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March 06, 2016
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This week the Biden administration moved swiftly to contain the fallout from the collapse of Silicon Valley Bank, reassuring depositors and other wobbling institutions.
Biden wants to head off a financial crisis, which could spark a recession and potentially harm millions of people. The government's decisive actions here are reasonable and probably necessary.
But it's hard not to notice how quickly the government moves when there’s a threat that the wealthy may lose some money, versus the much less urgent response to non-billionaires in trouble.
READ MORE: Ron DeSantis and right-wingers falsely blame wokeness and diversity for SVB collapse
Bank bailouts happen instantly.
Bailouts for student debt, or medical debt or for children in poverty occur on a much longer, and in many cases infinite, timetable.
We shouldn't let a bank collapse destroy the economy. But if we have the money and the will to protect the wealthy, we should find the money and the will to protect those who are struggling as well.
High interest, high recklessness
Silicon Valley Bank was done in by rising interest rates and its own short-sightedness.
It's the main banker for Silicon Valley technology and life sciences companies. As interest rates rose, its Treasury bond investments became less attractive.
In addition, startup funds dried up, and tech firms and executives started to withdraw money.
The problem was exacerbated by the fact that SVB had many depositors with large accounts over $250,000, the cap (in theory) for Federal government protection. A majority of its deposits were uninsured.
SVB lobbied to put itself in this precarious position.
CEO Greg Becker urged the government in the mid-2010s to weaken Dodd-Frank so that smaller banks like SVB would no longer be subject to yearly stress tests.
Trump complied with that request in 2018, rolling back regulations, and setting the stage for SVB's disaster.
When the bank's precarious position became clear last week, tech investors with uninsured deposits — most notably billionaire Republican donor Peter Thiel — panicked.
The bank couldn't find a buyer, and the Federal Deposit Insurance Corporation stepped in and took it over.
Protecting depositors
The administration moved swiftly to try to contain the crisis of confidence. It protected all deposits at SVB and another struggling institution, Signature Bank — even those over $250,000.
The funds come from a bank levy established in Dodd-Frank.
The government also made it easier for mid-size banks to obtain funding.
The goal is to show the public that funds are available and that the federal government is serious about protecting depositors (though not the bank's investors and owners).
We still don't know whether this will work or whether more funds will be needed.
Stocks in First Republic Bank plunged on Monday. The market remains nervous, and there is a possibility of more bank failures, though it seems clear that the government is taking this seriously and will respond with further measures if needed.
Help for the wealthy, no help for you
Again, a run on the banking system could have economy-wide repercussions. No one wants a repeat of 2008. It makes sense that Biden wants to act decisively.
However, the fact remains that the people directly benefiting here are mostly people with more than $250,000 in deposits in individual accounts. They have a lot of money.
In addition, many of these people have warned vocally about moral hazards and have argued strongly against government aid.
Thiel has backed candidates like Ohio Senator JD Vance. Vance has tried to claim (falsely) that student debt relief benefits the rich.
He's notably not on the rooftops right now demanding that Biden refuse to help tech billionaires like Thiel, though.
Obama-era National Economic Director Larry Summers insisted that Biden needed to bail out banks. Now is not the time for "moral hazard lectures," he insisted.
But when Biden announced his student loan forgiveness program, Summers was all about the moral hazard lectures, arguing that student loan relief was a giveaway to the affluent.
Similarly, wealthy investor Jason Calacanis claimed that bailouts "remove accountability" when student loan debt was at issue.
But this weekend he was screaming in all caps that "MAIN STREET" was going to lose their bank deposits, even though most people on main street don't have accounts with over $250,000.
People who aren't rich
Thiel, Summers and Calacanis are hypocrites. But they also sincerely believe that the wealthy are more important than everyone else.
In their view, you don't need to bail out students — or those with medical debt or children in poverty — because the middle class and the poor don't create jobs and can't swiftly destroy banks by abandoning their over-$250,000 accounts.
The truth, though, is that instability in the US economy is in large part due to the fact that we funnel so many resources to irresponsible reckless tech-bro billionaire gamblers, rather than investing in a strong, stable middle class.
The US has very high rates of inequality compared to its peers. That inequality almost certainly slows economic growth.
