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.
FTX Crash was a result of a “conscious and intentional fraud intended to steal money”
It is now clear that what happened at the FTX crypto exchange and the hedge fund Alameda Research [hedge fund] involved a variety of conscious and intentional fraud intended to steal money from both users and investors. That’s why a recent New York Times interview was widely derided for seeming to frame FTX’s collapse as the result of mismanagement rather than malfeasance. A Wall Street Journal article bemoaned the loss of charitable donations from FTX, arguably propping up Bankman-Fried’s strategic philanthropic pose. Vox co-founder Matthew Yglesias, court chronicler of the neoliberal status quo, seemed to whitewash his own entanglements by crediting Bankman-Fried’s money with helping Democrats in the 2020 elections – sidestepping the likelihood that the money was effectively embezzled.
FTX crash was not the result of a bank run, but a massive act of theft
Perhaps most perniciously, many outlets have described what happened to FTX as a “bank run” or a “run on deposits,” while Bankman-Fried has repeatedly insisted the company was simply overleveraged and disorganized. Both of these attempts to frame the fallout obfuscate the core issue: the misuse of customer funds.
FTX and other crypto exchanges are not banks. They do not (or should not) do bank-style lending, so even a very acute surge of withdrawals should not create a liquidity strain. FTX had specifically promised customers it would never lend out or otherwise use the crypto they entrusted to the exchange.
In reality, the funds were sent to the intimately linked trading firm Alameda Research, where they were, it seems, simply gambled away. This is, in the simplest terms, theft at a nearly unprecedented scale. While the total losses have yet to be quantified, up to one million customers could be impacted, according to a bankruptcy document.
Bankman-Fried stole FTX exchange customers’ funds to bankroll the Alameda hedge fund
The author goes into the gory details and the magnitude of the theft by Bankman-Fried and how he stole FTX exchange customers’ funds to bankroll the Alameda hedge fund, amongst other crimes:
“While an exchange [like FTX] ultimately makes money from transaction fees on assets that belong to users, a hedge fund like Alameda seeks to profit from actively trading or investing funds it controls….the [FTX] exchange had been funneling customer assets to Alameda for use in trading, lending and investing activities. On Nov. 12, Reuters made the stunning report that as much as $10 billion in user funds had been sent from FTX to Alameda.”
Bankman-Fried is the Bernie Madoff of the 2020s
“Bankman-Fried has continued to muddy the waters with carefully disingenuous letters, statements, interviews and tweets. He has attempted to portray himself as a well-intentioned but naïve kid who got in over his head and made a few miscalculations. This is a softer but more pernicious version of the crisis management approach Donald Trump learned from the black-hat mob lawyer Roy Cohn: Instead of “deny, deny, deny,” Bankman-Fried has decided to “confuse, evade, distort.”
Morris covers other criminal behaviors that resulted from this “cardinal sin” concluding:
“The scale and complexity of Bankman-Fried’s fraud and theft appear to rival those of Ponzi schemer Bernie Madoff and Malaysian embezzler Jho Low. Whether consciously or through malign ineptitude, the fraud also echoes much larger corporate scandals such as Worldcom and, particularly, Enron.
“The principals in all of those scandals wound up either sentenced to prison or on the run from the law. Sam Bankman-Fried clearly deserves to share their fate.”
Why Levi’s brand President and the woman lined up to be the next CEO of Levi’s, turned down a $1 million severance in exchange for her freedom to speak about the irrational “woke” culture that permeates the Levi’s corporation.
…Early on in the pandemic, I publicly questioned whether schools had to be shut down. This didn’t seem at all controversial to me. I felt—and still do—that the draconian policies would cause the most harm to those least at risk, and the burden would fall heaviest on disadvantaged kids in public schools, who need the safety and routine of school the most.
I wrote op-eds, appeared on local news shows, attended meetings with the mayor’s office, organized rallies and pleaded on social media to get the schools open. I was condemned for speaking out. This time, I was called a racist—a strange accusation given that I have two black sons—a eugenicist, and a QAnon conspiracy theorist.
… the Head of Diversity, Equity, and Inclusion at the company asked that I do an “apology tour.” I was told that the main complaint against me was that “I was not a friend of the Black community at Levi’s.” I was told to say that “I am an imperfect ally.” (I refused.)
The fact that I had been asked, back in 2017, to be the executive sponsor of the Black Employee Resource Group by two black employees did not matter. The fact that I’ve fought for kids for years didn’t matter. That I was just citing facts didn’t matter. The head of HR told me personally that even though I was right about the schools, that it was classist and racist that public schools stayed shut while private schools were open, and that I was probably right about everything else, I still shouldn’t say so. I kept thinking: Why shouldn’t I?
In the fall of 2021, during a dinner with the CEO, I was told that I was on track to become the next CEO of Levi’s—the stock price had doubled under my leadership, and revenue had returned to pre-pandemic levels. The only thing standing in my way, he said, was me. All I had to do was stop talking about the school thing.
Write economist Raymond Niles and urbanist Kyle M. Kirschling on the importance of a Substeading Act:
Imagine if getting to the airport were as easy as riding an elevator, if trains were as clean and comfortable as a limousine, if it took half as long to get anywhere in the city. In this paper, we show how Substeading (underground homesteading) can achieve this within a generation. In addition to proposing a new legal technology, we present specific projects that would be profitable today, despite high tunneling costs.
Substeading is economically powerful, based on proven technology, and could transform big cities in a generation.
Substeading would create brand-new and conveniently-located rights-of-way, ideal for new urban transportation networks and other infrastructure.
Substeading is politically practical because it has minimal environmental impacts, requires no government funding, and doesn’t use eminent domain.
Substeading would naturally pave the way for bigger and better cities by nurturing new construction and infrastructure technologies and by eroding regulatory obstacles to new development.