Bits about the Silicon Valley Bank failure

Among some other things, the failure of SVB is a great example of how modern politics and radical right propaganda works. The radical right spin monster is already lying through it’s teeth. The behaviors and moral rot of brass knuckles capitalists and corrupted politicians are crystal clear and undeniable. And, the corrupt nature of Republican Party brass knuckles capitalism and Democratic Party neoliberalism are also clear. Political power was no on the side of the public interest. It was on the side of unbounded greed and personal ambition driven by cynical moral rot and ideological fantasies.

The truth

The truth is needed for context. Some key points are these:

Runs on banks in the 1930s led to the creation of federal regulations and a regulatory agency, the FDIC.

Banks and Wall Street bitterly hated bank and financial regulations, attacking them as destructive, unnecessary, socialist and whatever other slander or stupid fantasy they thought would resonate with the public and idiot, incompetent and/or corrupt/cynical politicians and presidents.

Deregulation of banks and the financial sector led to the massive bank, financial and housing catastrophe of 2008-2009. Millions of people were seriously damaged, but 100% of criminal elites were untouched.

Democratic and Republican politicians bailed out some customers, but also investors in the face of the 2008 catastrophe. The regulatory system was never designed to bail investors out. It was there to protect depositors, not risk-taking investors.

New regulations to prevent bank failures due to runs on banks by panicked depositors passed in 2010 over vehement Republican opposition.

The banks lobbied relentlessly against the new regulations. Once the Republicans were back in power, they relaxed the regulations in 2018 by exempting mid-sized banks (up to $250 billion in assets) like SVB from the depositor-protecting regulations. Those banks were freed to take a lot more risk. Added risk increased profits, which led to huge payouts to bank executives. 

People like Elizabeth Warren warned that the dropped regulations would lead to bank failures due to runs on banks. Warren was 100% correct in her analysis. Greedy bankers took risks that regulations could have avoided and that led SVB to fail. The fiasco was aided by a the anti-regulation Federal Reserve under the brass knuckles capitalist Jerome Powell. Under Powell, the fed has been fully captured and neutered by banks and Wall Street, making regulations impossible or as weak as possible.

SVB failed because it had held too much asset in the form of low interest rate bonds, not because it was woke. When the fed started raising interest rates, those bonds had to be sold at a loss if there was a run on deposits. There was a run on deposits, $42 billion on one day, which caused SVB to collapse. 

A few hours before bank regulators took over SVB, the executives paid themselves one last big bonus for a job well done for themselves. Those morally rotted executives had no concern whatever about pain and damage their failure caused to depositors. That problem was no longer their problem once the regulators closed the bank down.  

This is a story about the essence and soul of unregulated brass knuckles capitalism and incompetent politicians who are corrupt, ruthlessly cynical and/or idiotically ideologically deluded into a belief that unregulated capitalism is best for everyone.

The radical right spins its poison lies and slanders

It seem fit to point out that the radical right propaganda Leviathan and the shameless jaw-dropping lies and slanders it routinely poisons American society with. Business Insider writes:

• Some Republicans blamed “woke” investment strategies for Silicon Valley Bank's downfall.

• The GOP has increasingly portrayed itself as against “wokeism” in all aspects even when the definition is unclear.

Conservatives are blasting their new boogeyman of wokeism after the second-largest bank collapse in US history, eschewing the more straightforward story of problematic balance sheets in favor of raw politics.

“SVB = too woke to fail,” Senator Josh Hawley tweeted (R-MO) on Monday.

To Florida Gov. Ron DeSantis, the culprit was “Diversity, Equity, and Inclusion.” The bank website says it was building a global workforce celebrating “greater dimensions of diversity.”

“This bank, they're so concerned with DEI and politics and all kinds of stuff, I think that really diverted from them focusing on their core mission,” DeSantis said on Fox News' “Sunday Morning Futures.”

Rep. Jim Comer, head of the House Oversight and Reform Committee, blasted "Democrat inflation" and called Silicon Valley Bank “one of the most woke banks in their quest for the ESG-type policy and investing,” a reference to environmental, social, and governance policies. 

Sen. Ted Cruz of Texas, himself a former presidential candidate, announced last week that he’s penning a new book titled “Unwoke: How to Defeat Cultural Marxism in America.”

That bullshit speaks for itself. SVB clearly failed due to the wrong assets on its balance sheet, not wokeism. The radical right blames wokeism and the left for its own failed policy choices. This is standard radical right authoritarian propaganda. 

Other commentary

The Financial Times writes:

It may stick in some throats that the US and UK financial authorities have had to engineer an emergency rescue for an institution, and an industry, that is so fond of railing against government intervention and lobbying against stricter regulatory oversight. 

The SVB fiasco also shines an unforgiving spotlight on the hypocrisy of some of the biggest venture capital players on both sides of the Atlantic, who privately urged their portfolio companies to pull their money from the bank and then later publicly called for government support. SVB collapsed on Friday as a result of a classic bank run after customers withdrew $42bn of deposits.

Well as we all know, hypocrisy does not faze the radical right or its brass knuckles capitalist supporters. Money is the only thing that counts. Democracy, truth and civil liberties can all go to hell as far as the radical right is concerned. 

Slate comments:

As the startups that make up Silicon Valley Bank’s customer base scrambled to figure out whether they would be able to make payroll, a group of extremely online venture capitalists spent four days emoting on Twitter, ginning up confusion and hysteria about the threat of a systemic risk if depositors didn’t get all their money back, pronto. All weekend, they screamed that there would be an economic collapse, that they were concerned about the workers, that the Federal Reserve was responsible, that-that-that … until finally, on Sunday evening, they got what they wanted: the government promising full account access to all Silicon Valley Bank depositors.

By now, it is relatively clear what happened at Silicon Valley Bank. A pandemic bull run inflated the value of tech startups and the funds of investors, resulting in a tripling of deposits at the regional bank that specializes in the industry’s fledgling companies, from $62 billion at the end of 2019 to $189 billion at the end of 2021. SVB wanted to put that money to work, so it bought up U.S. Treasury and mortgage bonds that would take years to mature but serve as a relatively safe place to park its cash—as long as interest rates didn’t rise. They did rise, however, multiple times.

Again the point is clear. Brass knuckles capitalists hate regulation. But when lack of regulation leads to a preventable disaster caused by unregulated greed, hypocrite capitalists scream to be bailed out by the government they hate so much. 

By now, it should be clear to everyone that brass knuckles capitalism is all about deregulated risk-taking and demands for bailouts when unregulated greed causes trouble. Capitalist dogma is clear and simple: Maximize wealth accumulation by privatizing and concentrating profits with the elites, but socializing risk and damage to the masses, the government and/or the environment, i.e., anyone or anything but lying, corrupt, hypocrite capitalist elites.

The NYT comments on the ongoing fallout: “Across the country, banks of various sizes are battling market turmoil as customers rushed to withdraw their deposits and investors, worried about more bank runs, dumped bank stocks.”