It also undermines innovation — that supposed idol of Silicon Valley billionaires.
When students leave college with massive debt, they can't take risks and pursue new ideas or projects. When people's health care is tied to their jobs, they are going to be afraid to pursue new opportunities.
When a country has high child poverty rates, it means that millions of children live in precarious circumstances, and lack nutrition, time, and stability needed to take full advantage of educational opportunities.
Main street vs. the worst people
The US should be giving everyone the tools they need to contribute to the economy and help each other.
Instead, we funnel money to Peter Thiel, who spends it on putting unqualified right-wing nutjobs in the Senate, and Elon Musk, who spends it on bringing Nazis back to Twitter.
Biden has tried to move towards greater equity with his student debt relief plan and the Expanded Child Tax Credit for poor children — both initiatives now stalled or gutted by conservative lawmakers.
Part of the government's job is to safeguard the economy.
That sometimes means bailing out banks. But it should also mean helping students, children, working people and poor people.
An economy built for Larry Summers and Peter Thiel is an economy that will always be in crisis.
READ MORE: The GOP's magic words have lost their magic
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We're in another one of those moments in which the makebelievers makebelieve a makebelieve thing, and everyone else – let's call them the spoilers – respects the makebelieving of the makebelievers just long enough to ask themselves whether the makebelieve thing is real.
It's not real.
I'm talking about the narrative that's been building since Friday when the Silicon Valley Bank collapsed. That was a BFD. Fear and panic seem to be spreading. The government seems to be taking action. As of this writing, Bloomberg reports that First Republic is "getting $30 billion from the biggest US banks in an effort brokered by the government to stabilize the lender." This is serious business.
READ MORE: 'Shaken confidence': Stocks plummet again as global anxiety persists over SVB collapse
But the makebelievers don't care, as chaos and disorder are part of their imaginary tandrumscapes. Like a kid who stomps another kid's toys, the makebelievers relish the instability unleashed when things, as they often do, fall apart. They have loads of fun blaming Big Bad Baddies for everything going wrong but making no effort to help.
To wit: the collapse of Silicon Valley Bank, and the apprehensions being felt in the world of finance, is all the fault of The Wokes.
It isn't.
According the San Francisco Chronicle, SVB "invested a lot of customer deposits into long-term Treasury and mortgage-backed bonds. They fell in value when the Federal Reserve began raising interest rates. Then, when many customers needed to withdraw cash as the tech boom fizzled, it had to sell those bonds at a loss."
READ MORE: Dems demand Biden DOJ probe possible 'criminal' violations by SVB execs
Don't spoil the fun!
Here's Andy Puzder, a fellow at the illiberal Heritage Foundation: "If you're not focused on how your company is governed and run, if you're just focused on being woke, you're going to have problems."
Wall Street Journal columnist Andy Kessler: "In its proxy statement, SVB notes that besides 91 percent of their board being independent and 45 percent women, they also have '1 Black,' '1 LGBTQ+' and '2 Veterans.' I'm not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demands."
An unnamed source told the New York Post that it's "the bank of the Democrats." "If it was the Bank of MAGA, what are the chances it would be bailed out?" the person said. "There's not a chance in hell."
That last one seems to be getting some attention on account of it looking, to the spoilers, like a gotcha. MAGA banks don't collapse, eh? Let me introduce you to Peter Thiel, billionaire fascist, benefactor of rightwing US Senator JD Vance, of Ohio, and a major SVB depositor.
Gotcha!
Not really.
It's more an inadvertent refueling of the makebelieving power of the makebelievers by giving it attention and time. We don't do this with small children. We don't wonder whether the madeupthing that they made up is real. We know it's not real. We don't analyze it. Yet we accept the framing of the question: Was SVB woke or MAGA?
Instead, let's really listen.
If we listen, we can hear the problem.
The problem for the makebelieves is that the most enduring symbol of capitalism – the bank – takes steps, in theory, toward recognizing the legitimacy of people who, according to the makebelievers, do not deserve recognition, because they are legitimate. The only people worthy of recognition are the people who have always gotten it. And I guess I should spell it out: they have always been male and white.
