In a NewsWeek opinion piece, “Silicon Valley Bank Bailout Is a Disgraceful Political Payoff“, , President, Palm Beach Freedom Institute, writes:
The notion that our whole banking system was teetering on the edge of a cliff sharply contradicts the Biden administration’s narrative that our economic fundamentals are strong. But temporizing on that doubtful claim was clearly preferable to admitting the truth that the SVB bailout is a poorly disguised political payoff.
Silicon Valley, where SVB is the “go-to” bank for the tech industry, is the Democratic Party‘s richest fiefdom. In 2020 alone, Federal Election Commission data recorded some $200 million flowing into Democratic coffers from the California counties comprising the region. According to the Center for Responsive Politics, in that same year Democrats received 98% of all political contributions from internet companies, whose financing is SVB’s bread and butter. Personal contributions to Democrats from individuals employed in the tech industry are nearly as high.
SVB cannot legally donate to individual candidates or political parties. According to the Open Secrets website, however, it operates a political action committee (PAC) that has donated predominantly to Democrats for the last 20 years. In 2020, Democrats received 100% of its PAC donations. Last year, the PAC sent hefty contributions to Democratic legislators Sen. Chuck Schumer (D-NY), Sen. Mark Warner (D-VA), Rep. Gregory Meeks (D-NY), and Rep. Josh Harder (D-CA), all of whom quickly praised the bailout. SVB’s CEO Greg Becker, who cashed in $3.6 million of company stock a week before the bank’s collapse, has been one of the PAC’s leading contributors.
In addition to massive financial support for the Democrats, SVB also offers unquestioning ideological fealty the modern Left. The bank slavishly toes the line on DEI and ESG initiatives favored by the Biden administration, but widely believed to be divisive, demoralizing, and financially underperforming. According to the bank’s website, “SVB is committed to creating a more diverse, equitable, inclusive, and accessible environment…within the innovation ecosystem, and in our communities…helping to advance solutions that create a more just and sustainable world [and] contribute to a healthier planet.”
This is not empty rhetoric spouted to console guilty millennial employees. Even as insolvency loomed, SVB still pledged “at least $5 billion in loans, investments, and other financing to support sustainability efforts.” According to Bernie Marcus, the billionaire cofounder of Home Depot, “these banks are badly run because everybody is focused on diversity and all of the woke issues and not concentrating on the one thing they should, which is shareholder returns.”
Fake Banks and Real Banks
We observe a run on deposits in a commercial bank, then observe that the same thing can happen to other financial institutions, then mistakenly assume these institutions are essentially the same.
Understanding Bank Failures and the Objective Role of the Lender of Last Resort
Since government regulatory practice has gone beyond making loans to illiquid-but-solvent banks, to paying back all the deposits of insolvent banks, the result is that there is no reason for depositors to care about whether their bank is taking excessive risks.
Federal Deposit Insurance Corporation (FDIC): No Banking System Savior Then or Now
Scaling back deposit insurance, combined with a credible policy of putting failure costs onto their rightful owners, stockholders, instead of onto taxpayers is the proper solution to preventing mass bank failures.