While it's fun to lambast Silicon Valley Bank for having a risk manager who, shall we say, was focused in a less-than-helpful woke direction,
Kimberley Strassel points out a more fact-based criticism of the bank's woke infection.
SVB was the lender of choice for tech dreamers. It claims to have banked nearly half of all U.S. venture-backed tech and healthcare startups. Yet in recent years those clients have skewed ever more in one direction. “We serve those creating positive environmental change,” SVB’s website brags, noting that the bank worked with some 1,550 companies in the “climate technology and sustainability sector.”
Most of these companies weren’t filling some vital market need. Rather, as the Journal reported, SVB was beloved for its willingness to offer “banking services to startups that often weren’t profitable, in some cases didn’t have a product, and would otherwise have a hard time getting a line of credit or a loan from a larger bank.” One tech entrepreneur provided law.com a more scathing description of SVB’s products: “They’re basically subprime business loans. You’re talking about companies that have no credit profile, they’re burning cash and are unlikely to raise the same type of capital because of interest rates. . . . It was basically social credit.”
Paywall issues? Try
this link to a search page, which usually takes care of it. If you were willing to drop bucks on an online subscription, though, you could do worse than the OpEd page that employs both Ms. Strassel and Holman Jenkins.
4 comments:
SVB was beloved for its willingness to offer “banking services to startups that often weren’t profitable, in some cases didn’t have a product, and would otherwise have a hard time getting a line of credit or a loan from a larger bank.” One tech entrepreneur provided law.com a more scathing description of SVB’s products: “They’re basically subprime business loans. You’re talking about companies that have no credit profile, they’re burning cash and are unlikely to raise the same type of capital because of interest rates. . . . It was basically social credit.”
That is NOT "lending" in any typical bank scenario (at least from the '70's perspective.) That is "investing"; but that should be done with the Bank's own capital account, not against insured deposits.
Apparently, 'regulation' here was either very light-handed or non-existent, perhaps due to politics and/or other connex. But until this emerged, one never read about "non-performing" assets of that bank. That's odd.
Thanks. Good stuff.
In recent decades it came to be called sub-prime lending, a cleaned-up version of what used to be disparaged as "junk bonds." But I agree that dignifying it with the name of "lending" at all is a way of obscuring what both lender and client knew: it was charity for projects considered so virtuous as to be above the usual crass considerations of profitability. I'd be surprised if these preening progressives genuinely believed the loans could be repaid, or really cared, when you come right down to it. Some of them probably thought it was wrong even to evaluate the situation in such capitalist terms.
I believe that's partly what comes of raising kids to believe that profit is a dirty word, and that spending other people's money in a good cause is as virtuous as donating your own, instead of theft.
We need to End TARP Bailout Thinking. Let them fail. Follow the Law.
When an institution says it is pursuing Diversity Equity, Inclusion, it means that it will never again accomplish anything useful. Behind the euphemisms, “Diversity Equity, Inclusion” means we are putting in unqualified people and pretending they add value. Diversity Equity, Inclusion is a tax to subidize incompetence.
This meme is perfect for the times, take a look
https://granitegrok.com/wp-content/uploads/2023/03/tired-of-pretending.jpg
Greg
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