The Silicon Valley Bank Failure Was Due to COVID Policies, Woke ESG, and Bad Business

Happy Tuesday. Welcome to The Liz Wheeler Show. We are going to talk today about one of the most massive scandalous stories that has happened in recent history. This quite possibly could be the biggest story of 2023. It could have the most repercussions in every area of our country. It could touch more of us at our kitchen tables, in our pocketbooks, in our bank accounts, than almost any other story. And I’m not trying to fear monger here. I’m just looking at this and analyzing exactly what is about to happen. I’m talking about the collapse of the Silicon Valley Bank. It’s happened in the last couple days. It’s been unfolding for a couple of weeks. And I wanna talk exactly, or I wanna talk about exactly what happened. Because my first reaction when I saw this go down, my first reaction was twofold. I wanted to ensure that the federal government did not bail out this bank.  

I, as a taxpayer, did not want my money going towards paying people who lost their money as sad and as harsh as it is to say, to see these people potentially wiped out. But that’s the looking forward perspective. The looking backward perspective is, I wondered what happened, what exactly led to this, what are the factors that contributed to this? Because there’s a lot of talk right now, maybe even some chaos, some fear, a lot of questions about, well, what is going to happen? Are we going to see a bank run across our country? Is this isolated just to this one bank? Or is this going to have a contagion effect? Is there going to be a ripple effect to other banks, especially other regional banks? Is this, you know, 2008, 2.0? Is this like layman brothers? Is this going to spark another financial crisis?  

All of these questions pass through my mind, probably pass through yours. And so what I wanna do today on the show is I wanna do a complete breakdown of what led to this bank failure. The factors that led to this bank failure are threefold, covid policies imposed, not by states at this point, but at by the federal government, covid policies at the end of the federal government combined with woke ESG, that underpins a lot of corporations and a lot of banking institutions. But in particular this banking institution. And in particular at this banking institution, their risk management department, and also a bad business structure. Part of this was simply bad banking. So, you put these three elements together and what happens is this massive implosion of the 16th largest bank in the United States. So, let’s get to this. Let’s break down exactly what led to this combination of toxic politics and bad business in order to better analyze what we can see or what we foresee happening in the future, what those ripple effects are going to be, and how we are going to be impacted, and how we can prevent this from happening again so that our financial system is stable.  

Let’s get to it.  

So let me share with you my thought process on this entire story. The collapse of the Silicon Valley Bank. First of all, sometimes for some of us who do not work in the financial sector, we can look at something like this and think, okay, is this something we should care about? Is this something that’s just Wall Street drama? Is this something that’s going to impact me? And I think that’s one of, that’s one of the key factors that gets people interest. Is this going to impact me? Is this going to have a negative consequence in my life? And I have come to the conclusion that yes, this is probably going to impact me. And so, my secondary question was, okay, well how is it going to impact me? But what led to this? Is this a fluke? Is this something bad that happened that just happened sometimes?  

Was there politics involved with this? What exactly contributed to the collapse of Silicon Valley Bank? Because we don’t often in our country face bank failure. They’re not like bank runs on a regular basis in our country. We have a fairly stable financial system, which we need. It’s essential to have a stable financial system in our country because we operate on fiat currency. If we don’t have confidence in our financial system, then it will collapse. If it collapses, then I don’t have to tell you the catastrophic repercussions of that. So, I think in a sense that this was not immediately clear to the average consumer how, what a massive story the Silicon Valley Bank collapse was. And I wanna talk about the factors that contributed to this, and then we’ll talk about the response, the political response and what’s gonna happen moving forward.  

But essentially what led to this collapse of this bank was Covid policies that were implemented by the federal government, in particular the PPP loans that businesses all across the country got from the federal government. After the federal government imposed lockdowns on us, or I guess it was state governments that shut down businesses, but the federal government was involved. Federal government was the one that gave businesses PPP loans. This infusion of cash to try to meet payroll. That combined with ESG. And by the way, I was shocked to learn the other day. I’m not shocked by much at this point. I was shocked to learn that 85% of people in our country do not know what ESG is. That means even a significant portion of Republicans are not aware of what ESG is.  

