Category: free trade & free markets

Old Woke, Not New

SVB, Silicon Valley Bank, interest rates, collapse, FED

Last week’s collapse of the Silicon Valley Bank gets more interesting with each revelation. But one of them is probably not that it was “woke.”

Contrary to rumor, I see no real evidence that SVB gave millions to Black Lives Matter. The bank did pledge $50 million towards an internal program dubbed “Access to Innovation.” This, we are told, “sought to connect women, Black people, and Latinos with startup funding, networking, and leadership development in the venture capitalist ecosystem.”

Sounds great in a press release, though what it has to do with making profits is a bit hard to determine.

Very feel-good, not very bottom-line.

And that’s where the bank failed, on the bottom line.

Its clientele was concentrated in one industry, which has been hit by rising interest rates. Thus stressed, it was exceptionally prone to “bank run” pressures. Its core asset class was long-term Treasury Bonds, whose value decreased with rising interest rates — and these were not hedged.

As Forbes put it, “Whether it was fully or semi-deliberate, Silicon Valley Bank was betting heavily on interest rates not rising.”

An extremely bad bet.

But you can see why the bankers would make it, right? Why wouldn’t they expect the giveaway mentality of Zero Interest Rates Forever?

Their hopes dashed, they nevertheless turned to their friends . . . in power. The Biden Administration that failed to keep interest rates down then pledged to cover SVB’s clients — the super-rich corporations that true progressive Democrats pretend to hate for all their “profits” and “under-taxed” income — well above the FDIC-insured levels.*

We may learn real data about the banks’ wokeness levels, rather than mere rumor, but the bedrock truth reveals itself as all-too-familiar: it’s all about monetary policy.

That is, the “woke” ideas of a century ago, when the Progressives’ beloved Federal Reserve was created.

This is Common Sense. I’m Paul Jacob.

* Like Signature Bank, which was closed on Sunday, the overwhelming bulk of SVB’s deposits were uninsured by FDIC.

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Tags banking, bankruptcy, interest rates, moral hazard

free trade & free markets moral hazard

Is It Still Capitalism?

capitalism, mixed economy, socialism, corporation, bank

Is it still capitalism if the capital is guaranteed?

“The U.S. government will guarantee all customer funds in Silicon Valley Bank (SVB) after a series of bad decisions and a run on deposits led to the bank’s collapse,” explains Elizabeth Nolan Brown in Reason.

Technically, the bank isn’t being bailed out. Its customers are. And that’s a lot more popular than bailing out banks directly. There are more bank customers who vote than bankers who vote — though there is probably more political donations from banks directly seeking banking policy “correctives” than bank customers doing the same. That’s almost apodictically true.

The most bizarre element? While the FDIC, the federal agency that insures depositors of this and similar banks, is designed to guarantee depositors’ capital up to a certain limited amount ($250,000, more or less), the regulatory triumvirate of Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell, and FDIC Chair Martin Gruenberg declare that “all depositors of this institution will be made whole.”

All.

Even the super-rich.

The key concept, here, is moral hazard — “The decision creates bad incentives for financial institutions and their customers” is how Ms. Brown puts it. We’ve been through all of this before. Is there really any question? The answers are in.

So, to the opening, Is it still capitalism if the capital is guaranteed? — if even Prince Harry’s fortune will be guaranteed — the answer is No.

Sorta.

It’s a special kind of capitalism. State-dominated capitalism; Neo-mercantilism; f***-ism. Use whichever term.

As we contemplate a profit-and-loss system without loss, and how the losses will be made up within the financial system, just remember that the federal government playing the role of Savior is not itself costless, and . . . its debt keeps growing. And the Ultimate Result of all this still looms.

Immoral hazard.

This is Common Sense. I’m Paul Jacob.

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Tags bailouts, capitalism, moral hazard, risk, socialism

free trade & free markets ideological culture national politics & policies

Can You Bank On It?

With major financial institutions going belly up lately, now may not seem the best time to start a new bank.

But economic conditions are always dicey.

In any case, much depends on whether the partners in such a venture follow sensible policies or treat depositors’ funds as gambling chips to be flung about in accordance with wishes, prayers, and prejudices.

Singer John Rich, doctor and politician Ben Carson, and pundit Larry Elder are teaming up to run Old Glory Bank. They’ve got at least one thing right. They see a market for “digital-first banking solutions” that is expressly anti-cancel-culture.

The three purchased an existing bank, First State Bank of Elmore City, Oklahoma, and are giving it a new name and modified mission.

According to Elder, Old Glory Bank, currently accepting account reservations, will be guided by principles of “liberty, privacy, security, community, family, and faith.” It’ll eschew what Rich calls “the political weaponization of the financial system.”

