Last weekendbetso88, U.S. policymakers went all in on bailing out two medium-size banks: Silicon Valley Bank and Signature Bank.
And yes, they were bailouts. I wish the Biden administration weren’t trying to claim otherwise. Yes, stockholders were cleaned out. But legally, deposits are insured only up to $250,000; by choosing to make all depositors whole, the feds have done holders of big accounts a major favor.
It’s true that losses, if any — it’s not clear whether either bank was insolvent, as opposed to simply lacking the ready cash to handle a bank run — won’t be made up with higher conventional taxes; the money is coming from the Federal Deposit Insurance Corporation, which will recover funds, if necessary, by imposing higher fees on banks. But these fees will be passed on to the public, so taxpayers are de facto on the hook.
But was it a bad decision? I’ve heard four basic kinds of criticism. One is ridiculous. Two are dubious. But the last one has me a bit worried, although I think it’s probably wrong.
Let’s start with the silly stuff. On the right side of the political spectrum, many have quickly rallied around the claim that S.V.B. failed because it was excessively woke — which is only marginally less ludicrous than claiming that wokeness somehow causes train derailments.
For what it’s worth, no, S.V.B. didn’t stand out from other banks in its concern for diversity, the environment and so on. And banks have been going bust for centuries, since long before H.R. departments began including boilerplate language about social responsibility in their mission statements. So the talk about wokeness tells us nothing about bank failures — but a lot about the intellectual and moral bankruptcy of the modern American right.
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