Remember what Andy Puzder, of the Heritage Foundation, said. SVB "focused" on things that it should not have been focused on. When capitalism is not "focused" on people undeserving of recognition, because they are not legitimate, all's well. But when capitalism, especially the most enduring symbol of it, focuses elsewhere?
WOKE CAPITALISM!
I would say it's ironic that – surprise! – most banks in America have governing bodies that are still very much male and white. I would say it's ironic if I believed for a second that the makebelievers were looking at the same reality the rest of us are looking at instead of imagining what they want to see for themselves and their enemies.
But I don't. Neither should you.
The makebelievers want a world that doesn't exist.
Let's spoil it.
READ MORE: MSNBC montage highlights conservatives' 'comically preposterous' spin on SVB collapse
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Donald Trump again blamed America for threatening the values of western civilization instead of the foreign nation that’s threatening them. “The greatest threat to western civilization today is not Russia,” he said. “It’s probably, more than anything else, ourselves, and some of the horrible USA-hating people that represent us.”
The criminal former president seemed to be taking Vladimir Putin’s side over his own country’s. Indeed, he thinks we should stay out of the war in Ukraine. He thinks Russia is a victim of American aggression. This pattern might be the only thing about this lying, thieving, philandering sadist that’s steady, reliable and predictable.
There was a time when it was political suicide for a leader to blame America first. That time continues – but only if we are to believe what his followers say about liberals, that they blame America first. Yet here we are, with Donald Trump blaming America first, and he’s not yet died politically. It’s almost like his followers understand that by “America,” he’s not talking about them. They are Realamericans.
The Russo-Realamerican allience
Realamerica is not the real America. Realamerica, according to its adherents, is a “nation” inside the real nation. It is a confederacy of the mind and spirit, made of pure makebelieve. Realamericans live according to God’s law. They share the goal of ruling, in God’s name, the real America. If Realamericans can’t dominate real Americans lawfully, they must take “the law” into their own hands. With the proliferation over two decades of semiautomatic rifles, they have.
I think it’s helpful to think about this confederacy of the mind and spirit when talking about Donald Trump’s treasonous remarks.
In a sense, he’s the president of Realamerica. He speaks for and represents this confederacy on the global stage. He seems to be taking Vladimir Putin’s side against his own country’s, but he’s not. Realamerica has an alliance with Russia against the real America.
This Russo-Realamerican alliance is critical to Putin’s war. As the Financial Times’ Edward Luce said, his best hope of winning in Ukraine is “for Nato’s resolve to collapse and America’s supply of money and weapons to dry up,” he said. “A Trump or [Ron] DeSantis presidency would be Russia’s likeliest chance of disuniting the west.”
Conversely, Trump’s best hope of retaking the presidency of the real America is for Realamerica’s foreign partner to sabotage Joe Biden’s campaign the way it sabotaged Hillary Clinton’s, using the only thing the Kremlin is good at, which is spreading propaganda and lies.
As Luce said, “the risk is that the Kremlin leader will further cement the view on the Maga right that Russia is the global champion of their anti-woke cause. Russian flags and T-shirts proclaiming ‘I would rather be a Russian than a Democrat’ are a regular sight nowadays.”
Trump’s followers prefer to be Russian because Democrats are real Americans, which is to say, Realamerica’s enemies. Realamericans have more in common with Russians. Real Americans live in this reality. Realamericans, however, live in a world of makebelieve without legitimacy, much like the “presidency” of Vladimir Putin.
So be it
It’s helpful to think of Trump as the president of a confederacy of the mind and spirit, because it clarifies the role of Republicans like Mitch McConnell. He knows appearing to side with the enemy of the real America is bad for his party. So he says things like the following:
“Republican leaders are committed to a strong trans-Atlantic alliance,” he said earlier this year. “We are committed to helping Ukraine. Not because of vague moral arguments or abstractions like the so-called ‘rules-based international order.’ But rather, because America’s own core national interests are at stake. Because our security is interlinked and our economies are intertwined.”
McConnell may seem to represent a split in the Republican Party over Ukraine. But when you see Trump as the president of Realamerica, and representing on the global stage that “nation” inside a real nation, you see it’s not. It’s the consequence of needing to hide Realamerica’s intentions of dominating the real America from the inside. If Russia happens to lend a hand, as it did in 2016, so be it.
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