The Bailout
Shouldn't Have Happened
The Federal Reserve is bailing out both SVB and Signature Bank. Both had a lot of crypto business by the way. Guess who is a director at Signature Bank? I just want to make the point if you wrote the regulations on banking (see Dodd-FRANK), it’s kind of poor form to be on the board of a bank that goes insolvent. Maybe Signature rolled the dice or something.
More regulations aren’t going to stop banks from failing. Especially given the nitwits that are writing them. Do you know what stops banks from failing? Letting them fail. We should have let them fail in 2008.
Venture Capitalists are super happy tonight. Back to the ski lifts everyone! Utah getting more powder this week! They got a bailout. The bailout will cost taxpayers money despite the protestations of the elites in Washington.
Why?
How are they going to bail them out? The Fed will expand its balance sheet and buy the securities from SVB and Signature. Where are those securities priced? We already know they are underwater by billions. Hence, the Fed will play bagman and eat the loss. Who gives the money to the Fed? You do with your tax dollars.
Hence, taxpayers are eating 100% of the loss and bailing out the VCs that had money, and their companies that had money at SVB.
If you don’t think politics are involved, then I want you to carefully consider who the leading person is in the race to be the Democratic Presidential nominee after Sleepy Joe. If you thought about Gavin Newsom and Kamala Harris, you’d be correct.
Hey, everyone feels for any business that placed money in a bank and saw it vanish due to no fault of their own. But, maybe everyone should be doing a little more diligence on banks and not taking people’s word for it. For what it’s worth, I never asked or directed a startup to bank anywhere. Just assumed any bank would be okay.
I think that assumption changes, doesn’t it?
We will get hearings with Senator Elizabeth Warren slamming her fist. But, there will only be smoke. Democrat Rep Ro Khanna will make sure the VCs see the signals and she will get some campaign money.
A capitalistic economy is not brittle. It doesn’t snap. A crony capitalistic economy is brittle and the bottom always pays for the elite’s mistakes.
What do we have in America today?
If you are lover of true free markets then you hate this.
We are watching what happens when the world's most successful economy slowly transforms (over decades, but a lot more recently) into a centrally planned one. More and more, the government has its hands in every business sector, every business, and every business decision. No longer does a business just think about following the rules and responding to market demands in a place with its suppliers, competition and customers.
Now it thinks about how to maximize rent seeking and government largesse. It thinks about how it can send signals to "regulators" that make them happy. It thinks about budgeting more and more money to its "government relations" department and its lobbyists. It thinks less about customers, and more about how to get the government to narrow the competition and create barriers for competition. It doesn't serve its customers any longer, it works around them with government assistance.
It's everywhere. Big Tech is in collaboration with multiple alphabet agencies *daily* to "work together" on censorship of their own customers. Entertainment companies decide to curry favor with particular positions and make policy statements on legislation, like Disney did in Florida, or MLB did in moving the All Star Game. Car companies' lobbyists write legislation to give them billions to make a car the government wants with the unions it favors. Virtually every business now requires government permission.
No longer can we just enjoy watching a market work, and enjoy the fruits of that incredible Invisible Hand. Now we have to think about Joe Biden's Hand and Liz Warren's Hand and all the rest of them.
It's a tragedy unfolding in slow motion, and it's not going to end well. They're destroying everything that got us here, including our spirit.
Privatize the gains. Socialize the losses. Fascists gonna Commie🤷🏼♂️🤮. It’s for the children. Or something.