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European bank shares make some recoveries​

European bank shares have rebounded slightly after tumbling in early trading.
By mid-morning, Deutsche Bank was down 4%, after slipping 10% earlier this morning, while BNP Paribas was down 3% compared with an earlier fall of more than 8%.
UBS - the bank that agreed to buy its troubled rival Credit Suisse - is now down 8% compared with an earlier slide of 13%.
 

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A historic development for the country and the world of finance is the takeover of the 166-year-old lender. Industrialist Alfred Escher established the former Schweizerische Kreditanstalt in 1856 to finance the expansion of the railway system in the mountainous nation. Before struggling to adjust to a new banking environment following the financial crisis, it had developed into a global powerhouse, symbolising Switzerland's function as a global financial centre.
 

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Switzerland’s emergency rescue of Credit Suisse could cost $13,500 for each and every Swiss person​


Switzerland’s tab for shoring up its reputation as a financial center could run to 12,500 Swiss francs ($13,500) for every man, woman and child in the country.



To backstop the emergency sale of Credit Suisse Group AG to its Zurich rival UBS Group AG, the Swiss government pledged to make as much as 109 billion francs available — a hefty burden for the country of 8.7 million people.
On top of that, there’s a guarantee from the Swiss National Bank of 100 billion francs that isn’t backed by a government guarantee, according to the deal announced Sunday evening.
The combined sum of 209 billion francs is equivalent to about a quarter of Switzerland’s gross domestic product and exceeds total European defense spending in 2021. The price tag for Switzerland’s largest ever corporate rescue could add up to more than three times the 60 billion-franc bailout of UBS in 2008.
The renewed rescue for well-paid bankers sparked protests. About 200 people gathered outside Credit Suisse’s headquarters in Zurich on Monday, chanting “eat the rich” and throwing eggs at the building at the heart of the city’s financial district.
“We are fed up with the idea that if you are big enough, you get everything,” said Christoph Rechsteiner, a partner at the Zurich-based tax consultancy MME. “The law is changed for you over a weekend.”

On top of the financial guarantees, the Swiss government agreed to change legislation that bypasses shareholder approval and the country’s financial regulator wiped out about 16 billion francs worth of Credit Suisse bonds to increase the bank’s core capital.
“The solution that has been drafted now is that if all comes good, UBS makes a huge profit,” Rechsteiner said by phone. “They got Credit Suisse for nothing at all and the government is backing the losses.”
Despite the frustration, financial experts cautioned that there’s little chance the final price tag will reach the limits set by the government, while the cost of doing nothing could have been much higher.
On the 100 billion-franc guarantee to SNB, “there I see a somewhat limited risk,” said Manuel Ammann, director of the Swiss Institute of Banking and Finance at the University of St. Gallen. “I see more risks in the 9 billion francs that the government is guaranteeing in terms of excess losses for Credit Suisse.”

The government’s SNB guarantee would be partially covered by securities and bankruptcy privileges, which should ensure that even in the worst-case scenario it would be covered without the need to tap state funds, Ammann said.
Liability for the government-backed 100 billion francs “would only materialize if there was a bankruptcy of the merged entity,” he added. “This is a real long shot at the moment.”

Bumpy Track Record​

During the global financial crisis, UBS received 6 billion francs from the government and split off 54 billion francs of risky assets into a fund backed by the central bank.
While the government did impose new “too big to fail” regulation for banks after the 2008 crisis, the legislation failed to counter the steady run of scandals and management upheaval that ultimately destroyed investor trust in Credit Suisse.
Systemically relevant banks had to turn themselves into holding companies. That was supposed to facilitate a clean breakup and protect domestic retail banking operations. In theory, all other parts would have been liquidated to prevent dangers to the Swiss financial system.
But Switzerland’s government decided not to implement the legislation, and instead pushed for the merger. The evident lack of trust in its own rules could prove very costly for the image of one of the world’s premier financial centers, according to Ammann.
“Now both Swiss banks had to be saved by the government,” he said. “That’s not a good track record.”
 

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Dutch central bank reports first loss since 1931 amid rising interest rates​



De Nederlandsche Bank (DNB) suffered a loss of almost half a billion euros last year due to the sharp rise in interest rates. That is the first loss in more than ninety years, the Dutch central bank said in its annual report released on Thursday.

Significant losses are also expected for the coming years. The DNB does not expect to be able to achieve a profit again until 2028. DNB President Klaas Knot already warned about this scenario in September. Due to the higher interest rates, the central bank itself has lost more money, while yields have tumbled on bonds purchased in droves in recent years.


