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Silicon Valley Bank & First Republic: Crisis Meets Opportunity



In the $30 billion rescue attempt of First Republic on Friday, Too Big To Fail Banks led by J.P. Morgan Chase, Citi, and Bank of America BAC finally stepped up to help stave off a crisis. Days earlier, in the stunning government seizure of Silicon Valley Bank and crypto lender Signature Bank SBNY , the Fed, FDIC, and Treasury were the stars.

But a separate cast of unsung heroes also was at work, and this shows what private enterprise can do. Soon after SVB’s shares took a tumble in the after hours market on Wednesday night, March 8, sending a wave of fear across thousands of customers, fintech firms started working to help cash-strapped startups meet payroll—and win new business for themselves.

JP Morgan, Bank of America, Citi and other giants have always seemed reluctant to serve Silicon Valley tech startups that have limited collateral and who burn more cash than they make. In this crisis, the traditional banks lacked the technology to do so, anyway. This is why Silicon Valley Bank was so integral to so many nascent companies and their funders—and why its overnight collapse was so devastating.

We watched in real time as capitalism’s invisible hand snapped into action. Fintech firms created, overnight, innovative payroll financing programs for cash-strapped startups. They offered SVB clients creative ways to spread cash across many different accounts at many different financial institutions to maximize insurance coverage, all at once.

My San Francisco-based startup, Arc, was one of them. It all happened so fast.

At Arc, we had some of our cash at SVB, and we admired it as a pillar of the industry. At the same time, this crisis offered an opportunity: we provide practically instant access to banking services and loans to the very startups that were threatened by SVB’s tragic tumble.


Flashback to Tuesday night of last week: I meet a hedge fund guy at the Four Seasons in San Francisco, and the CEO of an ed-tech firm joins us. Both of them ask me the same question: Why would any startup use Arc rather than Silicon Valley Bank?

I try to explain that we aren’t a bank, we’re a software business that partners with banks. And this is a good thing, because we can help tech companies diversify their deposits across many traditional banks without sacrificing user experience. They are less than sold.

A day later, SVB stock plunged after hours on a surprise $1.8 billion loss that amounted to less than 1% of assets. An Arc manager blasted an urgent Slack to our 40 employees:

“The next two business day(s) present a rare opportunity for us. SVB is about to endure more churn & outflow over the following quarter than any moment in time over the last decade…” He added: “We need to answer the call.”

On Thursday morning, we received a digital deluge of texts, emails, WhatsApp messages, and phone calls from tech founders with cash at SVB. We already had reassigned most everyone to a new role: onboarding panicked customers.

“This is rly rly bad,” one CEO texted to an Arc exec on Friday morning. Said another: “Hey I’m wiring $250K to (another fintech), is it possible to open an arc account today to move $250K. … Just trying to diversify.”

An email from the CEO of an AI media startup cut to the chase, seeking “an Arc advance of say $1M while SVB is a mess ($0.5M would be fine if that’s easier for any reason)? … we don’t want the cash to land in SVB, which is not reliably accessible for us right now.”

That is when we realized a payroll crisis loomed for thousands of startups. I quickly responded: “Sorry to hear this. Yes, we’re happy to support you in this challenging time,” and looped in two other staffers to open his new account and expedite approval.

CEO: “Awesome to hear this… Thank you!”

At 1:17 p.m. California time on Friday, we proudly tweeted out a bold offer: “Get funding to make payroll in less than 24 hours with Arc.” Thirteen minutes later, one of our peers, Brex, tweeted out their own offer. Others tech companies, including Gusto and Pipe, also quickly spun up solutions to help startups make payroll over the weekend. Ah, capitalism.

Later that day, our programmers gathered at the Palo Alto home of an Arc engineer, who interrupted his vacation to host a weekend hackathon. They worked around the clock to code new infrastructure to help customers securely diversify deposits and access instant payroll financing. On Saturday, our Chief Credit Officer and I worked through the night, personally approving new accounts.

