Business as usual

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Biden move to rescue pro-Democrat SVB depositors surprises no one

The Biden administration’s move to protect customer deposits at Silicon Valley Bank is rankling critics who call it a gift to wealthy Democratic donors in the tech sector — even as mom-and-pop investors are getting burned in the deal.

While depositors including top-tier venture capital firms like Andreesen Horowitz and Sequoia Capital were bailed out, the equity and bondholders were completely wiped out as part of the rescue by state regulators and the Federal Deposit Insurance Corp.

Those included big mutual funds that operate retirements funds for working Americans. Vanguard Group owned nearly 11% of Silicon Valley Bank shares. Alecta Pension Insurance Mutual owned nearly 4.5%, and Franklin Mutual Advisers owned nearly 2%, according to public filings.

“You’ve saved the Democratic donors but who are the equity holders?” one tech insider noted. “Retirement funds bought into this… many are policemen, teachers, firemen just trying to retire.” 

Ninety-eight percent of all political contributions from people who worked at internet companies went to Democrats in 2020, according to data from the Center for Responsive Politics.

Another estimate from a GovPredict analysis of Federal Election Commission data showed that people living in counties considered to be Silicon Valley gave nearly $200 million to Democrats.

“This is a bailout… and the account holders they bailed out are Democrats,” a tech insider told The Post, though he qualified the statement by noting the consensus view that the federal government did the right thing by pledging to make depositors whole.

“Silicon Valley Bank is the bank of the Democrats …. they’re looking after their own,” he added. “If it was the Bank of MAGA, what are the chances it would be bailed out? There’s not a chance in hell.”

And this is interesting:

Why regulators seized Signature Bank in third-biggest bank failure in U.S. history.

The sudden move shocked executives of Signature Bank, a New York-based institution with deep ties to the real estate and legal industries, said board member and former U.S. Rep. Barney Frank. Signature had 40 branches, assets of $110.36 billion and deposits of $88.59 billion at the end of 2022, according to a regulatory filing.

“We had no indication of problems until we got a deposit run late Friday, which was purely contagion from SVB,” Frank told CNBC in a phone interview.
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According to Frank, Signature executives explored “all avenues” to shore up its situation, including finding more capital and gauging interest from potential acquirers. The deposit exodus had slowed by Sunday, he said, and executives believed they had stabilized the situation.

Instead, Signature’s top managers have been summarily removed and the bank was shuttered Sunday.
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For his part, Frank, who helped draft the landmark Dodd-Frank Act after the 2008 financial crisis, said there was “no real objective reason” that Signature had to be seized.

“I think part of what happened was that regulators wanted to send a very strong anti-crypto message,” Frank said. “We became the poster boy because there was no insolvency based on the fundamentals.”

Stephen Green: “Frank would obviously want to put the best possible spin on a bank where he sat on the board, but I also wouldn’t put it past the Swamp to do everything in its power to kill off crypto.”