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The above is edited excerpts from a current opinion article in The Guardian. Hard not to share Mr. Naughton's opinion.So one day Silicon Valley Bank (SVB) was a bank, and then the next day it was a smoking hulk that looked as though it might bring down a whole segment of the US banking sector. The US government, which is widely regarded by the denizens of Silicon Valley as a lumbering, obsolescent colossus, then magically turned on a dime, ensuring that no depositors would lose even a cent.
The first thing to understand is that “Silicon Valley” is actually a reality-distortion field inhabited by people who inhale their own fumes and believe they’re living through Renaissance 2.0, with Palo Alto as the new Florence. The prevailing religion is founder worship, and its elders live on Sand Hill Road and are called venture capitalists. These elders decide who is to be elevated to the privileged caste of “founders”.
To achieve this status it is necessary to a) be male; b) have a Big Idea for disrupting something; and c) never have knowingly worn a suit and tie. Once admitted to the priesthood, the elders arrange for a large tipper-truck loaded with $100 bills to arrive at the new member’s door and cover his driveway with cash.
But this presents the new founder with a problem: where to store the loot while he is getting on with the business of disruption? Enter stage left one Gregory Becker, CEO of SVB and famous in the valley for being worshipful of founders and slavishly attentive to their needs.
So SVB was awash with money. But, as programmers say, that was a bug not a feature. Traditionally, as Bloomberg’s Matt Levine points out, “the way a bank works is that it takes deposits from people who have money, and makes loans to people who need money”. SVB’s problem was that mostly its customers didn’t need loans. So the bank had all this customer cash and needed to do something with it. Its solution was to buy long-dated, ostensibly safe securities like Treasury bonds. So 75% of SVB’s debt portfolio was in those “held to maturity” assets. On average, other banks with at least $1bn in assets classified only 6% of their debt in this category at the end of 2022.
There was, however, one fly in this ointment– the US Federal Reserve had been raising interest rates to combat inflation. Word got out – as word always does – and the elders on Sand Hill Road began to whisper to their esteemed founder proteges that they should pull their deposits out, and the next day they obediently withdrew $42bn. The rest, as they say, is recent history.
What can we infer about the culture of Silicon Valley from this shambles? Well, first up is its pervasive hypocrisy. Palo Alto is the centre of a microculture that regards the state as an innovation-blocking nuisance. But the minute the security of bank deposits greater than the $250,000 limit was in doubt, the screams for state protection were deafening. (In the end, the deposits were protected – by a state agency.) And when people started wondering why SVB wasn’t subjected to the “stress testing” imposed on big banks after the 2008 crash, we discovered that some of the most prominent lobbyists against such measures being applied to SVB-size institutions included that company’s own executives. What came to mind at that point was Samuel Johnson’s observation that “the loudest yelps for liberty” were invariably heard from the drivers of slaves.
But the most striking takeaway of all was the evidence produced by the crisis of the arrant stupidity of some of those involved. The venture capitalists whose whispered advice to their proteges triggered the fatal run must have known what the consequences would be.
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Anyone with half a rational thought knows that the overwhelming majority of depositors at SVB and FRC are overwhelmingly lefty Biden supporters. No mention of that anwhere though, no?
Meanwhile you need to ask what the hell was Mary Daly doing or better said not doing overseeing this, oh she was focused on inclusion, diversity blah blah blah...virtue signaling BS. How about focusing on merit, competence instead?
Root cause, no mention how Bidenomics has been the root cause of all this. Insane economic, fiscal, monetary policies caused inflation, caused the Fed to hike....and what da know, the peanut butter is hitting the fan. But hey, let's send another 100B to Ukraine and keep the killing fields operative rather than forcing a peaceful resolution.
So I guess you could argue this was a bail out of Biden supporters.
That being said, I do believe and agree with Hussman as he said all along since 08 they should protect all depositors and the shareholders get wiped out and bond holders get a crew cut, bank goes into receivership and taken over by stronger bank. What did the depositors do wrong here? I'll answer that for you. Nothing. Why should they get wiped out, jsut because they have a bigger uh, nest egg than some, so little boys are jealous now?
You need to do what is right for the country and most. If they don't stop the bank runs EVERYBODY is going to take it in the shorts. Cowns are trying to bring politics into play now rather than figuring out what caused this, how was this missed, how did they get a good ratings from Moody's and the auditors, how do we stop the bank runs, how do we have a better system going forward.
I can also tell you first hand, thank GOD for Silicon Valley and the innovation...as someone who has spent a lot of time there I can tell you a lot of medical advances, semiconductor advances, bio tech advances have come about and made our society better for it due to the entrepenourial climate out there without the loads of excessive govt intervention. For more curent times, I have no use for Meta and their virtual reality BS, that I would agree with.
And we "know that" exactly how?
aka: Let's force Ukraine to surrender to Russia... Peace in Our Time !!!
Evidently Baseball Fan isn't familiar with the warmup to the Second World War.
Might makes Right! Sure thing, Neville.
Would that be the same "GOD" that watches over every sparrow?
Who has determined that Russia should mercilessly destroy the people of Ukraine?
Who delights in religions trying to kill each other in "his name"?
Maybe we need a better class of "GOD". The one that you're using must have been a factory reject.
If U.S. depositors lost confidence in the banking system, the situation could have easily spun out of control.
Protecting depositors with over $250K in SVB and Signature Bank may have been necessary in this context¹.
Surprisingly, several prominent capitalists (David Sacks, Bill Ackman, etc.) who previously espoused libertarian ideals suddenly had a change of heart!
They utilized social media to warn of impending doom and demand a bail out by government agencies.
These hypocrites helped accelerate the run on SVB ($42B was withdrawn last Thursday).
¹ It may be prudent to modify FDIC insurance protection and scrutinize regulations for banks which aren't TBTF.
Some of my GOP colleagues have lost their moral compass on Ukraine The above section contains excerpts from an article by Mr. Sununu, which were edited for brevity. (Textual emphasis was added.)
It's pretty nuts.
Peter Thiel....Thiel is a self-described conservative libertarian, though more recently he has espoused support for national conservatism, and criticized economically liberal attitudes towards free trade and big tech. Reported that he 'had' $50 million at SVB. Have you a list? You must have one or can direct a link my way. I'm having a discussion with a neighbor; and would appreciate your help with a list of the major depositors.
Guess we should move this treat to "Off Topic" (again)
I assume people claiming SVB is "woke" get most or all of their information from Fox news, which has also promulgated the lie that SVB sent millions to BLM
Anyone interested in the facts should read Judd at Popular Information
Judd continues to back up his opinions with facts
How ironic: We give @Baseball_Fan the power to control our viewing by tolerating his Trumpian rants, which then obliges us to remove a topic from general viewing to the all-but-invisible "Off-Topic" section.
Right out of the right-wing playbook: censor what you don't like.