Upshot: some 500 startups applied to Arc for a total $150 million in payroll financing. We ended up funding only a fraction of this sum, however, before the feds on Sunday night guaranteed SVB’s $175 billion in remaining deposits, easing the panic. I’ve never been more relieved to discard so much hard work – the startup payroll crisis was averted.

In the week since the SVB crisis erupted, the amount of cash deposits we collected at Arc was up 15-fold from a typical week. While the feds have quelled the crisis, SVB customers continue to sign up with us and other fintech firms rather than return to the fold.

I am happy for the “backstop” the feds provided to SVB customers and beyond. It has cauterized contagion fears, while protecting depositors who were guilty only of keeping their cash at a top-20 bank that invested it in “safe” government securities.

Still … it is intriguing to ponder what the private markets might have accomplished if left to their own devices.


Bonds See 2023 Recession, Stocks Aren’t So Sure



The yield curve is one of the most robust recession predictors and has signaled a recession may be coming since mid 2022. In contrast, U.S. stocks as measured by the S&P 500 are up materially from the lows of last October and only just below year-to-date highs, seemingly rejecting recession fears. Yet, fixed income markets see the Fed potentially cutting rates by the summer, perhaps reacting to a U.S. recession.

The Evidence From The Bond Markets

The recessionary evidence, at least from fixed income markets, is mounting. The 10 yield Treasury yield has been below the 2 year yield consistently since last July. That is is called an inverted yield curve and has signaled a recession fairly reliably when compared to other leading indicators.

Building on that, fixed income markets see almost a nine in ten chance that the Federal Reserve cuts rates by September of this year. That’s something the Fed has repeatedly said they won’t do on their current forecasts. Yet, a recession could cause it to happen.

The Stock Market

In contrast, the stock market shows some optimism. The S&P 500 is up 7% year-to-date as the market has shrugged off fears of contagion from recent banking issues. In particular, tech stocks have rallied.

In contrast, more defensive sectors such as healthcare, utilities and consumer goods have lagged in 2023. This suggests that the stock market is taking more of a ‘risk on’ position and is perhaps less worried about the economy.


That said the stock market is a leading indicator of the business cycle, it may be that stocks see a recession, but are now looking past it to growth ahead and are factoring in the lower discount rates that a recession might bring as interest rates decline. Also, the U.S. stock market is relatively global, so the fate of the U.S. economy is a key factor in driving profits, but not the only one.

What’s Next?

Monitoring unemployment data will be key. Though the yield curve is a good long-term forecaster of recessions it is less precise in signaling when a recession starts. Unemployment rates can offer more accurate recession timing. Unemployment edged up in February, suggesting a recession may be near, but we’ve also seen monthly noise unemployment. Two similar monthly unemployment spikes during 2022 both proved false alarms.

However, if we see a sustained move up in unemployment from the low levels of 2022 that may be a relatively clear sign that a recession is here. Economist Claudia Sahm estimates that a sustained 0.5% increase in unemployment rate from 12-month lows is sufficient to trigger a recession. Unemployment rose 0.2% from January to February 2023, so maybe we’re on the way there. Of course, the jobs market performed better than expected in 2022 and it could do so again. Still, fixed income markets do suggest a 2023 recession is coming. Stock markets don’t necessarily share that view.

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Which States Have The Highest And Lowest Life Expectancies?



There’s a wide variance of life expectancies among the 50 states in the U.S., according to a recent report prepared by Assurance, an insurance technology platform that helps consumers with decisions related to insurance and financial well-being.

Figure 1 below shows the 10 states with the highest life expectancy, starting with Hawaii, the state with the highest life expectancy.

Figure 2 below shows the 10 states with the lowest life expectancy, starting with Mississippi, the state with the lowest life expectancy.

Assurance scoured life expectancy data prepared in January 2023 by the U.S. Centers for Disease Control and Prevention (CDC). With this data, Assurance created several easy-to-understand graphics that offer information about life expectancies.

