Alleged President Joe Biden said that there would be no government bailout of failed Silicon Valley Bank – but as usual with Democrats that was a lie.
While there has not yet been a bailout of Silicon Valley Bank’s shareholders, there has been a bailout, or at least the promise of a bailout, of the failed banks major depositors – many of whom are also major Democrat donors.
Our friend Club for Growth President David McIntosh explained the backdoor bailout in a statement issued in reaction to the announcement that the Federal Deposit Insurance Corporation (FDIC) would guarantee Silicon Valley Bank deposits beyond the $250,000 limit.
“The Biden bank bailout is a result of Biden’s failed economic policies. And it will make things worse – other banks and their customers will pay the price, all Americans will suffer, mass inflation will start back up again. Organizations that can’t manage risk should be allowed to fail, and taxpayers should not be forced to bailout the well-connected and wealthy because a bank prioritized woke causes above smart investing. Changing the rules after the crash to prop-up liberal investors at the expense of taxpayers is pure crony capitalism. The additional regulations being proposed by Biden would only make the situation worse and further consolidate power among the big banks and hurt regional banks that small businesses rely on.”
Former Congressional Budget Office Director Doug Holtz-Eakin, who also served on the Financial Crisis Inquiry Commission that studied the 2008 global economic crisis, said what happened is fairly simple: The bank and its clients got squeezed by higher interest rates and a slowing economy.
"People are used to having zero interest rates and easy money, and it’s gone. And there are people who will manage that well and people who will not," Holtz-Eakin said during an interview on "Cavuto Coast-to-Coast" Friday.
That puts responsibility on the bank’s executives.
"This looks like a business model failure. The Silicon Valley Bank had poor management of its Tier 1 capital, heavily concentrated in one asset. And it had a very narrow client base. It's all tech companies. It’s literally just Silicon Valley. So, I think of this as a real management failure. I don’t think it’s a financial system failure."
However, according to multiple media reports, SVB CEO, Greg Becker, sold $3.6 million of company stock less than two weeks before the SVB collapse, and employees received bonuses HOURS before the FDIC seized control of the company.
No word yet on whether Becker and his cronies are or will face an investigation into their looting of the bank as it crashed.
Entrepreneur and longshot Republican presidential candidate Vivek Ramaswamy explained what’s really going in the SVB bailout in a must-read op-ed in the Wall Street Journal (caution lots of finance and bank-speak but you’re smart and will get it):
Why would the bank hold only $26 billion in AFS (liquid assets) when it knew it had a concentrated, high-risk deposit base?
SVB intentionally decided not to hedge its interest-rate risk. This is shocking given that its $120 billion securities portfolio had a duration of 5.6 years, meaning a 200-basis-point increase in the five-year rate would equate to a $14 billion loss, roughly equal to SVB’s entire capital base. As recently as December 2021, SVB held a modest $10 billion of interest-rate swaps, so it knew the technique. CEO Greg Becker should have known better too. Until Friday he was a board member of the San Francisco Fed. He was also savvy enough to sell $3.6 million in stock days before his bank collapsed.
Either SVB was incompetent or this is a case of moral hazard, taking excessive risk and expecting political favors and bailouts. It turns out SVB’s real “hedge” was to curry favor with the Biden administration. In 2022 SVB publicly committed $5 billion in “sustainable finance and carbon neutral operations to support a healthier planet.” SVB’s 2022 ESG report lists a litany of “cross-function working groups,” including a “Sustainable Finance Group” that monitors progress against SVB’s Climate Commitment and an “Operational Climate Group” that “monitors implementation of operational greenhouse gas reduction initiatives.” Rather than apply basic risk-management practices, SVB resorted to lobbying for looser risk limits. Taxpayers shouldn’t vindicate SVB’s political hubris.
Unfortunately, Mr. Ramaswamy is right, here’s a sampling of the contributions to Democrats and Democrat-friendly PACs from SVB CEO Greg Becker* over the past couple of years:
BIDEN FOR PRESIDENT
BIDEN VICTORY FUND
FRIENDS OF MARK WARNER
NEW DEMOCRAT COALITION ACTION FUND
FRIENDS OF SCHUMER
TECHNET FEDERAL PAC
SILICON VALLEY BANK PAC
RO FOR CONGRESS
LOFGREN FOR CONGRESS
In all Becker has given tens of thousands of dollars to Democrats, and we haven’t even begun to plumb the contributions of other SVB executives and the major depositors, like ROKU, who were bailed out.**
Breaking Tuesday, March 14, 2023 SVB also gave $100,000 to a "charity" headed by the wife of California's Democrat Governor Gavin Newsom.
So, thanks to Becker’s political connections it looks like taxpayers and depositors in other banks are going to foot the bill for the SVB collapse via higher regulatory costs and paying off the Treasury for funds used to make SVB depositors whole above the $250,000 cap.
The Capitol Switchboard is (202) 224-3121 we urge CHQ readers and friends to call House Financial Services Committee Chairman Patrick McHenry to demand he hold hearings on the Silicon Valley Bank collapse, the legality of Biden’s FDIC cap-busting scheme and especially the political contributions and payouts to executives and employees as the bank nosedived into receivership.
*Becker also made a small contribution to Republican leader Kevin McCarthy’s leadership PAC.
**Streaming service ROKU had over $400 million in uninsured deposits in SVB, it won’t surprise you to learn that ROKU’s employees give overwhelmingly to Democrats and Democrat-friendly committees and PACs.
Troubled Asset Relief Program TARP
Kevin McCarthy
2008 bailouts
Emergency Economic Stabilization Act of 2008
Treasury Secretary Henry Paulson
moral hazard
Dodd Frank
Tea Party Movement
2023 Silicon Valley Bank bailout
SVB bailout
ESG investing
Democrat donors
Club for Growth President David McIntosh
Federal Deposit Insurance Corporation (FDIC)
SVB CEO Greg Becker
Vivek Ramaswamy
House Financial Services Committee Chairman Patrick McHenry