Wall Street veterans and politicians made quite a few unsupported—and, in one case, offensive—explanations for why Silicon Valley Bank collapsed and what should be done to rectify the situation. Did Twitter fuel the fear mongering? Bad takes on social and mainstream media were too numerous to count.
FINTECH SNARK TANK
Wall Street veterans and politicians have made quite a few unsupported—and, in at least one case, offensive—explanations for why Silicon Valley Bank collapsed and what should be done to rectify the situation.What Caused The Silicon Valley Bank Collapse?
Citing the bank’s proxy statement—which noted that nearly half of its board consists of women and has “1 Black, 1 LGBTQ+, and 2 Veterans”—Wall Street Journal columnist Andy Kessler wrote, “I’m not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demands.”
Distracted by diversity demands? Nonsense. This statement was nothing more than a cheap shot at DEI—and a highly offensive one at that. SVB critics might not like who the bank donated to or lent money to, but there’s no connection between the bank’s DEI efforts and its deposit management policies.Who Gets The Bailout?
Ramaswamy doesn’t think they deserve a bailout, either, and admonished startup executives to better manage financial risks and diversify across counterparties.
A former tech exec himself, the Republican presidential candidate went on to say that, because SVB “specialized in providing non-dilutive venture debt to risky early-stage companies,” startup founders were able to keep greater equity ownership in their companies for themselves.
According to Ramaswamy, “taxpayers were never going to participate in that equity upside, so they shouldn’t be asked to foot the bill when downside risks materialize.”
There are two problems with Ramaswamy’s logic:
If the failing bank was a community bank serving mom and pop businesses on Main Street USA, would Ramaswamy argue that Mom and Pop “must do better in managing financial risks and diversifying across counterparties”? Doubtful.