So let me tell you what that is. ESG stands for environmental, social and governance. ESG is a system of metrics. That’s why they’re called ESG Metrics. Environmental, social and governance metrics that operate like a social credit score. So, you have a business, so you have like Bank of America. Bank of America takes certain actions and they’re graded on this ESG metrics system. They’re graded on, you know, high score or low score. And what they’re graded on is their political actions. They’re not graded on the business that they do. This is not like the Better Business Bureau or something like that. ESG grades businesses on their social activity. So, their environmental activity, are they committed to fighting climate change? Are they committed to fighting carbon emissions? It grades them on social political agendas like diversity, equity and inclusion.  

Are they committed to those things in their workplace? It grades them on governmental governance metrics, such as do they pay for their, their employees to have abortions? Have they advocated for gay marriage politically that sort of thing. So, it’s ESG is a, is a social credit score system for businesses that forces businesses to act as activists for a radical leftist political agenda. These ESG metrics are 100% not just leftist metrics, but neo-Marxist metrics, right? These socialist, Marxist metrics. And the consequence, if a business does not achieve a high enough ESG rating or ESG metric, then that business could face a lack of access to capital to actually operate their business. So ESG, the enforcement mechanism of ESG is the big banking institutions are preparing to grade companies who apply for loans based on not the profitability or the potential profitability of that business or their capacity to pay back that loan, but based on whether they have a high enough ESG score.  

So if you decide you don’t care about climate change, if you reject D E I because it’s racist and discriminatory and intolerant, if you don’t want to pay for women to get abortions and you don’t want to advocate for transgender ideology in state law, then you will have a low ESG metric rating and you might not get as good of terms on a loan. The goal of this is to ultimately squeeze out from the market, any company and subsequently individuals who don’t actively celebrate the radical leftist ideology. So that little primer is for the 85% of people who don’t know what ESG ratings are, the 15% who do you know, you are ahead of the curve and kudos to you. But just so we know what ESG is, the majority of big businesses and big corporations in our country today operate through the lens of ESG.  

This is not something that’s potentially coming to our nation. This is not something that was just proposed by the United Nations, or that’s talked about at the World Economic Forum. This exists right now in our country. You can go to any business, maybe you shop at Kohl’s, maybe you shop at Target, maybe you go, you do your banking at Bank of America. Any company that you can think of that is a national company, go to their website, look for or just Google ESG report. And you will find that company has already embraced ESG. And of course, this is a, it’s a fiduciary delinquency, in my opinion, to operate via this lens of ESG because you are not being fair. You are, you are delinquent towards your shareholders because ESG does not mean that you are making business decisions based on what’s best for your business, what will get the most profit, what will serve customers and shareholders, but rather what will serve politicians.  

So, you can look it up. Any, any place that you went, maybe wherever you went shopping recently, look it up, see what they have. So, this bank, Silicon Valley Bank was heavily into ESG. They had their own ESG department, their own ESG report. They heavily invested in businesses who were also, who had also bought into the ESG mindset. So, the COVID policy is from the federal government, the PPP loans, ESG, and wokeness. And we’re gonna get into greater detail of exactly how this all came together in a, in a couple minutes. I just wanna give this overview first, and then of course, the business structure of this bank. Part of the problem here wasn’t political. Part of the problem here wasn’t wokeness, it wasn’t covid, part of it was just a really stupid poor business structure that even people outside of the financial sector should have been able to say, well, wait a second.  

If you want to have longevity in your business, if you want your business to have any kind of, any kind of chance of, of operating for more than a couple years without leading to inevitable failure, then you don’t structure your business in this way. So, let’s start right there. Let’s start with the business structure of Silicon Valley Bank. So, Silicon Valley Bank essentially focused their clientele, if you will, was threefold. They focused on venture capitalists, they focused on portfolio companies, and then they also had some individual people, a lot of times people that were like CEOs of, of companies in Silicon Valley. But those were their focus. They had a very, very start up friendly focus, a very venture capitalist friendly structure. And that’s very important for reasons you’ll see in just a minute. So the way that their business was structured leads to the obvious conclusion that I wanna preemptively get to right away.  

