❝ Quote of the Week
So I will make a prediction. This bill will pass. And, if the banks get their way, in the next ten years or so, there will be another financial crisis. Of course, when the crash comes, big banks will throw up their hands and say it's not their fault, nobody could have seen it coming. They'll run to Washington to beg for bailout money. And they'll probably get it. But just like in 2008, there will be no bailout for working families. Jobs will be lost, lives will be destroyed. The American people – not the banks – will once again bear the burden.”
Elizabeth Warren on the Economic Growth, Regulatory Relief, and Consumer Protection Act in 2018, which loosened Dodd-Frank regulations for mid-sized banks.
Hate Liz Warren all you want. Maybe sometimes she doesn't understand industry or says she’s Native American, but this time she was right.
Fiscally liberal, financially rich
Silicon Valley Bank (SVB) and Signature Bank collapsed last week. The 2nd and 3rd largest bank collapses in American history.
First, bank collpases suck.
Startups not being able to pay payroll? Terrible.
Regular people losing deposits? Shouldn’t happen.
Executives giving themselves bonuses right before the collapse? Disgusting.
I gotta say though, it was satisfying to watch the same VCs and founders who slam government regulation and promote libertarian policies get on their knees to beg the FED for a bailout.
You had guys like David Sacks, Jason Calacanis, Bill Ackman, and Mark Cuban pleading with the government to PLEASE DO SOMETHING.
It’s too on the nose for a Hollywood movie. “Hey, Mr. Speilberg I want to add a scene where all the anti-government investors and business owners lose their money in a bank run and they beg the federal government to save their asses.”
These guys want creative destruction and innovation, but don’t want to deal with the spillover when it doesn’t work for them. Turns out, creative destruction isn’t so fun when it happens to you and your friends.
Here’s a great video on Twitter where Calcunis praises SVB for being a founder-friendly bank. “That’s my bank. They’re super nice to me. I called SVB for a mortgage and they did it in 8 seconds. They asked, “you want this, you want this?” I’m like sure. I love that Silicon Valley Bank.” So yeah, Jason, it was cool when the bank was giving you cheap mortgages, but it’s a national tragedy when everyone else has to deal with it.
I don’t think I’ve ever seen these guys praise unions, advocate for increased wages, or universal healthcare. However, I’ll give them the benefit of the doubt. I think they care about the country and want to see it get better. We just have very different ideas on how to make it better.
I want to make it clear. The government had to bail out SVB and Signature Bank. More than a million workers weren’t going to be paid on time and who knows what else could have happened.
My problem isn’t with the FDIC backstopping deposits. My problems are:
The situation could have been avoided
Ever since FDIC was created in 1930 (from the new deal btw), we’ve tried to protect consumers from risky banking practices.
As recently as 2010, we signed extensive legislation to regulate banks. The bill was called Dodd-Frank and it was supposed to be the banking legislation to end all banking legislation.
However in 2018, mid-sized banks like SVB and Signature, successfully lobbied to peal back regulations from Dodd-Frank.
During that time, there was a board member at Signature named Barney Frank. The name may sound familiar. You know why? Barney was the same guy who co-sponsored the 2010 Dodd-Frank act… You can’t make it up. Two Hollywood movie scenes and were only halfway through.
Corporations are actually the main political party in America (more on that later).
The founders and VCs begging for bailouts are the same dudes who fight government regulation.
It’s fun to laugh at the hypocrisy until you realize how rigged the system is. What is the definition of “too big to fail?” Who gets access to the gov’t safety net? Will entrepreneurs and businesses continue to take unnecessary risks if they know a bailout is imminent? Do you just need a big enough platform and a loud enough voice? Creative destruction is good sometimes but bad other times?
I don’t see college students getting bailouts. I don’t see the 200k small businesses that failed during COVID getting bailed out.
Capitalism is all about incentives. The number one incentive is profit. Sometimes you take risks to get profit and when the risks get out of hand, there are negative externalities. If we don’t create responsible legislation bad things happen.
Ease banking regulations = banks crash
Ease environmental regulations = oil spills
IPO loopholes = SPAC bonanza (early investors make bank and retail investors get left holding the bag)
Libertarian ideals only work until they don't.
Why does the government always have money for corporations?
In 2014, there was a study called, "Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens" It found that when the 1% unanimously want legislation, it has a 60% chance of passing. When they don’t want it, it has a 25% of passing. Regardless of public opinion.
It reminded me of this Sacks tweet. (Sorry for bagging on you Mr. Sacks, you’re probably not that bad of a dude and want the same stuff as I do but say it in a much different way).
Now apply this to any crisis we’ve had over the past decade (healthcare, pharma, housing, income insecurity, etc.)
“I’m not asking for a bailout. I’m asking for government officials to ensure healthcare for every American. Either people in the US are safe or they’re not.”
The government doesn’t think ordinary citizens are worth the hassle.
In 2008, the government found over $700b to bail out GM, Chrysler, and banks like Goldman Sachs and Bank of America.
In 2020, the FED spent over $7t on corporate bonds and equity
This time the government will spend $300b+. (Even though most of that money will come from taxes on the big banks. Which btw, is still taxpayers money).
We’ve spent trillions and trillions of dollars on saving big business but still can’t find:
$25b to end hunger in the U.S.
$20b to end homelessness in the United States ($55b to give each homeless person $100k)
$500b for the student loan forgiveness act
Somehow, someway, the government always comes up short when it’s time to pay the average joe.
🤷🏼♂️ What did Billy do this week?
QUIT MY JOB
Remember when I said I was writing for Milk Road full-time again… I lied
I’m a free agent now.
In the short-term I plan on writing for brands, creating content, and talking to cool people. If you are looking for a writer or want to chat, hmu → billy@istheox.com .