Wow, it seems like this week lasted a month with all the news surrounding the Silicon Valley Bank failure. When this story broke last week, I immediately switched on Fox news to see how long it would take them to blame Joe Biden and the Democrats for it.
Literally by that night, Tucker Carlson was blaming them and their policies. I must have heard the term “woke” 30 times in two hours, I really couldn’t figure out how this was a “woke thing” but I digress. “Hmm, I thought to myself”, I wonder how long it will be till the Democrats blame Donald Trump, again it was only a few hours and BOOM, I heard it on CNN. More people should be talking about the fact that 15 banks failed while Donald Trump was president,” said a Twitter post from progressive political action committee MeidasTouch.
Playing the same game of partisan “whataboutism,” Donald Trump Jr. tweeted that he didn’t remember any banks collapsing during his father’s administration, prompting journalist Jake Sherman to provide a list of the 17 banks that did fail under the Trump Administration, none the size of SVB but you get the gist of this. You really can’t make this stuff up, it’s like a bad sitcom.
Now this awful situation with SVB is not a democrat or republican thing, it’s really about a mis-managed bank. Attributing bank failures solely to whichever political party is in power omits nuances concerning why the banks failed in the first place, and what lessons can be learned to prevent other banks from failing in the future. This isn’t really the Feds fault either, I’m sure the Feds policy hurt but it wasn’t the main reason for the implosion. Nor did SVB suffer the classic “sound bank wrecked by a stampede” scenario. Instead, SVB deployed just about every bad policy on both the asset and liabilities sides of its balance sheet. SVB is a case study in how setting a poor structure to enable quick expansion created daunting risks that prudently run banks, despite the Fed’s huge runup in rates, have avoided.
I am an economics guy, I studied it so I could do my own investing throughout my life, and I had a good handle on it and was very fortunate on some early investments that really panned out. I’ve always been fascinated by people I speak with, who know nothing about their money or where it’s being invested. One guy I spoke with this week thought the bank just kept his money in a safe, after I explained to him how it works, I thought he was going to have a stroke. I have often asked people if they know what happened during the 2008 financial crisis, usually I get crickets. One fella told me that crisis was all Barack Obama’s fault. I just dropped my head and said, “the first hedge funds collapsed in 2007 and Bear Sterns & Lehman crashed in 2008. Obama wasn’t sworn in until 2009 and had it dropped in his lap. I hate to ruin you BS narrative with facts but that’s the way the cookie crumbles.
Where does all this lead, I hope this is just a small bump in the road in the history of our country, but it could get worse. I’m glad the folks with under $250,000 have been made whole again by FDIC but for the folks who assets were not insured, I have no sympathy for you. Hell, the FDIC sign states right on it, insured up to 250,000, what were you thinking, there are secure accounts you could have used. I am not nor have I ever been a fan of bailouts. If you want to privatize your profits, good for you, but I will not support socializing your rescue. The folks who all love capitalism, bank failures are one on the downfalls, survival of the fittest my economics professor used to say. One company fails, another will take them over, like it or not, that’s the way Capitalism works.
One piece of advice, I’m a credit union guy, there are non-profit and usually don’t make risky investments, pay, and offer better interest rates and much more pleasant to deal with. Just my two cents.