This situation with Silicon Valley Bank is not the same as what happened in 2008. This is not Layman Brothers 2.0. This is actually quite different than that. And you will see why right now most banks in our country, especially most regional banks, do operate using a philosophy called fractional banking. You might be familiar with this, but fractional banking, lemme just give you a one sentence summary of what this is. Not to get too nerdy here, if I’m getting too nerdy, you guys can let me know. But these are the questions I was curious about when I heard this story. These are the questions that, basically what I’m talking about today, and the couple of notes that I have on my screen here are the things that I was investigating to make sure that my money was safe, that my business was safe.  

So, I thought you would want to probably answer the same questions, but if I get too nerdy, let me know. So, fractional banking is this idea that when you go into a bank and you deposit your money, the bank gives you interest on that money. But the reason that you get interest on that money is because the bank actually loans out your money to other people and therefore gets a return on that money and they pay a part of that to you. So, for example, going back just a couple of years before the interest rates were as high as they were right now, way back in the good old days here. Say you deposited some money, and your interest was just half a percent, half a percent of interest, while the bank, while you were making half a percent of interest, the bank was actually making, say, three or 4% interest because they took the money that you deposited, and they bought treasuries with it.  

And the return on those treasuries was several percent. So, their profitability of that bank was because they earned two or 3% on those treasuries that they bought while they only paid you a half a percentage on the money that you deposited in their bank. So that difference would be either two and a half or three and a half, one and a half to two and a half, to three and a half percent. They would pocket that as profitability. That’s fractional banking, right? And this is how most banks operate. The problem with this is not the idea of fractional banking. The problem with this is how Silicon Valley Bank specifically did this. So fractional banking, this is not something that’s problematic in and of itself, but it is problematic the way that Silicon Valley Bank did it, because Silicon Valley Bank did not do this with any kind of risk management structure in place, meaning they did not hedge against potential interest rate hikes.  

So, you deposited money, they paid you 0.5% interest, they bought these treasuries that paid 3% interest, say, and they pocketed that difference of two and a half percent. But the obvious question then that they should have asked is, well, what happens strategically to our business structure when interest rates increase? Because interest rates always increase, right? It’s a cycle. What happens when they increase? Well, Silicon Valley Bank didn’t seem to ask themselves that very elementary question, and therefore the answer to that question was not factored into their business structure at all. They did not diversify their investments with the money that was deposited into their bank because you have to, you can’t put all of your eggs in one basket when you’re a bank because of the natural financial cycles that we experience in the American economy or in the global economy. If all of your eggs are in one basket, then whenever that basket is not in an advantageous environment, meaning when there are high interest rates that, um, that have now occurred, of course, then all of a sudden you as this bank, and I’m not, I’m not talking about you as the consumer.  

I’m talking about Silicon Valley Bank faced a situation where they were not only not profiting anymore, but they were pay, they owed you more than they were making on those treasuries that they had purchased. And they couldn’t, they couldn’t just offload those treasuries that they’d purchased because they were essentially junk. No one was buying them anymore because interest rates were so hot. So, all of a sudden, they’re in this untenable situation when the interest rates go up. And then you factor in the politics of the thing, which we’ll discuss in a moment. But the result here is they were hemorrhaging. Their balance sheet was an absolute mess. And that led to some decisions that not only were questionable, but it led them to a position that when faced with the politics of the thing caused this catastrophe. So now to the politics of the thing, let me step back for just a second and talk about venture capitalists.  