The last time the DNB suffered a loss was in 1931, when the central bank had to take a significant loss on British pounds after the United Kingdom left the gold standard.

Strictly speaking, the net result for 2022 was zero. But the DNB was only able to achieve that by withdrawing the 460 million euros from the institutions 11 billion euro buffer to cover the loss. As a result, DNB cannot pay dividends to the Dutch state.


In the coming years, the losses could increase to such an extent that the built-up buffers are no longer sufficient, and the State, as shareholder, has to step in. As it stands now, the DNB could end up in the red by more than 3 billion euros this year, and losses in the billions will probably also be seen in the following years.

“The higher interest rate ensures that the DNB pays more interest on the balances that commercial banks hold with DNB. While the income from holdings of government bonds, which have increased considerably as a result of the ECB’s purchase programmes, is not rising along with it,” the DNB said in a statement.

The central bank holds hundreds of billions of euros of debt securities on its balance sheet that were bought up in the aftermath of the financial crisis and during the coronavirus pandemic. However, the income from those bonds is low.

To some extent, the problems are similar to those of the Silicon Valley Bank which recently collapsed in the United States. “The difference is that they have not accrued a provision since 2015,” says Knot. There is also no risk of a bank run at the DNB.

The fact that interest rates are rising at an unprecedented rate is partly due to the European Central Bank (ECB), where Knot is one of the key policymakers. By raising interest rates, the ECB is trying to curb high inflation. According to Knot, the latter is more important than the DNB’s own results. “We are not going to take our mandate less seriously because of our own results.”

The DNB president estimates that if the losses turn out as they have now predicted, no additional money from the State will be needed, but he said there is no certainty in the matter. In any case, DNB’s clout will not be compromised, Knot said. Even still, the central bank could also easily go through a period of time with negative financial equity. He acknowledged that the situation is “not ideal”
 

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Deutsche Bank, UBS stocks sink as fear of European banking crisis returns​



Europe’s banking stocks tumbled Friday as investors acted on their lingering worries that the recent crises at some banks could spill over into the wider sector.

Europe’s Stoxx Europe 600 Banks index, which tracks 42 big EU and UK banks, closed 3.8% lower. The index is down 18% from its high in late February. London’s bank-heavy FTSE 100 index closed down 1.3%.

Shares in Germany’s biggest bank, Deutsche Bank (DB), plunged as much as 14.5% before paring its losses to close 8.6% lower. Shares in UBS (UBS) and Credit Suisse (CS) were 3.6% and 5.2% down respectively.

The cost of insuring against a possible default by Deutsche Bank on its debt has soared in recent days. Deutsche’s five-year credit default swaps (CDS) skyrocketed to 203 basis points Thursday, according to data from S&P Market Intelligence. That’s their highest level since early 2019.

The swaps rose again Friday to trade at 208 basis points at midday ET.

German Chancellor Olaf Scholz said Friday that there was “no reason to be concerned” about Deutsche Bank.

“It’s a very profitable bank,” he told reporters in Brussels, where EU leaders issued a joint statement describing the European banking system as “resilient, with strong capital and liquidity positions.”

Deutsche Bank declined to comment.

“The rising price of insuring CDS senior debt is weighing on Deutsche Bank, as well as other European banks, on concerns over the impact of rising rates on the wider economy and banks’ balance sheets,” Michael Hewson, chief market analyst at CMC Markets, told CNN.

Last week, the European Central Bank stuck with its plan to hike interest rates by half a percentage point, judging that inflation posed a bigger threat to the economy than recent turmoil in the banking sector.

Then, on Thursday, the Bank of England raised its main interest rate by a quarter of a percentage point after data showed a surprise spike in inflation last month.

But Susannah Streeter, head of money and markets at investing platform Hargreaves Lansdown, told CNN that market nerves were out of step with reality.

“Worries about contagion are again rearing up even though more deposits appear to have been flowing into the German lender since the banking scare erupted, and it is thought to have capital reserves well in excess of regulatory requirements,” she said.

Some analysts said investors had been rattled by Deutsche Bank’s announcement Friday that it would pay back one of its bonds five years before its maturity date. Investors would usually interpret such a move as a sign that a company is in good financial health and able to pay back its creditors early.

But — after two bank collapses in the United States and an emergency takeover of Credit Suisse this month — some investors may have interpreted the announcement as a sign that Deutsche Bank is nervous about the state of the banking sector and trying to overcompensate, Jonas Goltermann, deputy chief markets economist at Capital Economics, told CNN.

