Pluralistic: Learning from Silicon Valley Bank's apologists (15 Mar 2023)


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A sign reading 'Pull on handle to open closet. Handle is rigid and doesn't turn.'

Learning from Silicon Valley Bank's apologists (permalink)

My weird hobby is taking pictures of signs, especially "vernacular" signs, handwritten and odd. The best kinds of signs tell you what other people think you are thinking, or what you don't understand. I've nabbed over 4,600 of 'em:

https://www.flickr.com/search/?user_id=37996580417%40N01&sort=date-taken-desc&text=sign&view_all=1

I think you learn more about the world by delving into others' misconceptions than you learn from their factual understandings. Facts are out there for anyone to discover, but when someone inadvertently affords you a glimpse into their wrong beliefs, well, that's something that can't be learned in any other way.

Which brings me to the apologists for Silicon Valley Bank, who are busily churning out incredibly revealing bad takes about why bailing out SVB was the right thing to do, and why you're wrong to call it a bailout, and why all of this is Very Regrettable but nevertheless The Right Thing To Do.

Here's a terrible reason to support the SVB bailout: because if we let all the tech companies who did business with it fail, you might not be able to get into your house anymore after your smart-lock fails because the cloud service it depends on cuts off the startup that made it because their bank account went up in a puff of smoke:

https://www.wired.com/story/silicon-valley-bank-collapse-fallout/

Look, if you think the fact that my Internet of Shit door-lock failed because the company that designed it made no plan to let me into my house if they went out of business would make me sympathetic to that company, you are out of your fucking mind. If that happened to me, it would make me want to tear the lock out of my door, hunt down the CEO of the company that made it, set the lock on fire, and throw it through their front window.

Here's another terrible reason to support the bailout: if SVB's depositors lose their money, every other large depositor will flock to Morganstanley, on the theory that Morganstanley is too big to fail, and will behave just as recklessly, but will never be allowed to go under precisely because they are so structurally important:

https://marginalrevolution.com/marginalrevolution/2023/03/can-the-svb-crisis-be-solved-in-the-longer-run.html

I'm pretty sure this is true! It doesn't make me want to support an SVB bailout though – it makes me want to break up Morganstanley, regulate the everlasting shit out of the resulting fragments, and create massive public banks that are run by and for their depositors, insulated from the reckless, speculative conduct of these maniacs who keep crashing the world economy:

https://prospect.org/economy/2023-03-15-federal-reserve-banking-public-option/

One more very bad reason to support the bailout: "it's not a bailout." The Biden administration wants us to know that SVB's creditors and shareholders aren't being bailout here, just the depositors – everyday folken with more than $250,000 in liquid cash in their checking accounts. Whomst amongst us can't relate to that?

https://www.nbcnews.com/meet-the-press/first-read/biden-administrations-message-dont-call-bailout-rcna74628

There are a lot of totally normal people who would suffer if not for this bailout – the people who clean the toilets or answer the customer-service calls for tech companies aren't stock-option-fattened bros in Patagoinia vests. They're totally normal working people who took no risks and bear no responsibility for the failure of SVB.

But come on. Does anyone seriously believe that the absolute fucking ghouls who came out against a barely-there student debt cancellation as a precursor to literal Stalinist gulags are advocating for endless billions for SVB's depositors because of the janitors?

https://www.forbes.com/sites/mattnovak/2023/03/12/larry-summers-says-now-is-not-the-time-for-moral-hazard-lectures-about-bailouts/

Listen: people aren't pissed off about the bailout because they want startups to fail. They're pissed off because they are living in the century of "socialism for the rich and rugged individualism for the poor":

https://www.reddit.com/r/LateStageCapitalism/comments/iaqdrl/as_martin_luther_king_jr_said_in_1968_this/