So, venture capitalists, when they are seeking loans from business or loans from banks in order to start their business, oftentimes banks tell them, hey, listen, if you want a loan from us then, and you want the best, you want the best terms of this loan, we can offer you the, the largest line of capital. Or we can offer you the lowest interest rate. Oftentimes the caveat or the condition that banks place on that is, but you have to put all of your money in our bank. You can’t spread that money out. You have to not only put all of your business, all of your operational cash in our bank, but you as an individual have to put all of your money in our bank too. So that was one of the questions, actually, full disclosure that I had originally. I saw how many, how much money some of these, some of these startups and these venture capitalists had in Silicon Valley Bank.  

And I was like, well, that doesn’t make any sense because everyone knows or thought everyone knew that you can only put $250,000 in a bank account if you want all of your deposit to be insured after $250,000. If something happens to a bank, like a bank failure or a bank collapse, any money that exceeds $250,000 is not insured. You could stand to lose that. And I understand that some companies that have billions of dollars, they can’t have 10,000 different banks. But it did not make sense to me that all of the money that they have for their business is all in one bank. Like, why not spread it out over 20 banks at the end? Yeah, it’s more administrative tasks to keep track of all of that. But aren’t you protecting your money a little bit better when a higher percentage of it is ensured when it’s common knowledge in the financial industry? And anybody who pays attention to their banking that deposits over $250,000 are not insured, which means you could stand to lose it if tragedy strikes.  

But oftentimes these banks apparently put these contingencies on lines of credit on loans saying that you have to put all of your money, you’d have to do all of your banking at our bank if you want more capital or a larger amount of capital or a lower interest rates. They basically, they basically coerced you to doing that. So that’s one of the reasons that a lot of these businesses had all of their money in this bank because they were doing, they’d do anything, they would take any risk in order to get the line of credit that they wanted for their business. Okay? So, then we see inflation start, right? Inflation starts in our country. We see interest rates going up and suddenly these venture capitalists were facing a situation where they were not allocating cash anymore. And a lot of these startup businesses are not yet profitable.  

In fact, most startups aren’t profitable for a long time. They rely on lines of credit to continue the operation of their business. But when that, when that cash dried up, suddenly the businesses were in a situation where they were being told by their creditors, you have to operate as if you’re profitable instead of operating on lines of, on lines of credit on capital. And so, these businesses, these businesses, these venture capitalists suddenly face a situation where they had to turn to their stash of cash. They’re operating cash, they’re operating cash. That because of the contingencies that these banks put on them to put all of their money in Silicon Valley Bank, if they wanted good terms on, on their lines of capital, they started withdrawing. They’re, they’re operating cash because they were no longer being allocated cash by the bank, right? Because the bank was facing a situation due to high interest rates where they were hemorrhaging money.  

They owed people who had deposited money at their bank more interest than they were making on the treasuries that they had purchased when interest rates were low. It’s kind of complicated, right? But when you map it out like that, suddenly you see that this was just like, this was just like a slow moving, but fast-moving disaster headed towards a cliff. All of these different factors playing into it. And then, and then you face the politics of the thing, okay? The politics of the thing. So during covid governments locked down our states, our businesses were either shuttered completely if we weren’t deemed essential. Where restaurants were told to social distance. Churches were shut down. You know what I’m talking about. I don’t have to describe all of this here. And the federal government in order to face a less catastrophic “situation” with unemployment, because when businesses weren’t profiting because they weren’t allowed to operate their business, then they weren’t able to pay their employees, they were going to lay off their employees.  

So, the federal government said, wait a second, wait a second before you do that, that’s gonna cause mass chaos. We are going to step in, and we are going to bail you out. Enter the PPP loans. The PPP loans. So, at Silicon Valley Bank and other banks, this is not just true of Silicon Valley Bank, but deposits on hand for many of these businesses tripled during the Covid pandemic, which at first glance you may think is really odd because didn’t they have to spend their money on operating their business? Well, no they didn’t because PPP loans exceeded what they needed. And so these businesses deposited the PPP loan money into their bank accounts at Silicon Valley Bank. But here’s the thing, when a bank like Silicon Valley Bank receives this enormous cash infusion, they can’t with depositors.  