Goltermann said the bank’s decision “seems to have backfired.”

Deutsche Bank’s decision to pay back the bond ahead of schedule was pre-planned and not a reaction to recent market developments, a source familiar with the matter told CNN. The bond would have gradually lost its eligibility as a form of regulatory capital according to rules brought in after the 2008 financial crisis, the source said.

The bank replaced the bond by issuing another bond of the same type in February, they added.

Shares of Germany’s Commerzbank (CRZBF) and France’s Société Générale also suffered heavy losses, closing 5.5% and 5.9% lower respectively.

Swiss banks still rattled​

Last week, Switzerland’s biggest bank UBS bought its embattled Swiss rival for 3 billion Swiss francs ($3.25 billion) in an emergency takeover brokered by the Swiss government.

That helped restore some calm to markets rattled by the failure earlier this month of two US regional banks. But investors were on edge again Friday.

The falls in UBS and Credit Suisse come after Bloomberg reported Thursday that the US Department of Justice was investigating whether their staff had helped Russian oligarchs evade Western sanctions.

The DOJ had sent subpoenas to those employees before UBS took over Credit Suisse, according to the report.

Employees at some major US banks are also part of the probe, Bloomberg said.

Hewson at CMC Markets said “the DOJ probe into UBS is certainly playing a part in the share price weakness” in European banks.

UBS and Credit Suisse declined to comment to CNN.
 

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U.S. Banks are sitting on $1.7 trillion in unrealized losses, research says. That’s not a problem—until it is​


After the rapid collapse of Silicon Valley Bank and Signature Bank earlier this month, along with Credit Suisse’s untimely demise last week, regulators and business leaders have made it a point to publicly assure consumers that banks are safe. The potential for “contagion” throughout the financial system is now slim after the Federal Deposit Insurance Corp. (FDIC), Federal Reserve, and Treasury came together to backstop all depositors, both uninsured and insured, at SVB and Signature, they say.



Treasury Secretary Janet Yellen, for example, told lawmakers on the Senate Finance Committee last week after the second- and third-largest bank failures in history that Americans “can feel confident” about the safety of their deposits. And Citigroup CEO Jane Fraser told the Economic Club of Washington D.C. on Wednesday that the banking system is “sound,” and both large and regional banks are “well-capitalized,” adding “this is not a credit crisis,” Reuters reported.
When Credit Suisse went under shortly after Silicon Valley Bank, analysts argued that it was a scandal-plagued institution that had racked up billions in losses from high profile issues—including the Archegos hedge fund implosion of 2021—and its clients and depositors merely lost confidence. And they note that Silicon Valley Bank made fatal, and easily avoidable, errors in risk management that aren’t indicative of the health of the overall financial system.
But SVB also suffered from heavy unrealized losses caused by rising interest rates that helped to trigger a bank run from its large base of uninsured depositors. And a new paper by researchers at New York University on March 13 found that they aren’t the only ones with these issues—U.S. banks had unrealized losses of $1.7 trillion at the end of 2022. The losses were nearly equal to banks’ total equity of $2.1 trillion, professors Philip Schnabel and Alexi Savov and the University of Pennsylvania’s Itamar Drechsler explained.
Rising interest rates have slashed the value of the U.S. Treasuries and mortgage-backed securities that make up a large portion of many banks’ assets. In another paper, also from March 13, university researchers found that U.S. banks’ assets have lost 10% of their value over the past year alone.
Additionally, of the $17 trillion in total U.S. bank deposits, nearly $7 trillion are currently not insured by the FDIC, according to that paper. The authors of the study—including University of Southern California’s Erica Xuewei Jiang, Northwestern University’s Gregor Matvos, Columbia University’s Tomasz Piskorski, and Stanford University’s Amit Seru—explained that if half of these uninsured depositors decide to withdraw their funds after the recent bank instability, it could put hundreds of billions of dollars of deposits in jeopardy.

“If uninsured deposit withdrawals cause even small fire sales [of assets], substantially more banks are at risk,” they wrote. “Overall, these calculations suggest that recent declines in bank asset values very significantly increased the fragility of the U.S. banking system.”

