startup’s investors called Yang and offered to help Akita make payroll, she said. “My hope is that the government bails out people past $250,000,” she said. “I know people with tens of millions, hundreds of millions [of dollars] with SVB. I think if they only get $250,000, their companies are going to be wiped out.”
“Now, everyone’s waiting to see when the Treasury will step in,” said another venture investor. “Hopefully [California Gov.] Gavin Newsom is calling Biden right now and saying, ‘This is systemic in our area, but you can see the ripple effects on other banks and their equities and their bonds.’ If it’s systemic, I think the Treasury will step in like 2007 and ’08 and protect the money market accounts, plus will protect the depositor.”
This person added, “If they don’t step in, then people will presume that money’s lost. That’s going to have huge ramifications on the business environment.”
Watch: CEOs react to the closure of Silicon Valley Bank

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Tech companies that held deposits at SVB are wondering when they’re going to be able to pay employees and their bills after the bank’s collapsed.
The FDIC was named the receiver of Silicon Valley Bank on Friday after the bank was closed by California regulators.
“The number one question is, ‘How do you make payroll in the next couple days?'” said Ryan Gilbert, founder of venture firm Launchpad Capital.

Employees stand outside of the shuttered Silicon Valley Bank (SVB) headquarters on March 10, 2023 in Santa Clara, California. 
Justin Sullivan | Getty Images

The sudden collapse of Silicon Valley Bank has thousands of tech startups wondering what happens now to their millions of dollars in deposits, money market investments and outstanding loans.
Most importantly, they’re trying to figure how to pay their employees.

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“The number one question is, ‘How do you make payroll in the next couple days,'” said Ryan Gilbert, founder of venture firm Launchpad Capital. “No one has the answer.”
SVB, a 40-year-old bank that’s known for handling deposits and loans for thousands of tech startups in Silicon Valley and beyond, fell apart this week and was shut down by regulators in the largest bank failure since the financial crisis. The demise began late Wednesday, when SVB said it was selling $21 billion of securities at a loss and trying to raise money. It turned into an all-out panic by late Thursday, with the stock down 60% and tech executives racing to pull their funds.
While bank failures aren’t entirely uncommon, SVB is a unique beast. It was the 16th biggest bank by assets at the end of 2022, according to the Federal Reserve, with $209 billion in assets and over $175 billion in deposits.
However, unlike a typical brick-and-mortar bank — Chase, Bank of America or Wells Fargo — SVB is designed to serve businesses, with over half its loans to venture funds and private equity firms and 9% to early and growth-stage companies. Clients that turn to SVB for loans also tend to store their deposits with the bank.
The Federal Deposit Insurance Corporation, which became the receiver of SVB, insures $250,000 of deposits per client. Because SVB serves mostly businesses, those limits don’t mean much. As of December, roughly 95% of SVB’s deposits were uninsured, according to filings with the SEC.

The FDIC said in a press release that insured depositors will have access to their money by Monday morning.
But the process is much more convoluted for uninsured depositors. They’ll receive a dividend within a week covering an undetermined amount of their money and a “receivership certificate for the remaining amount of their uninsured funds.”
“As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors,” the regulator said. Typically, the FDIC would put the assets and liabilities in the hands of another bank, but in this case it created a separate institution, the Deposit Insurance National Bank of Santa Clara (DINB), to take care of insured deposits.
Clients with uninsured funds — anything over $250,000 — don’t know what to do. Gilbert said he’s advising portfolio companies individually, instead of sending out a mass email, because every situation is different. He said the universal concern is meeting payroll for March 15.
Gilbert is also a limited partner in over 50 venture funds. On Thursday, he received several messages from firms regarding capital calls, or the money that investors in the funds send in as transactions take place.
“I got emails saying saying don’t send money to SVB, and if you have let us know,” Gilbert said.
The concerns regarding payroll are more complex than just getting access to frozen funds, because many of those services are handled by third parties that were working with SVB.
Rippling, a back office-focused startup, handles payroll services for many tech companies. On Friday morning, the company sent a note to clients telling them that, because of the SVB news, it was moving “key elements of our payments infrastructure” to JPMorgan Chase.
“You need to inform your bank immediately about an important change to the way Rippling debits your account,” the memo said. “If you do not make this update, your payments, including payroll, will fail.”
Rippling CEO Parker Conrad said in a series of tweets on Friday that some payments are getting delayed amid the FDIC process.
“Our top priority is to get our customers’ employees paid as soon as we possibly can, and we’re working diligently toward that on all available channels, and trying to learn what the FDIC takeover means for today’s payments,” Conrad wrote.
One founder, who asked to remain anonymous, told CNBC that everyone is scrambling. He said he’s spoken with more than 30 other founders, and talked to a finance chief from a billion-dollar startup who has tried to move more than $45 million out of SVB to no avail. Another company with 250 employees told him that SVB has “all our cash.”
A SVB spokesperson pointed CNBC back to the FDIC’s statement when asked for comment.

