Bailouts for me, but not for thee. Kudos to Silicon Valle for winning this edition of cronyism in America.
When Biden’s Treasury Secretary, Janet Yellen, announced that all tech companies who deposited funds at SVB, even those who recklessly parked obscene amounts of money there without diversifying, would be made whole, the federal government sent a clear message to the American people: There are alternative rules if you are part of the favored class.
It’s not as complicated as they want you to believe. Silicon Valley Bank (SVB) is a bank for a bunch of tech companies in Silicon Valley. The bank invested deposits in mortgage-backed securities that go down in value when interest rates go up. When the Federal Reserve raised interest rates, SVB ran into trouble.
It turns out that many of the tech companies who parked money at SVB did so without thinking too much about it—and made some horrendous decisions. For example, the tech company Roku deposited a staggering $487 million at SVB.
The normal rules of the road are clear: The first $250,000 is insured by FDIC. After that, the customer is liable for loss. But Silicon Valley wanted a different set of rules for itself.
So on Sunday, Silicon Valley threw every argument in the book against the wall to see what stuck: Venture capitalists and startup executives who stood to lose their deposits at SVB screamed «bank run» from the rooftops.
