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March 15, 2023 - 5:46pm
The reaction to the rescue of Silicon Valley Bank has been acutely divided — but not along political lines. On one end there are Democratic economic advisors, establishment Republicans and venture capitalist libertarians like David Sacks, who featured on UnHerd this week to defend the decision. On the other are populist politicians from Left and Right like Senators Elizabeth Warren and J.D. Vance who are leading calls to crack down on the banking industry’s loose regulatory framework.
One figure to have offered his full-throated support to the latter camp is economist Matthew Stoller. Stoller is Director of Research at the American Economic Liberties Project and writes the Substack ‘BIG‘. He joined Freddie Sayers to explain why he thinks the SVB bailout was so disastrous, arguing that it was wholly unnecessary:
In Stoller’s opinion, the SVB crisis was a storm in a teacup, whipped up by executives who didn’t want to deal with the inevitable fallout from their “bad risk management”.
Which begs the question: what would have happened had the Fed done nothing? According to Stoller, SVB depositors, over time, would have been more or less alright had the crisis been left to follow a natural course:
Stoller believes the whole banking system needs a revamp. First and foremost, the too-big-to-fail banks need to be dismantled and regulated “more aggressively”, with the result being “more banks, closer to communities, that allow for risk management”. Another solution, which may be less palatable to many, is to offer everyone and anyone the ability to bank directly with the Federal Reserve, risk free. Concerns over privacy and governmental control were brushed aside. In any case, Stoller declares it a myth that the Government isn’t already pulling the strings:
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SubscribeHere’s all you need to know: Gavin Newsom, Governor of the failed State of California, owns three wineries financed by SVB. He calls up his Democrat cronies in Washington, D.C., and demands that SVB be bailed out, along with offering unspecified favors to those who enable this fraud. This is the pretty-boy, wheeler-dealer most likely to succeed to the Democrat Party nomination for the Presidency, where he will be in the position to influence even more financial and economic policy on behalf of the wealthy progressive elites.
Remember when the Democrats could plausibly claim to be the party of the working class? Ha! Ha! Ha! They have no intention of fixing the ( almost non-existent ) border with Mexico, because that is the source of cheap labor for wealthy business interests. Hypocrites and liars. Bad to the bone.
Right On!
Yep. Corruption wins. Every time. California has been gutted economically, spiritually and socially. It’s my former home. I don’t even recognise it anymore. Too depressing.
Spot on. SVB’s clientele is the complete inverse of most depositors in US banks: only 5% at best of SVB’s depositors held accounts of $250K or less (the limit for FDIC insurance on individual deposits). To quote Dave Ramsay, their customers are “players” in VC, tech, and very well-heeled liberal donors.
SVB’s management had plenty of warning about interest rate risk, as everyone in the banking industry has. They and other banksters should be held financially liable for such egregious mismanagement of known risk. And depositors who grossly exceed FDIC insurance limits should exercise due diligence on the bank they have funds parked in or diversify their risk.
Right On!
Yep. Corruption wins. Every time. California has been gutted economically, spiritually and socially. It’s my former home. I don’t even recognise it anymore. Too depressing.
Spot on. SVB’s clientele is the complete inverse of most depositors in US banks: only 5% at best of SVB’s depositors held accounts of $250K or less (the limit for FDIC insurance on individual deposits). To quote Dave Ramsay, their customers are “players” in VC, tech, and very well-heeled liberal donors.
SVB’s management had plenty of warning about interest rate risk, as everyone in the banking industry has. They and other banksters should be held financially liable for such egregious mismanagement of known risk. And depositors who grossly exceed FDIC insurance limits should exercise due diligence on the bank they have funds parked in or diversify their risk.
Here’s all you need to know: Gavin Newsom, Governor of the failed State of California, owns three wineries financed by SVB. He calls up his Democrat cronies in Washington, D.C., and demands that SVB be bailed out, along with offering unspecified favors to those who enable this fraud. This is the pretty-boy, wheeler-dealer most likely to succeed to the Democrat Party nomination for the Presidency, where he will be in the position to influence even more financial and economic policy on behalf of the wealthy progressive elites.
Remember when the Democrats could plausibly claim to be the party of the working class? Ha! Ha! Ha! They have no intention of fixing the ( almost non-existent ) border with Mexico, because that is the source of cheap labor for wealthy business interests. Hypocrites and liars. Bad to the bone.
The subject of this interview is important but my sense is Unherd chose the wrong guest to discuss this issue.
Stoller started the interview with whooping and hollering, as if firing up a revival meeting, then lurched from semi-hysterical outbursts to vague generalities. We needed a calmer, more informed guest who would explain the technicalities for a general audience. I’m still none the wiser about whether SVB was a special case because of its tech-centered clientele, or whether it’s the canary in the coalmine for the whole banking sector, and whether bail out was the best way to handle this problem.