I mean they can’t just leave it there. They can’t have this amount of money at their bank. They have to diffuse that cash because they cannot leave it on the books. And so the cycle that I described before of taking people’s deposits and buying treasuries, this cycle became a vicious cycle because this infusion of cash from PPP loans that businesses deposited into their accounts at Silicon Valley had to be diffused. And so what Silicon Valley Bank did is they bought more of those junk treasuries, the treasuries that had already put them in a situation where they owed interest to depositors that exceeded the income they had from buying treasuries with their depositors money. And they perpetuated that vicious cycle. Now, I wanna be really clear here and make a differentiation. I’m not talking about a PPP loan, that Silicon Valley Bank got.  

I’m talking about all of the different people who had accounts at Silicon Valley Bank. I’m talking about those people, all those individual businesses, dozens and dozens and dozens of businesses getting PPP loans, taking that money, depositing it into Silicon Valley Bank, right? It’s depositors money, not money that Silicon Valley Bank got from PPP loans. So the vicious cycle continues when Silicon Valley Bank had to diffuse this influx of cash from their depositors. And the choice they made with what to do with that cash was buy more of the junk treasuries that were paying an interest rate less than what the interest rate of the deposits were owed to the depositors. Do you see what a humongous mess this is, an absolute mess. This is Congressman Thomas Massey also, I wanna read you a tweet or a couple of tweets that he posted because there was an additional factor when it comes to politics and the interest rate that played into this.  

Lemme bring this up cause I wanna read this exactly. Congressman Massey said, let’s review the Federal Reserve Banks many roles in how each of them enabled the Silicon Valley Bank failure slash malfeasance. He said, number one is they played Santa Claus by keeping interest rates artificially low. The Fed stimulated the economy and nudged those with capital into the venture capitalist space, creating a demand for a bank like Silicon Valley Bank. And by the way, as I mentioned at the very beginning of this, Silicon Valley Bank was created specifically to serve venture capitalists. It was created specifically to serve startups. That’s why it’s called Silicon Valley Bank, because that in Silicon Valley, it’s the place of startups, right? That’s why, that’s maybe why they didn’t diversify, because they really wanted to support startups. But you can see how much support those startups are getting now when the bank has collapsed and failed.  

Massie goes on to say the Fed, the Federal Reserve Bank also played arsonist. The Fed created 5 trillion out of thin air, so Congress could inject this money into the economy. There weren’t $5 trillion to borrow during Covid, and certainly not at the low rates imposed by the Fed. So, inflation was off to the races thanks to dilution Thomas Massey said, then they played firefighter after setting the blaze, the Fed came to the rescue to fight inflation by rapidly increasing interest rates. As a result, net venture capitalist startup deposits into Silicon Valley banks slowed, while assets held by Silicon Valley Bank, long-term low interest government debt became less valuable. That’s the vicious cycle that we were just talking about. Massey says, then the Fed played trauma doctor, will the Fed play a role in bailing out Silicon Valley Bank, depositors and other banks possibly by lowering rates, buying their holdings at above value or creating more money for bailouts?  

None of these are free, but the Fed becomes Santa Claus again and inflation rages on. And then Massey of course, says, we, the American people would be better off if the Federal Reserve Bank, an instrument of the very wealthy and connected, did not exist to socialize the risks of insiders while distorting the economy, destroying jobs and devaluing our currency. He’s correct, of course. And that’s an additional factor besides the PPP loans, ESG, which we’re gonna get to in a second. And the bad business practices that we talked about. Then we have the ESG factor here. We have the wokeness factor that played the third in the trifecta of factors that played the third role here in the collapse of this bank. So now we’re circling back to ESG metrics, environmental, social and governance metrics, the social credit score system that is intended to turn corporations and businesses into leftist activists.  