They're pissed off because the Treasury official who presided over the theft of millions of houses by corrupt, bailed-out banks after the 2008 Great Financial Crisis and then wrote academic articles defending the decision to "foam the runways" for the banks with everyday Americans' homes is about to join the Federal Reserve Board:

https://pluralistic.net/2023/03/06/personnel-are-policy/#janice-eberly

They're pissed off because Biden reneged on his promise for muscular, sweeping StudentDebtCancellation in favor of a self-immolating weaksauce version that would barely dent the crushing financial devastation faced by millions of young people:

https://pluralistic.net/2022/05/03/utopia-of-rules/#in-triplicate

Only to have the illegitimate dotards of the Supreme Court make even that symbolic gesture moot:

https://www.npr.org/2023/02/28/1159606491/student-loan-forgiveness-supreme-court

(As to what Biden should do about it? The same thing Trump would: Pack the court. Pack the fucking court. Pack it. Just do it. The court's legitimacy could not sink any lower. There is no downside. Do it.)

The rage at well-capitalized startups being rescued from unearned distress isn't motivated by a free-floating techlash rage at "bros." It's rage born of the fact that young Americans are being put on the hook for their dead parents' debts:

https://pluralistic.net/2021/05/19/zombie-debt/#damnation

There is infinite political will and bottomless appetite for money creation when VC-backed companies face distress, but when the death of your parents is followed by years of brutal debt-collector armbreakers chasing you from phone number to phone number, it's just crickets.

There's no question that the SVB failure resulted from a series of extremely technical phenomena that offer a fascinating peek into the behind-the-scenes forces that power an economy built on private banking and home ownership as the sole means of intergenerational wealth transfer.

But the fact that this is a complicated circumstance doesn't mean that laypeople don't have a right to be furious about it. We should all be suspicious of the inevitabilist narratives of the "experts" who claim that none of this could have been avoided:

https://prospect.org/economy/2023-03-15-qa-daniel-davies-venture-capitalist-bailout/

When finance "experts" tell you that you have no business opining on this highly technical matter, just remember that these are the same experts who were paid fantastic gobs of cash to certify that all these failing banks are just groovy, mere weeks ago:

https://www.wsj.com/articles/kpmg-faces-scrutiny-for-audits-of-svb-and-signature-bank-42dc49dd

Those same experts were caught bribing government officials to help their top staff cheaton ethics exams (!!!!!!!!!!!!):

https://pluralistic.net/2021/06/04/aaronsw/#crooked-ref

Even if it turns out to be true that the kind of risk that SVB was exposed to is an inevitable consequence of an economy built on private banking and housing as an asset, rather than a human right:

https://www.bitsaboutmoney.com/archive/banking-in-very-uncertain-times/

Remember that those choices are not inevitable. The decision to make housing the primary driver of intergenerational wealth transfer is both recent and very, very stupid:

https://gen.medium.com/the-rents-too-damned-high-520f958d5ec5

Private banking doesn't need to be an unregulated free-for-all, nor does it have to be the only game in town:

https://publicbankla.com/

As SVB's apologists insist that tech startups should be preserved lest our IoT gadgets brick themselves, or that SVB should be preserved so that the Morganstanley cancer doesn't creep into more of our social organs, or that bailing out SVB is acceptable because it's to defend elite startup founders, not ultrawealthy bank owners, they are missing the fucking point.

But they're missing it in a useful way. Like any weird sign, these bad takes teach us a lot about how the people who utter them model our own beliefs. They think that people like smart gadgets. They think that we don't want the finance sector reformed. They think that we're motivated by schadenfreude, which means that they also think we've forgotten about broken student debt promises, about robosigning and the foreclosure epidemic. They think we are fully onboard with rugged individualism for the poor and socialism for the rich.

These bad takes reveal a profoundly out-of-touch elite, the spiritual descendants of the French aristos who went to the guillotine with sincerely baffled hearts, unable to imagine why anyone would be this angry at them.

Upton Sinclair said, "It is difficult to get a man to understand something, when his salary depends on his not understanding it." It's even more difficult to get a one percenter to understand something when the system that insulates them from the endless, spiraling economic wreckage of our new feudal economy is on the line.


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