Life expectancies are a basic measure of well-being

As measured by the CDC, life expectancies are a basic measurement of well-being in a broad population and not a prediction of how long an individual might live. The CDC measures the expected lifespan for a person born in the year of measurement. This measurement is calculated based on the assumption that the individual will live and die according to the rates of death that are prevalent in the measurement year for each age. There’s no assumed improvement or backsliding in the assumed mortality rates in future years for each age in the life expectancy calculation.


By contrast, an estimated lifespan for an individual would consider their current age, their gender, and some basic lifestyle information. It might also attempt to project future improvements or backsliding in mortality rates based on key factors.

Significant influences on life expectancy calculations

Leading causes of death in the U.S. are heart disease, cancer, and accidents in that order. These immediate causes are significantly influenced by factors in the population such as poverty rates, educational attainment, rates of obesity and smoking, access to healthcare, prevalence of violent crime, and the support people receive from federal, state, and local governments. All these factors can vary widely among different states, which can be a key reason why life expectancies vary by state.

When you think about it, all these factors also have the potential to influence a person’s quality of life. The measured life expectancy rate rolls up all these factors into one objective measurement of well-being that’s based on population data.

In addition to the factors listed above, mortality rates increased and life expectancies decreased in the past few years due to the Covid-19 pandemic. A recent article titled “Live Free And Die” summarized recent research results that show that life expectancies in most countries around the world rebounded after the Covid-19 pandemic but that they continued to decline in the United States. Many of the reasons cited in the article for the continued decline in U.S. life expectancies are the same or similar to the factors listed above.

NPR‘Live free and die?’ The sad state of U.S. life expectancy

Why should retirees care about the life expectancies reported here if these measures don’t predict your own lifespan? Life expectancy calculations indicate the general well-being of the entire population in your area. While the living conditions in your area can influence your own lifespan and quality of life, retirees should focus on their remaining life expectancy given their age. They should also consider how the factors listed above that influence life expectancies in the population might apply to them.

You can obtain customized estimates of your remaining life expectancy at the Actuaries Longevity Illustrator. Part of your planning for retirement is understanding how long you an an individual might live, instead of relying on generalized information about larger populations you see in the media.

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IRS Dirty Dozen Campaign Warns Taxpayers To Avoid Offer In Compromise ‘Mills’



Owing taxes can be stressful. Unfortunately, the actions of some companies can make it worse. As part of its “Dirty Dozen” campaign, the IRS has renewed a warning about so-called Offer in Compromise “mills” that often mislead taxpayers into believing they can settle a tax debt for pennies on the dollar—while the companies collective excessive fees.

Dirty Dozen

The “Dirty Dozen” is an annual list of common scams taxpayers may encounter. Many of these schemes peak during tax filing season as people prepare their returns or hire someone to help with their taxes. The schemes put taxpayers and tax professionals at risk of losing money, personal information, data, and more.

(You can read about other schemes on the list this year—including aggressive ERC grabs here, phishing/smishing scams here and charitable ploys here.)

Tax Debt Resolution Schemes

“Too often, we see some unscrupulous promoters mislead taxpayers into thinking they can magically get rid of a tax debt,” said IRS Commissioner Danny Werfel.

“This is a legitimate IRS program, but there are specific requirements for people to qualify. People desperate for help can make a costly mistake if they clearly don’t qualify for the program. Before using an aggressive promoter, we encourage people to review readily available IRS resources to help resolve a tax debt on their own without facing hefty fees.”


Offers In Compromise

Legitimate is a key word. Offers in Compromise are an important program to help people who can’t pay to settle their federal tax debts. But, as the IRS notes, these “mills” can aggressively promote Offers in Compromise—OIC—in misleading ways to people who don’t meet the qualifications, frequently costing taxpayers thousands of dollars.