No fire without a spark​

Unrealized losses aren’t reflected on banks’ balance sheets due to an accounting practice where assets are held on banks’ books at the value at which they are bought, instead of their current market value. And Stephan Weiler, an economics professor at Colorado State University and co-director of the Regional Economic Development Institute, explained that these losses will only be realized by banks if they are forced to sell their holdings amid a bank run where depositors withdraw their funds en masse. That’s what happened with SVB, depositors asked for the money back in droves, forcing the bank to sell its holdings of mortgage-backed securities at a $2.4 billion pre-tax loss.
“As long as people aren’t all coming in at the same time and demanding that their deposits back, you’re okay,” Weiler told Fortune Thursday.
The problem, JPMorgan’s analysts led by Nikolaos Panigirtzoglou noted this week, is that $1 trillion in deposits were pulled from the “most vulnerable” U.S. banks after SVB’s collapse.

“So the chances of facing those unrealized losses are going up,” Weiler warned, and that could lead to more bank runs.
As a result of this potential problem for U.S. banks, multiple politicians, including Massachusetts Sen. Elizabeth Warren and California Rep. Ro Khanna, have argued the Fed should backstop every type of depositor at all banks to prevent further bank runs from the public. And those calls intensified this week after Treasury Secretary Janet Yellen told the Senate Appropriations subcommittee Wednesday that she is not considering “blanket insurance” for all U.S. bank deposits, unless “systemic risk” becomes an issue, Reuters reported.
Even the billionaire hedge fund manager Bill Ackman said this week that the FDIC “stop the bleeding” and “explicitly guarantee all deposits now.”
“We have gone from implicit support for depositors to [Secretary Yellen’s] explicit statement today that no guarantee is being considered,” Ackman, who founded Pershing Square Capital Management tweeted on Wednesday, adding that he “would be surprised if deposit outflows don’t accelerate, effective immediately.”

 

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It is truly astonishing that these people run the world but what is more astonishing that there are so many people in our countries talking about the local " corruption " on behalf of these cultists degenerates.
 

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Policies pushed by Progressives, aka Rainbow-Marxists, which caused this, and a lot more which is about to happen:
  • Shutting whole populations in their homes for a year, and other hugely expensive, hysterical, irrational and pseudoscientific covid responses
  • Printing huge amounts of money to try to revive the economy after crippling it through hysterical covid measures
  • Expensive measures to avert energy shortages in 2022 as a result of climate hysteria energy policies
  • Abusing trillions in investment and retirement funds to fund "ESG", i.e., climate hysteria and Progressive/Woke/Rainbow-Marxist social engineering and enforcement
  • Rampant immigration causing further economic strain, crime, and cultural decay
  • The promotion of incompetent people into positions of power for "diversity" or "gender equality", systemically decreasing economic inefficiency and increasing risk
  • Etc
 
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Deutsche Bank’s collapse would be a threat to the whole eurozone​

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It could be next month. It might be next week. Or it might well happen over the weekend. But today’s collapse in the share price of Deutsche Bank, and the huge rise in the cost of insuring its debt against default, means it is probably only a matter of time before there’s an intervention. It looks increasingly inevitable that Deutsche will require some form of rescue, led by the German government and the European Central Bank. The trouble is: that will be a threat to the entire eurozone.
If you have any money in Germany’s largest bank, the only rational move right now is to get it out
To market insiders, the real surprise of today’s collapse in confidence in Deutsche Bank is that it took so long. On Friday morning, its share price dropped by 15 per cent, while the cost of insuring against a default soared. The charts look eerily similar to Silicon Valley Bank two weekends ago, and to Credit Suisse last weekend. If you have any money in Germany’s largest bank, the only rational move right now is to get it out. Once a run like this starts it is impossible to stop.
Deutsche has been in trouble for years, much like Credit Suisse, with speculation about its survival swirling through the markets. If any major institution was going to lose the confidence of its investors during this crisis, it was always likely to be at the front of the queue. It remains to be seen what happens next. But the only real way out will be for the German government and the ECB to step in with a guarantee to backstop Deutsche’s losses and to guarantee that depositors will be paid in full. They could decide to nationalise it, or else arrange a quick merger with a rival, most probably Commerzbank, or possibly France’s BNP Paribas.

Any fallout from a Deutsche bailout would hit the entire eurozone. On Friday, there were already signs of confidence ebbing in the other major banks across the zone. Shares in France’s BNP and Société Générale were down by 6 per cent, Italy’s UniCredit by 4 per cent, and Spain’s Santander by 4 per cent. The core problem for the eurozone has always been that a poorly designed, dysfunctional single currency builds up huge surpluses in some countries and deficits in others, and all that money has to be recycled somehow through the banking system. Deutsche, as Germany’s largest bank and the main commercial lender, is right at the heart of that system. The losses on recycling all that money were always going to end up somewhere, and in the end, they will have to be paid for by German taxpayers.
A Deutsche collapse could bring the euro down with it. Unless the government and the central bank can shore it up over the weekend, very soon the entire currency will be in deep trouble.
 