This is really unexpected, and too bad because in writing Matt Stoller generally comes across as calm, rational, and well-informed. He is an anti-monopoly hawk, but there are worse passions to have.
I am not sure I agree with ‘the banks are too corrupt to trust with your money (nod) therefore we all need to be able to bypass the banks and bank with the Fed directly (come again?)’. I think the Fed are part of the rotten system, not outside of it. But he outlined his beliefs better here:
https://mattstoller.substack.com/p/silicon-valley-bank-collapse
This is really unexpected, and too bad because in writing Matt Stoller generally comes across as calm, rational, and well-informed. He is an anti-monopoly hawk, but there are worse passions to have.
I am not sure I agree with ‘the banks are too corrupt to trust with your money (nod) therefore we all need to be able to bypass the banks and bank with the Fed directly (come again?)’. I think the Fed are part of the rotten system, not outside of it. But he outlined his beliefs better here:
https://mattstoller.substack.com/p/silicon-valley-bank-collapse
The subject of this interview is important but my sense is Unherd chose the wrong guest to discuss this issue.
Stoller started the interview with whooping and hollering, as if firing up a revival meeting, then lurched from semi-hysterical outbursts to vague generalities. We needed a calmer, more informed guest who would explain the technicalities for a general audience. I’m still none the wiser about whether SVB was a special case because of its tech-centered clientele, or whether it’s the canary in the coalmine for the whole banking sector, and whether bail out was the best way to handle this problem.
Startup banks have attempted to offer zero risk banking- essentially holding all deposits as liquid assets at the Fed. Incredibly, the Fed banned them from operating in this manner! The whole Fed ponzi requires that banks take risks in the longer dated Bond market and this explains the hysterical reaction to a relatively niche crisis. The Fed doesn’t want any momentum growing behind ‘riskless banking’, keeping deposits as short duration securities, because if they allow this who is going to buy all its long-dated ponzi paper?
Startup banks have attempted to offer zero risk banking- essentially holding all deposits as liquid assets at the Fed. Incredibly, the Fed banned them from operating in this manner! The whole Fed ponzi requires that banks take risks in the longer dated Bond market and this explains the hysterical reaction to a relatively niche crisis. The Fed doesn’t want any momentum growing behind ‘riskless banking’, keeping deposits as short duration securities, because if they allow this who is going to buy all its long-dated ponzi paper?
Caveat emptor is the only consumer protection regulation worth a dime.
Caveat emptor is the only consumer protection regulation worth a dime.
If the bank was in such a parlous state how were they able to pay big (or any sort of) bonus? O silly me, they are bankers and not subject to the same constraints of commerce as the rest of us. I thought the US had laws (with sensible prison sentences) about that sort of thing. I suppose that’s just for us plebs and deplorables now that financial crookedness has reached even the highest political offices in so-called ‘civilised’ countries.
If the bank was in such a parlous state how were they able to pay big (or any sort of) bonus? O silly me, they are bankers and not subject to the same constraints of commerce as the rest of us. I thought the US had laws (with sensible prison sentences) about that sort of thing. I suppose that’s just for us plebs and deplorables now that financial crookedness has reached even the highest political offices in so-called ‘civilised’ countries.
”Another solution, which may be less palatable to many, is to offer everyone and anyone the ability to bank directly with the Federal Reserve, risk free. Concerns over privacy and governmental control were brushed aside. ”
Man…..Revelations 13:16, Mark of the Beast…
I cannot believe this guy – I lots more think Doug Casey – because once the CBDC arrives – then you are a slave and there is NO changing your mind. Remember – you do not own that phone you sheep clutch so tightly 24 hours a day – It Owns You! And when CBDCs come you are Owned in the Literal sense – CBDC’s are the true and forever Horror-Show.
”We’re Entering a Major Crisis; CBDCs Coming in 2023, Serfdom is Upon Us Warns Doug Casey”
”Another solution, which may be less palatable to many, is to offer everyone and anyone the ability to bank directly with the Federal Reserve, risk free. Concerns over privacy and governmental control were brushed aside. ”
Man…..Revelations 13:16, Mark of the Beast…
I cannot believe this guy – I lots more think Doug Casey – because once the CBDC arrives – then you are a slave and there is NO changing your mind. Remember – you do not own that phone you sheep clutch so tightly 24 hours a day – It Owns You! And when CBDCs come you are Owned in the Literal sense – CBDC’s are the true and forever Horror-Show.