And the enforcement mechanism is big banks who determine whether or not they will give loans or the terms of the loan. Two small businesses based on this grading system, this social credit score system. Are you woke enough? Are you leftist enough? Silicon Valley Bank bought into ESG in an enormous way. In fact, one position that’s incredibly important at a bank like Silicon Valley Bank would be their head of risk management. Someone in a position of risk management would hopefully recognize what we were talking about at the very beginning. That if you don’t hedge against the idea or against the possibility, the potential of interest rates, h rate hikes, then you’re gonna face a situation where maybe you’ve bought a bunch of treasuries that aren’t paying you as much interest as the interest that you owe your depositors. And yet that’s what you, that’s where you’ve put all your eggs in that basket. Somebody who’s in charge of a risk mitigation or rich man risk management department would be responsible for recognizing that is not a good business strategy. It’s a very bad business strategy. It’s not only risky, it’s asinine. It’s almost criminal to run a banking institution in that way. The Silicon Valley Bank had no head of risk management for almost a year. Nobody, nobody,  

Not one person served in that role for nine months until, what you can see on the screen here is a headline from the Daily Mail. It says, Silicon Valley Bank had no head of risk management for nine months before it collapsed as the woke boss for risk management or risk assessment for Europe. The Middle East and Africa was busy organizing a month-long pride campaign and a lesbian visibility day.  

Yes. So these are not just, I mean, this is obvious woke stuff, right? A month-long pride campaign as the money depositors were putting in Silicon Valley Bank was being used to purchase treasuries that don’t have interest enough to pay the interest of the depositors themselves as they are hurdling towards this cliff. Thank God for lesbian visibility day, right? That must make all of these, all of these depositors feel really good, really safe, really secure, like they can trust that their money is being taken care of. It’s not just wokeness that was exhibited by individuals in this company. It’s that Silicon Valley Bank itself had an ESG report. Let’s show that on the screen. What did they call it? They called it diversity, equity, and inclusion. We believe they say that inclusion ignites innovation. Well, you know what also ignites innovation, not losing your depositors’ money.  

That ignites innovation. That’s actually one of the ripple effects that I wanna talk about. A lot of people are talking about ripple effects, like, oh, is this going to cause a bank run? Is this going to impact my money? One of the ripple effects of this is going to be innovation. Silicon Valley Bank funded the startups in Silicon Valley that aren’t just maybe what we stereotypically think of when we think of Silicon Valley. We think of Facebook and Twitter and other social media also. A lot of drug innovation starts in Silicon Valley. A lot of drug startups, pharmaceutical startups, and yeah, I know we talk about big pharma and how evil it is all the time. And it is. Ee talk about how the modern medical model isn’t maybe effective. It’s not as effective as it should be because it’s because it’s focused so much on selling people drugs at whatever costs and then just suffering the consequences of class action lawsuits later.  

That’s all true. At the same time, modern medicine and in a drug innovation has saved so many people’s lives. It’s saved. I mean, everybody who’s listening, including me, has had family members whose lives were saved by drug innovation. And drug innovation is gonna be one of the areas that’s really damaged by this. That takes a big hit because Silicon Valley Bank funded a lot of the startups that engaged in drug research or innovation. So ironically, Silicon Valley banks had diversity, equity, and inclusion. We believe inclusion ignites innovation while now Silicon Valley Bank is the anti-innovation. They are actually shutting down innovation in our country, in our country. So across the pond, while Silicon Valley Bank had no head of risk, no chief risk officer here in the United States, the chief risk officer in Europe, Jay ERs spa, the head of risk for their bank in Africa, the Middle East and Europe describes herself, this is what the Daily Mail writes, as a queer person of color from a working-class background. And she organized a host of LGBTQ initiatives and implemented a safe space catch up for staff while she was coordinating a munch long pride campaign.  

Okay? Again, this is ESG, this is ESG. So now we turn, now that we understand the factors that led to this collapse, it seems like, okay, well maybe we should have seen this coming a little bit earlier. So-called experts, like Jim Cramer, said Silicon Valley Bank was doing just fine. But it seems obvious now, if you look at what caused this. Bad business practices, no risk mitigation, covid policies, especially PPP loans and ESG, that’s what led to this. But what about what happens now, should these people who deposited money in this bank, should they lose everything? Should the federal government bail them out? Should the FDIC bail them out? Should they simply be wiped out? What is the proper recourse here? What should we do moving forward?  