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Small banks lost $120 billion in deposits during SVB tumult​


Small and mid-sized banks lost $120 billion in deposits in just one week as turmoil gripped the regional banking world, according to new Federal Reserve data, while customers sought safer havens at the country's largest financial institutions.

The dramatic movements happened during a tumultuous period marked by the seizures of Silicon Valley Bank and Signature Bank on March 10 and March 12, which sparked fears of potential runs at other banks.

As regional and community banks lost $120 billion during the week ending March 15, the 25 biggest banks raked in $67 billion in new deposits on a seasonally adjusted basis, according to new Fed data released Friday. The net outflow from all banks was $98 billion, an annual drop of 5.8%. Total industry deposits of $17.5 trillion was the lowest count since September 2021.

The new numbers reinforce the big bank-small bank divide during this current crisis, as the giants of the industry escape some of the same investor pressure being applied to smaller rivals. It also accelerates some trends that were already in place. Deposits had been declining at small (and big) banks before the Silicon Valley failure, falling each of the first two months of the year. Deposits for all banks were also down 5% annually in the fourth quarter of 2022.

Many observers attribute this industrywide shift to pressure being applied by an aggressive Federal Reserve campaign to lower inflation. During the early part of the pandemic, when interest rates were historically low, banks were awash in deposits. When the Fed began moving those rates higher to cool the economy, customers who had deposits began seeking out places with higher yields. The first year-over-year deposit decline for all banks came in the second quarter of 2022.

Big banks weren't the only place customers parked their money. Inflows into money market funds totaled $121 billion in the week following Silicon Valley Bank's collapse, the largest inflow since early 2020, and then another $117 billion for the week ending March 22, according to the Investment Company Institute. Those are down from average weekly inflows of $16 billion year to date, according to JPMorgan Chase.

Government officials have been working to prevent massive deposit outflows in the aftermath of the bank failures. They first pledged to cover all depositors at both banks they seized, hoping that would calm any panic. But some regional lenders continued to see outflows. Eleven giant banks, in fact, decided to provide one troubled regional lender, First Republic, with $30 billion in uninsured deposits to stabilize the situation.

Treasury Secretary Janet Yellen on Tuesday vowed to safeguard deposits at smaller banks and said regulators were prepared to intervene if further deposit runs threaten more banking contagion. She said Wednesday this would not involve "blanket insurance" on all U.S. bank deposits without the approval of Congress.

On Wednesday, Federal Reserve Chairman Jerome Powell said "deposit flows in the banking system have stabilized over the last week." He also called the banking system "sound and resilient" and dubbed Silicon Valley Bank as an "outlier" that "failed badly." The same day, regional bank PacWest (PACW) disclosed a 20% drop in deposits from the end of last year.

The challenge for small banks is that if they raise rates on their deposits to keep customers, that could make them less profitable. But if they lose too many customers, as Silicon Valley Bank did, they give up critical funding and may have to sell assets at a loss to cover withdrawals.

Silicon Valley Bank customers withdrew $42 billion in one day, leaving the bank with a negative cash balance of $958 million. That forced regulators to seize the bank, which was the 16th largest in the U.S.
 

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Pentagon Woos Silicon Valley to Join Ranks of Arms Makers​


The Pentagon is seeking to enlist Silicon Valley startups in its effort to fund and develop new weapons technology and more-nimble suppliers, as the U.S. races to keep pace with China’s military advances.

The push to tap private capital comes in the midst of concern that U.S. defense-industry consolidation has led to dependence on a few large companies that rely on government funding for research and is hampering innovation. Meanwhile, China has pulled ahead in some key technologies, ranging from small drones to hypersonic missiles, helped by Beijing’s use of external public-private guidance funds, according to current and former Pentagon officials.


Steve Blank, co-founder of the Gordian Knot Center for National Security Innovation at Stanford University, said some estimates place Beijing’s capital infusion into the tech sector at more than $1 trillion.
“China is organized like Silicon Valley,” and the Pentagon is organized more like a Detroit auto maker, he said. “That’s not a fair fight.”

The Biden administration recently requested $115 million to fund a new Pentagon unit called the Office of Strategic Capital, which is designed to attract more investment, particularly venture capital, into companies producing technology and products viewed as critical to the military. It is the latest in a variety of Pentagon-backed efforts to harvest ideas from outside the traditional defense sector.

