Over the weekend, Etsy sellers found themselves struggling to pay their bills after transactions on the site were frozen due to the collapse of Silicon Valley Bank.
The bank had been the largest to fail since the 2008 financial crisis, causing many investors to lose their funds. However, small businesses also suffered as a result, with Etsy having to announce that it could not process some sales payments due to the fact that it uses Silicon Valley Bank to distribute funds on a number of its accounts.
Furious sellers took to social media to voice their frustrations, with one mother-of-three expressing her concerns that her funds feed her family and pay her bills. Similarly, another seller revealed that she would be unable to pay her mortgage next week if the issue wasn’t resolved quickly.
Entrepreneur Amber, who runs personalized gift company Little Miss Lovely Creations, expressed her worries in a TikTok video, stating that she was “freaking out” over the news. She also stated that her funds feed her family and pay her bills, hoping that they would be available on Monday.
Panic rocked the financial sector as a result of SVB’s collapse, with those with deposits over a quarter of a million dollars with the bank now facing the possibility of losing all their money above the $250,000 protected by federal law.
Dozens of customers were seen lining up outside a branch to withdraw whatever cash they could, and police were even called to the bank’s headquarters after a group of disgruntled tech founders turned up on the doorstep.
On Friday, Etsy had to email its sellers to inform them that payments were being frozen because they relied on the bank for some of its accounts. An email to sellers stated that there was a delay with their deposit that was scheduled for that day, caused by the recent developments regarding Silicon Valley Bank, who uses Etsy to facilitate disbursments to some sellers.
Etsy’s share price had tumbled by 12.52 percent in the last week, sitting at $105.98 yesterday. Ohio-native Amanda Nielson, 45, who runs her soap store Flower and Earth mostly through Etsy, expressed her frustration that the email came through on a Friday night, as she cannot do anything for two days, feeling helpless.
She runs the business with her husband Sean, 54, and although they can survive for the short-term without the funds, she is worried she will have to shut her shop down.
The collapse of SVB also brought to light the bank CEO Greg Becker’s appearance before Congress in 2015 to argue that the bank should not be subject to scrutiny.
Becker argued that given the low-risk profile of the bank’s activities, “enhanced prudential standards” should be lifted. He successfully convinced Congress to lessen the scrutiny of businesses like his. It also emerged that Becker had sold $3.57m of stock in a pre-planned, automated sell-off two weeks before the bank collapsed, and the CFO ditched $575,000 the same day.
Becker sold 12,451 shares at an average price of $287.42 each on February 27, before the price plunged to just $39.49 in premarket on Friday before the Federal Deposit Insurance Corporation (FDIC) seized the bank’s assets. Federal records obtained by The Lever showed that Becker had spent more than half a million dollars on federal lobbying in 2015-18, with SVB obtaining the light-touch regulation it wanted. Becker told Congress about “SVB’s deep understanding of the markets it serves, our strong risk management practices.”
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