Can the working class afford to bail out Silicon Valley Bank customers?

Update: Ordinary schmoes are going to bail out the billionaire customers of Silicon Valley Bank, but the bailout is being disguised as a “special assessment” on the peasants’ banks. (NYT) Technically this is “not from taxpayers”… it is a bailout only from those taxpayers who have bank accounts.

I’m inaugurating a new category for blog posts today: transferism. The working class has already paid for a portion of all of the luxurious electric cars being driven around Silicon Valley. Joe Biden’s loan forgiveness scheme forces the working class to pay for elite families’ kids’ college education. What if there is a bailout of Silicon Valley Bank today with some money from the Federal Reserve or the U.S. Treasury? A friend in the money business says that Silicon Valley Bank wouldn’t take personal accounts unless an individual had at least $7 million in liquid assets (i.e., excluding real estate and private company shares). So a federal bailout would be a transfer from the working class to some of the richest people in the world.

(This also happened during coronapanic. A friend owns an aircraft charter company and the government gave him a huge amount of money in 2020 to pay pilot salaries. “I turned around and gave almost all of the money to the [Gulfstream] owners,” he said, “because they’re the ones actually responsible for the cost of pilot salaries. They never would have fired the pilots because they were still using their planes personally and it would have been too hard to re-hire and re-train. We ended up having our most profitable charter year ever, though that was exceeded in 2021.” In other words, money that will one day be extracted from the working class via taxation was used to pay billionaire Gulfstream jet owners.)

What are readers predicting for the fate of Silicon Valley Bank? “Regulators Hold Auction for Silicon Valley Bank” (WSJ):

Regulators are auctioning Silicon Valley Bank as part of a broader effort to contain the fallout from its failure on Friday.

Treasury officials confirmed the auction to lawmakers and staff on a call Sunday afternoon, according to people familiar with the matter, saying bids were expected by 2 p.m. Eastern Time.

That was hours ago! If there had been a successful bid, wouldn’t we have heard? Pre-coronapanic, which we can use as a period of time when valuations were at least vaguely tethered to reality, Silicon Valley Bank was worth about $10 billion. If it takes $20 billion to make depositors whole, the current enterprise should be worth at most -$10 billion. But given that the enterprise is now associated with incompetence and a huge amount of money has been wired out, maybe -$17 billion is a more accurate number?

So, despite not knowing anything about banking or being confident in the $20 billion shortfall plug figure, my prediction is that SVB is sold to a large bank for -$17 billion (i.e., taxpayers give the acquirer $17 billion). The justification will be that if taxpayers didn’t “invest” this $17 billion, the panic would spread and your Main Street bank would be next.

From the library at the Charles Hotel in Harvard Square:


Full post, including comments