These efforts coincide with rising interest by venture-capital investors in the military business, spurred by Washington’s focus on China, and the success of such companies as Elon Musk’s SpaceX in winning Pentagon business.

Roughly $6 billion annually is now flowing from private capital into the U.S. defense and aerospace market, up from around $1 billion in 2017, according to PitchBook Data Inc., which tracks private funding.

The burgeoning links between the tech sector and the U.S. military come with their own set of complications. The shock waves from Silicon Valley Bank’s rapid collapse this month rippled through the Pentagon, where officials scrambled to come up with plans for startups working on defense projects that had accounts there, according to government and industry officials.

The Federal Reserve eventually guaranteed deposits.

“It was a very close call,” said Eric Levesque, co-founder of Strider Technologies Inc., a data and software-services startup that contracts with the Defense Department. He said Washington’s decision to fully guarantee deposits spurred a “sigh of relief.”

Had the government not stepped in, some military production could have been at risk, said Mike Brown
, a former director of the Pentagon’s Defense Innovation Unit, which aims to strengthen ties between the military and tech startups.

“It would’ve created immediate problems in the current supply chain,” he said, adding that some suppliers to classified programs could have been imperiled. Mr. Brown is now a venture partner at Shield Capital, which invests in defense-related startups.

The Pentagon referred questions about Silicon Valley Bank to the Treasury Department, which declined to comment specifically on defense startups.


Trae Stephens, a partner at the venture-capital Founders Fund, said investors are turning to defense because of changing dynamics in the startup market. The view of many VCs, he said, is, “You really can’t deploy capital into crypto anymore, you really can’t deploy capital into e-commerce anymore. Where am I going to deploy capital? Well, there is a recession-proof category, it’s defense.”

The Defense Department has for years signaled an interest in working with nontraditional suppliers in the tech industry, but there were few successes. That changed in 2016, when the software startup Palantir Technologies Inc. sued to compete on a Pentagon contract, said Mr. Stephens, a Palantir executive at the time.

The startup, which designed a system to allow users to sift through large intelligence data sets, argued that it had an existing product the Pentagon should consider rather than developing a bespoke system. Palantir prevailed.

“This was the turning point for private companies,” said Mr. Stephens., who co-founded Anduril Industries Inc., a startup that makes drone and surveillance systems. Mr. Musk’s SpaceX had to sue before Space Exploration Technologies Corp., as the company is formally known, won Pentagon orders. More recently Anduril has secured U.S. military business without the need for a legal battle.

Those companies have demonstrated that the Pentagon is a market now open to startups, said Gilman Louie, chief executive and co-founder of America’s Frontier Fund, which invests in technologies to address national and economic security problems.


“It’s the younger, innovative companies that are dominating the cyber, AI, software spaces,” said Mr. Louie, who ran In-Q-Tel, the Central Intelligence Agency’s venture-capital arm.

What helped some of the early startups prevail were deep-pocketed backers, raising questions on whether less well-heeled newcomers can succeed. “You can probably count on one hand companies that have billionaire founders who can just keep funding and funding and funding the thing until eventually they crack the nut and get a large program,” said Warren Katz, who heads the Alliance for Commercial Technology in Government, an industry association.

It is hard to determine how deep the Defense Department’s interest in new suppliers goes. Mr. Stephens of Founders Fund said the Pentagon’s inclination to work through large defense contractors means that many of the smaller VC-funded startups likely won’t survive. “It’s just a ticking time bomb waiting to collapse,” he said.

Adding to that concern, Pentagon acquisition chief Bill LaPlante last year lashed out against traditional defense manufacturers for lagging production, and Silicon Valley by questioning the relevance of technologies such as artificial intelligence and quantum computing in the midst of an artillery war in Europe.

“The tech bros aren’t helping us that much in Ukraine,” he said.

In a statement to The Wall Street Journal, Dr. LaPlante said that a number of tech companies, including SpaceX, whose satellite internet has been critical for Ukraine’s military, have in fact helped in the conflict. “What I was really referring to are the kind of aspirational, often-elusive technology capabilities that have not yet developed on a time frame that’ll impact the battlefield in Ukraine,” he said.

Mr. Blank, of Stanford, said allowing tech companies to contribute on a wider scale would require a radical overhaul of the Pentagon’s acquisition system, ending the current system dominated by a handful of major defense contractors. “If you don’t see 10 new names in the next three years, we’re failing to actually integrate commercial technology into the DOD,” he said. “That’s the ultimate test.”
 

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