Casualties of SVB’s Collapse
Silicon Valley libertarianism, every congressional Republican, 50 congressional Democrats—and why are some still sitting on the banking committees?
The implosion of Silicon Valley Bank has brought with it—or, at least, should bring with it—the implosion of the reputations of certain key groups and individuals in America’s political and economic infrastructure. The list begins with SVB’s own leaders, of course, most particularly CEO Greg Becker, who repeatedly urged Congress in 2018 to eliminate the Dodd-Frank regulation requiring midsize banks like his to maintain a prudent amount of ready money lest nefarious forces cause a run on the bank. But Becker is just one of a number of public figures whose credibility just now is at Tucker Carlson levels.
Silicon Valley was already going through a hard time before SVB went under, as the nation’s consumption of digital products declined with the waning of the pandemic. (Just today, Meta [aka Facebook] announced it would lay off another 10,000 employees.) But Silicon Valley’s defining ideology—a libertarianism that extolled private markets and condemned government efforts to regulate them—has been shown to be as hollow as Marjorie Taylor Greene’s head. I won’t enumerate all the pleas to the feds to step up and rescue their deposits from the very same Valley libertarians who’d been disparaging any governmental role in the economy as recently as the middle of last week. Michael Hiltzik in the Los Angeles Times and Adam Lashinsky in The Washington Post have both done excellent jobs laying out this epic of hypocrisy.
Libertarianism will surely survive this setback; it’s as American as mass shootings. But the one wing of libertarianism with cultural cachet was Silicon Valley’s super-cool version. (Compare and contrast Steve Jobs and Ron Paul.) Now that version has been shown to be as phony as a three-dollar bill (for which, doubtless, there is a crypto equivalent).
Reputational damage also attaches to the members of Congress who voted in 2018 to roll back the keep-cash-handy provisions of Dodd-Frank on midsize ($50 billion to $250 billion in assets) banks. That list includes every Republican save one, as well as 33 House Democrats and 17 Democratic senators. None of the Democrats whose districts were even remotely close to Silicon Valley voted for the measure, nor did California’s senators (Feinstein and Harris). The yes votes came instead from a mix of the pro-corporate Democrats usually hailed by centrist publications for their bipartisanship (Virginia’s Mark Warner, West Virginia’s Joe Manchin, New Jersey’s Josh Gottheimer), from the senators and representatives of states dominated by banks (Delaware’s Tom Carper, Chris Coons, and Lisa Blunt Rochester), and from a small number of inner-city representatives doing the bidding of their cities’ midsize banks. A number of those Democrats in both houses served on the congressional committees that oversaw banking and thus received ample campaign funding from the banks; those who served on the Senate’s committee, Warner in particular, played a decisive role in passing that legislation. (Warner won the chutzpah prize of the month last weekend when he defended the 2018 deregulation on a Sunday talk show.) Why their fellow Democrats would want to keep these deregulators on those committees now, given their appalling lack of judgment, is a good question. There should be some price attached to having lit the deregulatory fuse in 2018; commendably, Arizona Rep. Ruben Gallego, currently seeking Kyrsten Sinema’s Senate seat, has taken her to task for voting for the measure back when she was in the House.
And then there’s the reputation of the mega-banker who didn’t step up: Jamie Dimon. His bank, JPMorgan Chase, is much the nation’s largest, and best equipped to take over the remaining assets and debts left by SVP. Old J.P. Morgan himself, it’s worth recalling, ended the financial panic of 1907, in which banks were toppling like tenpins, by pledging his bank’s reserves to stabilize the system, and strong-arming the heads of other big banks to do the same. Dimon is the one banker, and Chase the best-suited bank, capable of doing the 21st-century version of that today. It’s time for President Joe to give CEO Jamie a friendly call.
The American Prospect
Meyerson on TAP
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