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Who's To Blame for the Silicon Valley Bank Crisis?


Silicon Valley Bank was not just the second largest bank failure in the nation’s history. It was also a harbinger of things to come.
What the American financial system is witnessing with the collapse of Silicon Valley Bank (SVB) and the related instability in banking more generally are the results of the 21st-century version of Galbraith’s “bezzle.” It increased rapidly for years, and now it will contract just as rapidly, if not more so.
Now, to be clear, no one at SVB has been accused of embezzlement, and there has been no evidence presented that any crimes were committed at the bank. But, then, that’s not the point. The contemporary version of the bezzle is more nuanced and complicated than Galbraith’s version, but it’s also likely been far more widespread.
For more than a decade, the Federal Reserve has ensured that money has been plentiful and, indeed, practically free to borrowers. Interest rates have been kept artificially low, and both corporations and investors have had access to as much credit as they could ever possibly want. As a result, they all grew comfortable and, in many cases, careless. They have been relaxed and trusting, as Galbraith put it, and they’ve used the Fed’s gift to build unhealthy and unsustainable business practices.
In the immediate aftermath of the SVB failure, some observers insisted that the bank’s troubles were caused by its pronounced involvement in the world of ESG—Environmental, Social, and Governance investing and management. Chairman of the House Oversight Committee Rep. James Comer (R-Ky.), for example, attacked SVB as “one of the most woke banks” in the country, insisting that many of its problems were the result of its “quest” for “ESG-type policy and investing.”
While there is little doubt that Silicon Valley Bank was up to its proverbial eyeballs in ESG, lending to risky “sustainable” environmental startups and backing “woke” business practices, none of this was directly related to the bank’s immediate troubles. The good congressman was almost certainly mistaken. Even Matt Cole, chief investment officer and head of fixed income for Strive Asset Management, the Vivek Ramaswamy-founded anti-ESG investment firm, was clear about this, writing that “The SVB failure had about as much to do with ESG/Stakeholder Capitalism as ESG/Stakeholder Capitalism has to do with making money—nothing.

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