David Sacks: is the Silicon Valley Bank deal a bailout?
The tech investor argues that the Government is right to protect depositors
On Friday, California-based Silicon Valley Bank collapsed. On Thursday, customers had pulled $42 billion from its accounts, triggering a bank run. As a result, SVB’s share price plummeted and US regulators closed the bank the following day. It became the second largest banking failure in American history. This was followed by the closure of Signature Bank on Sunday, all of which pointed to a worrying contagion effect.
Last night, UnHerd TV welcomed David Sacks, founding partner at Craft Ventures and a former member of the ‘Paypal Mafia’, to shed light on the unfolding situation. When UnHerd‘s Freddie Sayers spoke to him, it was unclear whether there would be a bailout (since then, both the Bank of England and Federal Reserve have moved to protect all deposits), but Sacks’s message was clear: the Government needed to protect depositors and needed to do so quickly if it didn’t want confidence in regional banks to collapse nationwide.
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“We’re not talking about bailing out the stockholders or bondholders,” said Sacks. “We’re talking about protecting deposits in the regional banking system.” The tech investor went on to argue that a lack of sympathy for small business owners in the tech industry was bringing about “faux-populist” confusion regarding the seriousness of the situation for normal people. Many users were small business owners who had opened a standard checking account. Indeed, if depositors in SVB were farmers then there would have been no debate, he argued:
Sacks remains concerned that events this week will damage confidence in smaller banks and lead to a further centralisation of banking in the US, with nervous CEOs everywhere deciding to move their money to the four big banks in the “trillion dollar club”:
Last night, Sacks brought us the populist case for shoring up smaller banks in America and ensuring future confidence. A federal-level rescue of depositors affected by the failure of SVB will protect them.
Bank failures will be the next boogeyman used by governments to herd depositors into CBDC’s
In every metric of why economies succeed one of the most predictive is the number of small, local banks. The base economy is small business. That is the bottom of the pyramid GDP rests on. Community banks loan to them – they know the local situation, the people, the needs.
A guy needs to borrow $300,000 to buy an earth mover, a Machine shop expand with $200,000 of modern milling machines, a Pub wants to add 2 bedrooms for Air B&B and needs $200,000, and on and on – these are what is called ‘Productive Loans’ the loaned money MAKES Money, and jobs.
Local banks do this. Call Bank of America to borrow to buy a used crane for $150,000 – they will tell you to F-off. Bank of America is Huge – it only does business with Huge companies. It is WEF Corporatocracy. it is same as the Amazoning of the High Street – leaving it empty and graffiti covered…..
Many say Germany can directly point to its industrial success as it has many of these local banks – it is a huge factor in their success!
Anyway – the Big Banks are Devouring these small banks which are vital to local economic success. They are eating them up like Industrial Ag is eating the small farms. But those small banks are Vital. Look it up if you do not know this – it is 100% true.
This is All About the Big Banks eating all the small ones. It is wicked how it is being done. This Lizard here talks of how a Big Bank may step in and buy them. That is because destroying all the small banks is 100% part of the New World Order.
The interesting thing here is that the USA has masses of small local banks ! In part due to things like the Glass-Steagal Act (which Clinton unwisely repealed). A lot of large employers also run Credit Unions (something like a building society). US banking is far less consolidated and centralised than anywhere else I’ve been – there are very few national banks. Much as there really aren’t any national newspapers (USA Today excepted) – each large city has its own (sometimes several).
‘Tech investor says tech investment bank being bailed out with taxpayer’s money is a good thing’
No, no, no (as someone once said).
Depositors in Silicon Valley Bank knew perfectly well that the FDIC limit protecting their deposits was $250K. They made their deposits on that basis. Indeed, it appears that many people were foolish enough not to spread their deposits around banks (who would deposit more than £100K in a single UK bank for the same reason ?).
So what possible reason do they have to expect to be bailed out ? They had alternative choices to protect their money – they could, for instance, have bought US government bonds directly rather than pay SVB to incompetently do it for them.
If you have more than $250K to deposit, you should be able to take responsibility for your money.
Yet again, something is deemed “too big to fail” and the moral hazard is ignored.
This isn’t capitalism …
I have become a fan of the All-In podcast, but I now I have been gobsmacked by David Sacks.
He doesn’t know what a bail-in is?
He thinks long-dated Treasuries should be Marked-to -Market by banks on a daily basis?
He thinks lending to 40,000 farmers is a good analogy for SVB when it is industry concentration that was the most serious vulnerability for that bank?
He thinks blanket government deposit guarantees doesn’t contravene all of his libertarian/conservative principles?
He doesn’t think the left will exact a price for saving VC skins?
He says ”This is why you need the Fed to Backstop the Bank, to keep confidence’ In other words, if they are stupid, lazy, corrupt, incompetent, Diversity Hire Managed, risk chasing….No Problem, the FED has your back (but if the risk you take pays off you get to keep it and pay huge bonuses,,,and if it loses, no worries, we got your back, haha…madness)
This, in the Finance world is called a ‘Moral Hazard’, and those are Bad.
If you basically tell the banking industry they have zero risk and may get as crazy as they wish because the FED will allow them all the Gains – but absorb all the Risk – well, it is insane.
Just started it – but Freddy’s opening seems to be:
A Chief Lizard joins us here to explain how Government needs to bail out big Lizard bank to protect all the Lizards from money loss.
My be wrong… but will watch.
At the least this is a mechanism for the giant banks to gobble up all the smaller banks to destroy financial freedom of actual people, and to conquer the nation financially.
”The only reason people are being stubborn about this point is because Silicon Valley Bank has the name Silicon Valley in it. If this was a farmers’ bank and it was 40,000 farms, small business farms that were on the hook, everybody would understand. The arguments being made would be: we can’t let 40,000 farms go out of business. They didn’t do anything wrong. They just trusted when they put their money in a bank that it was safe.
– David Sacks”
Hahaahaaa, right… Have it a bit backwards there, David.
See, the name Silicone in the Bank is code for ‘Biden Voter’
Wile the word ‘Farmers‘ in the Bank means ‘Trump Voter.‘
And all of us know what that means when it comes time for free money.
Like Zalenski = $131,000,000,000 free money because it means Democrat Party.
Palestine Ohio means Republican Party, which means No money and it is fine to drink the water.
If what’s happening now is accurately described above, it’s how I’ve been saying the 2008 bailouts ought to have worked but didn’t. In 2008 what was propped up with tax money was the ludicrously overleveraged system of incestuous derivative exchange between investment banks, as well as the solvency of retail banks. What ought to have happened instead is that depositors were guaranteed, but the investment banks allowed to go bust.
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