”We’re Entering a Major Crisis; CBDCs Coming in 2023, Serfdom is Upon Us Warns Doug Casey”
SVB was a “rogue” bank. This was a liquidity and risk management issue. This bank did not have risk manager, but they did have a equity manager. As Barney Frank (on the board of the Signature Bank – that also failed) said… liquidity and not regulations.
Can the blatant corruption of our elites be in a more clear light than in February and March of 2023? This, combined with the Twitter File debacle might be the two straws that just might break the camel’s back.
I was all for the bailouts of 2008, but this one is simply beyond the pale.
I understand your angst and agree with you. What happens now is anyone’s guess; however, we have wonderful, sane, strong, independent thinking, confident and brave people who are all around us – and we just have to stand together. The WOKE may not be shrinking yet, but the opposition to WOKE is growing exponentially. That is what makes us brave, and what gives us hope and FAITH.
I understand your angst and agree with you. What happens now is anyone’s guess; however, we have wonderful, sane, strong, independent thinking, confident and brave people who are all around us – and we just have to stand together. The WOKE may not be shrinking yet, but the opposition to WOKE is growing exponentially. That is what makes us brave, and what gives us hope and FAITH.
Can the blatant corruption of our elites be in a more clear light than in February and March of 2023? This, combined with the Twitter File debacle might be the two straws that just might break the camel’s back.
I was all for the bailouts of 2008, but this one is simply beyond the pale.
SVB was a “rogue” bank. This was a liquidity and risk management issue. This bank did not have risk manager, but they did have a equity manager. As Barney Frank (on the board of the Signature Bank – that also failed) said… liquidity and not regulations.
Scary how Matt Stoller fails to understand the role of a bank in the economy and contagion. Banks exist to match people who have money but want to defer expenditure, depositors, with people who expect to have money and want to spend it in advance of receiving it, borrowers. Depositors want ready access to their money but borrowers cannot repay them until they get the money they are expecting.
Contagion is depositors panicking and wanting all of their deposit back because they are frightened that they wil lose it, but of course they cannot have it back from their bank because the bank is waiting for their borrowers to have the money to repay them. When contagion starts all banks are fragile. To stop panic you have to give total reassurance, so depositors leave their money where it is.
Stoller dismissing it as just panic is like the captain of the Titanic.
Stoller claiming everyone can deposit with the Fed would either stop a ot of lening and slw the conomy down or leave the Fed lending to the banks instead. Which is effectively the same as FDIC guaranteeing all depositors.
The action taken was necessary to stop contagion and sensible in passing some of the cost to management and shareholders, which should have happened in 2008.
What is needed is qualitative better regulation based on better teaching on risk. And bonuses clawed back if a bank fails.
Scary how Matt Stoller fails to understand the role of a bank in the economy and contagion. Banks exist to match people who have money but want to defer expenditure, depositors, with people who expect to have money and want to spend it in advance of receiving it, borrowers. Depositors want ready access to their money but borrowers cannot repay them until they get the money they are expecting.
Contagion is depositors panicking and wanting all of their deposit back because they are frightened that they wil lose it, but of course they cannot have it back from their bank because the bank is waiting for their borrowers to have the money to repay them. When contagion starts all banks are fragile. To stop panic you have to give total reassurance, so depositors leave their money where it is.
Stoller dismissing it as just panic is like the captain of the Titanic.
Stoller claiming everyone can deposit with the Fed would either stop a ot of lening and slw the conomy down or leave the Fed lending to the banks instead. Which is effectively the same as FDIC guaranteeing all depositors.
The action taken was necessary to stop contagion and sensible in passing some of the cost to management and shareholders, which should have happened in 2008.
What is needed is qualitative better regulation based on better teaching on risk. And bonuses clawed back if a bank fails.
The depositors have been protected, the shareholders have not. That’s a much more nuanced ‘rescue’. And it’s being funded by other Banks and Wall St not US taxpayers.
Interestingly SVB might not have got into such trouble without Trump’s loosening of regulations in 2018.
Hunt & Sunak were pondering a similar loosening here in the UK. That’s back on the shelf now.
Better recheck info on what Trump’s regulations did (with agreements from both sides) NOT have anything to do with how this bank SVB operated and it’s outrageous WOKE agenda, expenditures, board with no experience, and on and on.
Better recheck info on what Trump’s regulations did (with agreements from both sides) NOT have anything to do with how this bank SVB operated and it’s outrageous WOKE agenda, expenditures, board with no experience, and on and on.
The depositors have been protected, the shareholders have not. That’s a much more nuanced ‘rescue’. And it’s being funded by other Banks and Wall St not US taxpayers.
Interestingly SVB might not have got into such trouble without Trump’s loosening of regulations in 2018.
Hunt & Sunak were pondering a similar loosening here in the UK. That’s back on the shelf now.