So, this is going to sound harsh, but what should happen is this bank should fail and it should be allowed to fail because it was based, the failure is, is based primarily on bad banking that was simply exacerbated and accelerated by bad political policies. But the political policies in and of themselves might not have caused this bank to fail. It might have just sped up; it might have just brought it to fruition more quickly. But the alternative to allowing this bank to fail, the alternative is two things. Either the Fed could bail this out, in which case we don’t have a free market society. This is a socialist fix. If the Fed bails out this bank, it means that you and I as a taxpayer are giving money to, or that we are not giving money. The Fed is taking our money and giving it to someone else.  

It’s just redistribution of wealth based on what the Fed thinks is the right thing to do, what the Fed thinks we should do with our money. If the federal government does that, then that’s socialism. That’s the federal government being in charge. It’s us not having any right to our property. It’s the Fed taking over our property that’s wrong. Clearly that’s wrong. Now, venture capitalists, this is a pretty important side note. Venture capitalists who stand to lose a lot of money if this bank is allowed to fail, have been trying to instill panic in people over the past couple days saying, if the Fed does not bail this out, this could start. This could have a domino effect. We could see bank runs all across the country. This could harm you. You could lose your livelihood if the Fed doesn’t bail us out.  

And I just like to put a pin in that for one second and say, the reason venture capitalists are saying that is not because they actually expect there to be a bank run. They’re saying that because they want you to fear that to the extent that you put pressure on the Fed to bail ’em out, or you sit back and quietly allow the Fed to bail them out without pushing back against it. They are trying to manipulate you to build political capital so that they can get bailed out by a gov, by essentially a socialist government or a government that becomes socialist by redistributing wealth, taking your money, your taxpayer money, and giving it to this private bank. Even though the rules on the book right now say that if there are deposits over $250,000, it is not. In short, the federal government does not guarantee any deposits or any amount of money in the bank that exceeds $250,000.  

They want the rules changed for them simply because this impacts them. They want the government to take your money and give it to them. So they’re trying to make you feel like you’re at risk here. That those are the loudest voices proposing the idea of a bank run striking fear in the hearts of people, that there might be a bank run. It’s the venture capitalist, and they’re doing it as a cynical political ploy. Now, the FDIC has said that they are going to cover the deposits that exceed $250,000. Janet Yellen at the Treasury said the Fed is not going to bail out, not going to bail out Silicon Valley Bank. And that taxpayers will not be on the hook here. The FDIC says that they will cover the costs and that it will be at no cost to taxpayers. 

And my response to that is to say, ha ha ha, very funny. This is a sneaky workaround so that it’s a little bit harder to convince people that they still will foot the bill for this. But make no mistake, you and I, my friends will still be footing the bill. The FDIC bailout is still a bailout. And here’s exactly how it works. So the FDIC is a government entity. This is not some independent panel somewhere. This is a government backed trust, and it is composed of the biggest banks. So, the biggest banks all get together. It is part of this government entity and the FDIC, meaning these big banks are now going to be on the hook because the government told them to. They’re going to be on the hook for bailing out Silicon Valley Bank and all the depositors of Silicon Valley Bank.  

This makes the people at Silicon Valley Bank very happy. This makes the federal government very happy because the federal government can now look at you and say, actually Biden did say this yesterday. He said, because of the quick action of the Biden administration, that banking industry is strong or some nonsense that none of us believe. However, that’s not true. The Biden administration is happy because they know that they dodged a bullet. The bullet being, if the Fed had bailed out Silicon Valley Bank, then Republicans can spend the next couple of years saying, listen, you took our money. You used taxpayer money to bail out the rich, to bail out the wealthy, to bail out startup CEOs. You took working class men and women. You took our money and you gave it to rich people. It’s the most egregious display of socialism I’ve ever seen.  