An OIC allows you to resolve your tax obligations for less than the total amount you owe. You generally submit an OIC because you don’t believe you owe the tax, you can’t pay the tax, or
 exceptional circumstances exist.

Because of the nature of the OIC—and the dollars involved—the process can be time-consuming. It can also be confusing for taxpayers who may not have a complete grasp on their finances.

First, you must complete a detailed application, Form 656, Offer in Compromise. You must also submit Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-B, Collection Information Statement for Businesses, with supporting documentation (generally, bank and brokerage statements and proof of expenses).

You’ll also need to submit a non-refundable fee of $205 and payment made in good faith. The payment is typically 20% of the offer amount for a lump sum cash offer or the first month’s payment for those made over time. Generally, initial payments will not be returned but will be applied to your tax debt if your offer is not accepted. Payments and fees may be waived if the OIC is submitted based solely on the premise that you do not owe the tax or if your total monthly income falls at or below income levels based on the Department of Health and Human Services (DHSS) poverty guidelines.

The IRS will examine your application and decide whether to accept it based on many things, including the total amount due and the time remaining to collect under the statute of limitations. The IRS will also review your income—including future earnings and accounts receivables—and your reasonable expenses, as determined by their formula. The IRS will also consider the amount of equity you have in assets that you own—this would include real property, personal property (like automobiles), and bank accounts.


Before your offer can be considered, you must be compliant. That means you must have filed all your tax returns and paid off any liabilities not subject to the OIC. After you submit your offer, you must continue to timely file your tax returns, and pay all required tax, including estimated tax payments. If you don’t, the IRS will return your offer.

Additionally, you cannot currently be in an open bankruptcy proceeding, and you must resolve any open audit or outstanding innocent spouse claim issues before you submit an offer.


You can probably tell—it’s a lot to consider. You may want representation. A tax professional can help marshal you through the process and offer practical guidance, while communicating what fees could look like.

By contrast, according to the IRS, an OIC “mill” will usually make outlandish claims, frequently in radio and TV ads, about how they can settle a person’s tax debt for cheap. Also telling: the fees tend to be significant in exchange for very little work.

Those mills also knowingly advise indebted taxpayers to file an OIC application even though the promoters know the person will not qualify, costing taxpayers money and time. You can check your eligibility for free using the IRS’s Offer in Compromise Pre-Qualifier tool.

“Pennies On A Dollar”

What about those promises that taxpayers can routinely settle for pennies on a dollar? Not true. Generally, the IRS will not accept an offer if they believe you can pay your tax debt in full through an installment agreement or equity in assets, including your home. That’s why the IRS tends to reject a majority of OICs that are submitted. The acceptance rate is less than 1 in 3, according to the 2021 Data Book.

The IRS will generally approve an OIC when the amount offered represents the best opportunity for the IRS to collect the debt. It’s true that there’s a formula that the IRS uses to figure out how much they think they can collect from you. But there is some wiggle room to account for special circumstances, including a loss of income or a medical condition. It’s worth noting those are the exceptions, not the rule.


While submitting an OIC may keep the IRS from calling you, it doesn’t stop all collections activities—don’t believe companies that suggest that submitting an OIC will make your tax debt disappear. Penalties and interest will continue to accrue on your outstanding tax liability. Additionally, the IRS may keep your tax refund, including interest, through the date the IRS accepts your OIC.

You may also be liened. In most cases, the IRS will file a Notice of Federal Tax Lien to protect their interests, and the lien will generally stay in place until your tax obligation is satisfied.

Be Skeptical

An OIC is a serious effort to resolve tax debt and shouldn’t be taken lightly. Be skeptical—if it sounds too good to be true, it likely is. If you’re considering an OIC, hire a competent tax professional who understands the rules and is willing to level with you about your chances of being successful—including other options. Don’t fall into a trap that can make your situation worse.

MORE FROM FORBESIRS Urges Those Hoping To Help To Beware Of Scammers Using Fake Charities

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