Adapted from what I said on the “In The Tank Podcast” #389 on March 16, 2023. Transcribed and summarized by fan of the show, TM Willemse.
Some people have commented that it’s not true that wokeness brought down Silicon Valley Bank. But I think that by and large it’s mostly true and I’ll try to explain here.
The failure of Silicon Valley Bank was the largest since the collapse of Washington Mutual Bank and the subsequent financial crisis of 2008. What’s important about this, and one of the big takeaways, is how remarkably quickly Joe Biden stepped in to say, in essence, don’t worry, we’re going to save this bank. There was an attempt to do this the proper way. There was a buyer for this bank that the Biden administration rejected for reasons to do with wokeness; the agenda of the potential purchaser wasn’t politically correct when it came to this administration.
Bailing out SVB was not like bailing out your local savings and loan. This isn’t the government coming in to make sure that everyone who had their homes built by the Bailey Brothers in “It’s a Wonderful Life” didn’t lose their entire savings. I think it’s important to do what you can to prevent a run on banks but, again, this was not a regular bank, this was Silicon Valley Bank. This bank specialized in investing in startups in Silicon Valley, which is a wonderful thing to do. But as the bank developed, the money became easier for them to acquire. The portfolio of Silicon Valley bank grew exponentially very quickly. It grew from $15 billion a few years ago to more than $200 billion in assets that they would then lend out. However, 97% of the depositors at Silicon Valley bank were above that $250,000 limit that is protected by the FDIC. This is the richest of the rich. These are millionaires and billionaires who have poured all this capital into Silicon Valley bank, which was then run by morons and idiots who put politics ahead of fiduciary responsibility, investing in stupid green energy projects which were garbage.
They didn’t have a risk assessment officer for the last nine months, and I guess they never would have had one, because they didn’t really care about that. If you look at their last annual report it didn’t really talk too much about how they were responsibly shepherding people’s money. They talked a lot about their corporate responsibility, and they leaned really heavily into the ESG stuff; it was such a big part of what they were doing. They bragged about their climate and environmental finance and investments, their climate and environmental risk management, their climate and environmental impacts from operations. Their focus was on “climate, diversity, equity and inclusion across our leadership, workforce and supply chain,” and “community development financial inclusion and economic equality.” These are not the things that they should have been focused on. They should have been focused on finding sound investments in Silicon Valley.
In his latest piece at Red State, published March 15, 2023, The Heartland Institute’s Chris Talgo writes, “In the summer of 2020, SVB donated a whopping $73 million to Black Lives Matter,” and that “They spent a huge amount of time and resources checking the diversity, equity, and inclusion (DEI) boxes while not paying nearly as much attention to macro-economic trends or routine risk assessment practices.” The billions of dollars they dedicated to these things is easy to do when you think you are always going to have this money. But when your business plan was to buy treasury bills at 0% and then try to put them back on the market when they were now almost worthless — because interest rates are higher now, and buyers can get them at better rates somewhere else — you know they weren’t really interested in running a bank. They were interested in running a social justice program with other people’s money.
One of the big reasons that the Biden Administration moved in there so quickly to bail out this bank (they’re going to tell you it’s not a bailout, but it is a bailout) is because all these rich millionaires and billionaires were not going to be allowed to either try to pull out their deposits or lose their investments. They were going to be made whole. One of the people that is going to be made whole is Gavin Newsom, the governor of California. He personally lobbied President Biden to bail out this bank. He has untold millions invested in Silicon Valley Bank, and he’s going to be made whole.
Isn’t that great?! Isn’t it fun to participate in capitalism when the system is rigged, and you can pick up the phone and call the guy who can rig it for you, so you don’t lose a damned penny? That is such a great system to live in. It surely is not capitalism. It is something else.
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