‘Significant contagion risk’

For the FDIC, the immediate goal is to quell fears of systemic risk to the banking system, said Mark Wiliams, who teaches finance at Boston University. Williams is quite familiar with the topic as well as the history of SVB. He used to work as a bank regulator in San Francisco.
Williams said the FDIC has always tried to work swiftly and to make depositors whole, even if when the money is uninsured. And according to SVB’s audited financials, the bank has the cash available — its assets are greater than its liabilities — so there’s no apparent reason why clients shouldn’t be able to retrieve the bulk of their funds, he said.
“Bank regulators understand not moving quickly to make SVB’s uninsured depositors whole would unleash significant contagion risk to the broader banking system,” Williams said.
Treasury Secretary Janet Yellen on Friday met with leaders from the Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency regarding the SVB meltdown. The Treasury Department said in a readout that Yellen “expressed full confidence in banking regulators to take appropriate actions in response and noted that the banking system remains resilient and regulators have effective tools to address this type of event.”
On the ground in Silicon Valley, the process has been far from smooth. Some execs told CNBC that, by sending in their wire transfer early on Thursday, they were able to successfully move their money. Others who took action later in the day are still waiting — in some cases, for millions of dollars — and are uncertain if they’ll be able to meet their near-term obligations.
Regardless of if and how quickly they’re able to get back up and running, companies are going to change how they think about their banking partners, said Matt Brezina, a partner at Ford Street Ventures and investor in startup bank Mercury.
Brezina said that after payroll, the biggest issue his companies face is accessing their debt facilities, particularly for those in financial technology and labor marketplaces.
“Companies are going to end up diversifying their bank accounts much more coming out of this,” Brezina said. “This is causing a lot of pain and headaches for lots of founders right now. And it’s going to hit their employees and customers too.”
SVB’s rapid failure could also serve as a wakeup call to regulators when it comes to dealing with banks that are heavily concentrated in a particular industry, Williams said. He said that SVB has always been overexposed to tech even though it managed to survive the dot-com crash and financial crisis.
In its mid-quarter update, which began the downward spiral on Wednesday, SVB said it was selling securities at a loss and raising capital because startup clients were continuing to burn cash at a rapid clip despite the ongoing slump in fundraising. That meant SVB was struggling to maintain the necessary level of deposits.
Rather than sticking with SVB, startups saw the news as troublesome and decided to rush for the exits, a swarm that gained strength as VCs instructed portfolio companies to get their money out. Williams said SVB’s risk profile was always a concern.
“It’s a concentrated bet on an industry that it’s going to do well,” Williams said. “The liquidity event would not have occurred if they weren’t so concentrated in their deposit base.”
SVB was started in 1983 and, according to its written history, was conceived by co-founders Bill Biggerstaff and Robert Medearis over a poker game. Williams said that story is now more appropriate than ever.
“It started as the result of a poker game,” Williams said. “And that’s kind of how it ended.”
— CNBC’s Lora Kolodny, Ashley Capoot and Rohan Goswami contributed to this report.
WATCH: SVB fallout could mean less credit is available

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Wage growth cooled last month, according to the February jobs report issued by the Bureau of Labor Statistics.
That trend aligns with signals from the Federal Reserve Bank of Atlanta and the Employment Cost Index, economists said.
However, the broad job market remains strong for workers.
The Federal Reserve is raising interest rates to cool the economy and reduce inflation. The policy seems to be affecting workers most in sectors such as technology and real estate, economists said.

Luis Alvarez | Digitalvision | Getty Images

The pace of wage growth seems to be decelerating, according to the February jobs report issued Friday — but workers still have bargaining power in a cooling but strong job market, economists said.
“Workers have a very strong negotiating position,” Mark Zandi, chief economist of Moody’s Analytics. “The labor market is still very strong and workers are still in the driver’s seat.”

Workers have enjoyed historically large raises and pay increases since early 2021. Employers had to compete for workers in a hot market characterized by record job openings and turnover.
While growth is still above average, the trendline points at a slowdown, economists said.
Employees saw their average hourly earnings increase by 0.2% from January to February, the U.S. Bureau of Labor Statistics said Friday. That’s down from a monthly rate of 0.3% in January and December, and 0.6% in November.
It’s also the slowest monthly gain since February 2022, according to Jeffrey Roach, chief economist at LPL Financial.

Why economists say it’s good that pay is moderating

This isn’t necessarily a bad sign for workers, economists said.
The Federal Reserve has been raising interest rates aggressively to try to cool the economy and rein in high inflation. Reducing wage growth is a key aim for the central bank; those labor costs have been a contributing factor to historically high growth in the prices consumers pay for goods and services.  
Inflation has been outstripping pay growth for the average worker. The Fed is trying to reverse that dynamic, so workers enjoy wage gains after accounting for inflation.
Overall job growth in February was stronger than expected and participation in the labor force rebounded to its highest level since March 2020.

The labor market is still very strong and workers are still in the driver’s seat.

Mark Zandi
chief economist of Moody’s Analytics

“Stronger rates of participation could help companies fill open positions and ease wage growth pressures going forward,” said Julia Pollak, chief economist at ZipRecruiter.
“Overall, then, the [February jobs] report suggests U.S. workers are enjoying the best of both worlds — robust job growth paired with easing inflationary pressures,” she said.
Not all workers necessarily have bargaining power in the current environment, though, said Aaron Terrazas, chief economist at Glassdoor, a job site.
Workers in “front line, skilled vocational work” are in a position of strength, he said. Those include sectors such as health care, and leisure and hospitality, he said. Those sectors saw “notable job gains” in February, according to the Bureau of Labor Statistics.
But job seekers in other sectors — particularly in “skilled, knowledge work,” including technology and real estate — have “dramatically less” power now, Terrazas said.
However, this isn’t necessarily a surprise since these are among the most interest-rate sensitive areas of the U.S. economy, Zandi said. Slowing the U.S. economy means some part of it will suffer a pullback, even if the broader economic picture remains largely healthy, he said.
“We want a world where unemployment is low, there are lots of jobs, inflation is under control and your wages are rising faster than inflation,” Zandi said. “All in all, that’s what appears to be happening … though maybe not as fast as people want to see.”

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