Failure of Silicon Valley Bank won’t affect CHA despite investment in four of its rehab projects
Silicon Valley Bank, the failed bank seized by federal regulators March 10, was involved in four Cambridge Housing Authority public housing rehabilitation projects, and the authority still has some accounts and is getting some services from a temporary “bridge bank” set up by the government to continue serving customers, CHA executive director Michael Johnston said Monday.
“The issue with SVB has not and will not affect any of our residents or projects in the pipeline,” Johnston said. Though the weekend after the bank failure “brought a lot of anxiety,” he said, “things landed in a good position” by the Monday after the weekend.
CHA was one of many Massachusetts affordable-housing developers affected by the collapse of Silicon Valley Bank because the California bank bought a major player in the low-income housing community here, Boston Private Bank & Trust Co., in 2021. Boston Private Bank provided loans, investment funds and services to affordable-housing developers in Massachusetts.
Johnston said CHA had “relied heavily” on Boston Private, as did other affordable-housing developers. Of the four Cambridge projects involving Silicon Valley Bank when it failed, construction is complete for three, he said: Truman Apartments, Porter Road and Roosevelt Towers Family. The California bank serviced permanent loans and held replacement and reserve accounts for those completed developments, he said.
The fourth project, the rehabilitation of Putnam School, is under construction, Johnston said. Silicon Valley Bank received and paid requisitions and managed “draws” of bond funds for that project.
After the Federal Deposit Insurance Corp. took over Silicon Valley Bank, federal bank regulators established the Silicon Valley Bridge Bank to continue providing services while the government tries to dispose of the assets. The Silicon Valley bridge bank continues to handle paying requisitions and servicing loans for CHA. “We did move the funds that were not required to be at SVB as a requirement of loan documents, but we are not moving anything else,” Johnston said. The business that was moved went to Bank of America.
Responding to a question about how the agency decided where to transfer its funds, given the turmoil in the banking industry since the failure, Johnston said: “Is BOA safe? Who knows right now. And I think we are all watching to see how this and the debt ceiling fight are going to play out.” Republicans in Congress are threatening to let the United States default on its debt payments unless their unspecified demands are met – a result that could cause massive damage to the U.S. and global economy.
Meanwhile, a Silicon Valley employee who had worked with developers here contacted Homeowners Rehab, one of Cambridge’s nonprofit low-income housing developers, on March 15 to reassure HRI that the bridge bank was continuing to meet its obligations. In an email, the employee said the bridge bank was conducting “business as usual” and even trying to “grow the business.” HRI passed along the message to other local developers.
Still, the bridge bank isn’t meant to be permanent. Federal officials want to auction off its business and intend to sell the Boston Private Bank portion separately, according to news reports.