Treasury Secretary Janet Yellen was in Congress Thursday to provide information regarding the extraordinary decision to rescue depositors at the now-defunct Silicon Valley Bank.
SVB was the favored financial institution of Silicon Valley tech start-ups and global warming-related enterprises. The bank was also a leader in the ESG movement and embraced progressive causes, like Black Lives Matter.
In normal capitalism, enterprises that took risks and were irresponsible with investments would fail, and the people who trusted those enterprises with their money — a de facto endorsement of their activities — would lose as a result.
But in America, we don’t have capitalism. We have something else. So it shouldn’t be a surprise, then, that the federal government bent the rules to help out people connected with SVB’s failure.
Sen. James Lankford (R-Okla.) began the hearing by asking whether the community banks in his home state would receive similar preferential treatment.
“A bank only gets that treatment if a majority of the FDIC board, a super majority, a super majority of the Fed Board, and I, in consultation with the president determine that the failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences,” said Yellen.
If that process sounds convoluted and like regulators are making it up as the go along, well…
Lankford’s obvious concern is that the favored treatment SVB received will cause depositors with other community banks to worry that their funds wouldn’t receive the same special treatment from Yellen, the Fed, the FDIC Board, and Biden.
If they are worried about getting special treatment for their money, the obvious step would be to place their money in a bank that is big and politically connected. It’s a real concern, one that apparently a lot of depositors are having, because flows into the largest, most politically connected banks have increased majorly this week.