by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Editors at the Washington Free Beacon take aim at the government’s planned bailout of a failed California bank.
Silicon Valley Bank (SVB) is getting a bailout. That’s the latest news from the United States Treasury Department, which announced it will make depositors in the failed bank whole.
Many of those depositors were tech start-ups, and until Treasury Secretary Janet Yellen’s announcement on Sunday afternoon, they didn’t know if they would make payroll on the 15th of the month. Their investors, famous for their risk-taking, feared massive losses in their portfolios.
The bank’s clients were in a bind because federal insurance only covers deposits up to $250,000. That’s more money than almost anybody would keep in a bank account—but not a start-up! According to the Economist, almost 93 percent of SVB’s deposits were not insured.
These entrepreneurs either knew, or should have known, the risks they were taking, and the government should not be in the business of rewarding this arrogance and stupidity. A government bailout is nothing more than a backdoor that will leave taxpayers on the hook for the foolish decisions of so-called capitalists who are unwilling to pay the costs of risks gone awry.
The Fed claims none of the costs of this bailout will be borne by the taxpayer. Don’t be fooled by these word games. SVB’s safety net may be paid with insurance premiums that banks pay to the Federal Deposit Insurance Corporation. That in turn means that banks will charge their customers—the taxpayers—more.
Meanwhile, the tech industry has already benefited tremendously from government policy. From 2020 through the end of 2021, SVB’s assets grew 83 percent—and kept growing into 2022. For at least three years, government policy has underwritten tech speculation and fantastic valuations. Venture capitalists and founders became fantastically rich.