Joe Biden and his administration are happy because they dodged that bullet. But the FDIC bailout is still a bailout because when the big banks who are part of the FDIC cover this money, they’re not gonna wanna take the loss on that. Let’s use an example, say Bank of America. Bank of America is now going to have to pay for another bank’s failure. And you think Bank of America’s gonna, bank of America is just gonna wanna lose that money. No, they’re not. So what are they going to do? Well, they’re going to do what small businesses around the country do. Whenever we politically hike the minimum wage, when we hike the minimum wage businesses sometimes lay off employees. Sure, sometimes they reduce hours so that they don’t have to pay benefits. But mostly what they do is they pass on the increased cost of that mandated wage to the consumer.  

So small businesses increase the prices of their goods and services. So you and I end up paying for the minimum wage hikes. It’s not the big corporations that pays for it. That’s the exact same thing that’s gonna happen here when these big banks that are part of this FDIC, this government backed trust, when they are forced to cover the debts, this delinquency, this malfeasance, this failure of Silicon Valley Bank, when they’re forced to cover, ensure all of these deposits that exceed the $250,000 guarantee, they’re gonna pass those costs onto consumers, consumers being us, anybody who uses a bank. So your checking account, the administrative fees for your checking account, how much it costs to buy checks, anything that the bank charges you for, you’re going to see that charge increase, and you’re going to see that increase significantly.  

And you’re going to see services that previously were free. They’re not gonna be free anymore because there’s no way these big banks simply eat this. These big banks want to profit, and they don’t think that you’ll notice that you are on the hook for paying for this. So, the Biden administration maybe dodged the bullet because we can’t directly point our fingers at them and say, you bailed out rich people using our paychecks. But the effect is the same. The effect is the same because anybody who has a job has a bank account. Anybody who is a taxpayer gets money from their job, they pay income tax on that, they deposit that money in the bank, and now the bank’s gonna pass on that fee, that increase in cost to us. So the end is the same. The route is just more convoluted for the purpose of political narratives.  

We will still be paying to bail out Silicon Valley Bank. Which brings me back to my original point. It brings me back to my point of saying it sounds harsh. It’s not like I want to see people lose their money. It’s not like I want to see businesses be wiped out. I’m not that harsh. However, I don’t want the American people to participate in a scheme by the federal government and by these venture capitalists that puts us on the hook for paying for their bad business practices, for paying for bad business practices, combined with toxic political policies like the Covid policies and like ESG. That leads to catastrophic failures. Because when we create a system in our country that just eats up failures where there’s no consequence for risky behavior, it doesn’t disincentivize risky behavior, it does the reverse.  

It incentivizes risky behavior. So why wouldn’t banks all over the country now, venture capitalists all over the country, behave in a riskier manner with depositors’ money knowing that the American taxpayer one way or the other, is going to foot the bill when they inevitably fail. It’s a very dangerous situation that we’re facing right now. And as I said, ultimately, I don’t want to see people lose money. But those people that use Silicon Valley Bank picked that bank for a reason. This is not your average Joe that walks down to the nearest street corner, walks down to the nearest strip mall and finds the closest bank and opens a checking account. The people that use Silicon Valley Bank picked that bank for a very specific reason because of the line of credit, because of the terms of the loans. And they are financially oriented enough people that they knew the risks involved. They knew that Silicon Valley Bank was openly woke. They knew Silicon Valley Bank was an open user of ESG. They knew Silicon Valley Bank did not hedge their risks against increasing inflation and increasing interest rates. They knew Silicon Valley Bank continued to buy treasuries that were junk. And so, what I would say to everyone involved in Silicon Valley Bank is what you’re facing right now or what you should be facing right now, which is the possibility of financial catastrophe.  

That’s the reality of ESG. And if we don’t stop ESG, if we don’t stop big government and the redistribution of wealth policies that we saw under Covid, then what happened at Silicon Valley Bank, which is also happening at Signature Bank in New York. This is going to happen at other financial institutions all over our country, and that ripple effect will impact us. Thank you for watching. Thank you for listening. I’m Liz Wheeler. This is the Liz Wheeler Show.