Silicon Valley Bank (SVB) is getting a bailout. That’s the latest news from the United States Treasury Department, which announced it will make depositors in the failed bank whole.
Many of those depositors were tech start-ups, and until Treasury Secretary Janet Yellen’s announcement on Sunday afternoon, they didn’t know if they would make payroll on the 15th of the month. Their investors, famous for their risk-taking, feared massive losses in their portfolios.
The bank’s clients were in a bind because federal insurance only covers deposits up to $250,000. That’s more money than almost anybody would keep in a bank account—but not a start-up! According to the Economist, almost 93 percent of SVB’s deposits were not insured.
These entrepreneurs either knew, or should have known, the risks they were taking, and the government should not be in the business of rewarding this arrogance and stupidity. A government bailout is nothing more than a backdoor that will leave taxpayers on the hook for the foolish decisions of so-called capitalists who are unwilling to pay the costs of risks gone awry.
The Fed claims none of the costs of this bailout will be borne by the taxpayer. Don’t be fooled by these word games. SVB’s safety net may be paid with insurance premiums that banks pay to the Federal Deposit Insurance Corporation. That in turn means that banks will charge their customers—the taxpayers—more.
Meanwhile, the tech industry has already benefited tremendously from government policy. From 2020 through the end of 2021, SVB’s assets grew 83 percent—and kept growing into 2022. For at least three years, government policy has underwritten tech speculation and fantastic valuations. Venture capitalists and founders became fantastically rich.
In fact, they became so flush that they poured cash into their portfolio companies until it overflowed into deposit accounts at SVB, which in turn bought government bonds and mortgage-backed securities.
When interest rates rose thanks to Bidenflation, those bonds and securities lost value. A government bailout, given this chain of events, is nothing more than socialism for the rich.
It is not irrelevant that upwards of 90 percent of Silicon Valley’s political donations flow to Democrats, and that the tech bros shelled out far more for President Joe Biden than for Hillary Clinton. This of course as some of Silicon Valley’s major players have cozied up to America’s enemies and eagerly done the bidding of the Democratic Party in its attempts to ostracize and silence dissenting views.
It’s hard to stomach a bailout for these people. It will be even harder for the Democrats to explain it to American taxpayers.