It’s feeling like 2007 all over again as Silicon Valley Bank and other financial institutions are going belly up and asking for bailouts from the federal government.
President Joe Biden insists that he won’t be bailing out Silicon Valley Bank, but he certainly is. The bailouts are coming. They’ve already begun.
The official reason for the bailouts is to prevent a general banking crisis, but no doubt it’s also being done to save the bacon of some very wealthy organizations and people.
Should we just hand taxpayer money over to these companies? President Andrew Jackson had some helpful advice in this matter, which I’ll get into more later.
There are two major problems here. First is the hazard of allowing massive, wealthy companies to take unnecessary risks because they can get taxpayer money. The second is how America’s corporate and financial institutions have gone woke.
Why should the average American do anything to help institutions that fund extreme social and political causes they abhor?
A database created by The Claremont Institute Center for the American Way of Life found that Silicon Valley Bank donated over $73 million to Black Lives Matter and related left-wing causes.
“Innovation is global and is touching every aspect of our lives, which is creating even more need for inclusiveness of ideas and approaches,” reads a Silicon Valley Bank report from August 2020, Tristan Justice writes at The Federalist. “We are on a journey committed to increasing diversity, equity and inclusion (DEI) in our workplace, with our partners and across the innovation economy.”
Silicon Valley Bank committed itself to various woke causes.
“In recent months, we’ve expanded our philanthropic giving through corporate donations and employee matching programs,” CEO Greg Becker wrote in an introduction to the bank’s 2020 report. “These programs focus on pandemic response, social justice, sustainability and supporting women, Black and Latinx emerging talent, and other underrepresented groups.”
It seems the California bank’s commitment to diversity, equity, and inclusion ended up being higher than its commitment to risk management.
Diana Furchtgott-Roth, director of the Center for Energy, Climate and Environment at The Heritage Foundation, shed some light on how Silicon Valley Bank got itself into financial trouble. (The Daily Signal is Heritage’s multimedia news organization.)
Writing in The Daily Signal, Furchtgott-Roth said the bank’s documents “indicate that corporate leadership may have been more interested in things like environmental sustainability, climate change, and diversity initiatives than risk management.”
These risk managers apparently led the state-chartered commercial bank astray.
“Members of the bank’s Risk Committee had little risk management experience and did not know enough to get an experienced risk assessment team on board,” Furchtgott-Roth wrote. “The bank invested its deposits in higher-interest long-term securities whose prices changed more dramatically than short-term bonds as the Fed raised interest rates. The higher interest rates are how it could pay half a percent more on deposits than other banks.”
This was happening as many Silicon Valley tech companies were failing.
So it’s looking like the failures at Silicon Valley Bank were part self-inflicted, part government-fueled. No surprise there.
Unfortunately, we’ve created a system in which those who run the richest, most powerful financial institutions now can assume that if they really get in trouble, the government will simply bail them out with taxpayer money.
And the issue with bailouts is not just that we’re writing a big check to a few woke companies, it’s that through these actions we will keep writing checks in the future.
This means that these companies are willing to take more risks in pursuit of a payout because they won’t be the ones who pay if their gambles catastrophically fail.
It’s times like this, when the government is used on behalf of the private interests of a few elites, that we can turn to the words of Andrew Jackson when he denounced oligarchy and crony capitalism.
In his famous 1832 speech after vetoing a charter for the Second National Bank of the United States, Jackson explained that the American people have a right to be wary of a powerful, connected elite bending the government to its interests.
“It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes,” Jackson said. “Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth cannot be produced by human institutions.”
Jackson was no leveler. He wasn’t interested in using government power to enforce “equality.” Instead, he believed a just government would be one dedicated toward treating Americans equally, without privileging any group over another. It should serve a general, not specific interest.
Jackson warned how powerful interest groups could pervert our system and that “the humble members of society—the farmers, mechanics, and laborers—who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their government.”
Later in the speech, Jackson explained that allowing the federal government to be used on behalf of a few elites threatens the unity and stability of the country.
“Many of our rich men have not been content with equal protection and equal benefits, but have besought us to make them richer by act of Congress,” Jackson said. “By attempting to gratify their desires we have in the results of our legislation arrayed section against section, interest against interest, and man against man, in a fearful commotion which threatens to shake the foundations of our Union.”
In a sense, we have that now with Silicon Valley Bank.
In normal times, a bailout is bad. The fact that these failing institutions have hooked their wagons to extreme, left-wing causes, cultural revolutionaries, and crooks makes government intervention on their behalf even more obnoxious.
Why should Americans be so keen on sending their hard-earned money to institutions that funded the same groups that brought about the “defunding” of police and riots that struck large swaths of the country?
The government’s stepping in to save big, woke financial companies and their uber-wealthy investors is an insult to the average Americans who will have to pick up the tab, and further erodes the frayed fabric of our society.
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Jarrett Stepman is a columnist for The Daily Signal, where this first appeared. He is also the author of the book “The War on History: The Conspiracy to Rewrite America’s Past.”