This sentiment contrasts with the animus animating outfits like PayPal, which cancels customers for having PayPal-disapproved views or political goals. (A pro-democracy group in Hong Kong is one victim of this policy.)

Some standard banks, too, have begun spurning customers involved in certain legal but politically controversial industries, like the firearms industry.

According to a press release issued late last year, Old Glory Bank “will never cancel law-abiding customers for their beliefs or for exercising their lawful rights of free speech.”

We will hold you to that.

This is Common Sense. I’m Paul Jacob.

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Tags bank failures, bank runs, banking, economy

First Amendment rights free trade & free markets general freedom

Sneaky Censorship

disinformation, disagreement, censorship

If our government tried to march all dissenters to jail — or hang them all — it probably couldn’t get away with it. Too many Americans still have enough sense of fair play and concern for individual rights to make such ugly expedients untenable.

Also, the First Amendment hasn’t been repealed yet. Oh, no! So the non-crime of uttering “misinformation,” “disinformation,” “hate speech” — that is, uttering disagreement — can only be thwarted indirectly.

One way is for government officials to get chummy with compliant social media companies and point them to utterances (posted comments, videos) to censor.

Another is to fund organizations with missions of defunding wrongthinkers.

The Washington Examiner’s Gabe Kaminsky reports on the taxpayer-bankrolled conspiracy.

Congress funds the State Department and “two State Department-backed entities,” including National Endowment for Democracy; which has in turn been funding a British organization called the Global Disinformation; which has a group called the AN Foundation that is also called Disinformation Index Foundation; which is sending blacklists of websites that supposedly purvey disinformation to American ad companies like Microsoft-owned Xandr.

The State Department, not constitutionally authorized to censor our speech, gave over $300 million (three tenths of a billion) to the Endowment in 2021.

Websites to be deprived — and that probably have already been deprived — of advertising dollars as ad distributors seek to avoid “risks that arise from funding disinformation” include the New York Post, Reason, Newsmax, The Federalist, American Spectator.

No commie egalitarians; no woke websites.

All very roundabout and mostly under the radar. As intended.

This is Common Sense. I’m Paul Jacob.

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First Amendment rights free trade & free markets general freedom international affairs

Censorship Rerun

The Disney company, old chum of Chinese tyranny, is at it again.

In November 2021, Disney hid from Hong Kong viewers an episode of The Simpsons that mentions the Tiananmen Square massacre in a way not laudatory of the Chinese government. Disney had recently acquired 20th Century Fox, now called 20th Century Studios, which produces The Simpsons.

And now Disney has removed an episode from its Hong Kong platform because it refers to “forced labor camps” in China.

Let us not say that The Simpsons is just a cartoon.

Everything you could want to know about the evils perpetrated by the Chinese government, as established by eyewitness accounts and other documentation, is available in many videos and articles and books. But not everybody reads Steven Mosher or BBC backgrounders on the detention and murder of the Uyghurs.

When a cartoon character says “Behold the wonders of China. Bitcoin mines, forced labor camps where children make smartphones, and romance,” a viewer not yet acquainted with China’s policies has two options. He can let the words slide by unheeded, or he can make a mental note to find out what the cartoon is talking about.

I don’t want a world where such opportunities for enlightenment in our most popular cultural products are routinely squelched — in Hong Kong or anywhere else — by the likes of Disney, an entity whose controlling officers are much more concerned to rationalize, hide, and accommodate tyranny than to expose and counter it.

With the Chinese Communist Party pushing Disney to censor, why don’t we pummel Disney in the pocketbook from the freedom side?

This is Common Sense. I’m Paul Jacob.

Detonators in Place

rent control, good intentions, government regulations

You must place explosives a certain way when demolishing a building to avoid damaging surrounding structures. But if you just want to destroy, you can forget about such precautions.

Could this be the perspective of those demanding national rent control?

They forget — or ignore — the destruction of living space inflicted by incentive-incinerating rent controls in places like New York City and Santa Monica.

Rick Moran perceives that President Biden is making a “first move toward a radical national rent control law,” telling agencies to find ways to stop rent increases. Biden is doing so at the behest of 50 congressional communists who have implored him to take executive action to save tenants from rising rents.

According to their letter, “rent is too high and millions of people across this country are struggling to stay stably housed as a result.” Meanwhile, landlords are “increasing the rent for their own profit . . .”

Profit? In a market economy?

Rising rents! Caused by . . . ?

But if you just want to “solve the problem” and have been trained to be heedless of the destruction regulation can cause, you needn’t think about cause and effect — who did what and how and why. In the interventionist mentality, when oil or food or housing prices zoom upwards, only one cause is possible, and it has nothing to do with politics and policies already in place.

Even if the government’s central banks have been zanily pumping up the supply of money and credit while city and state bureaus have been going all-out to hamper and halt production.

That single cause, they contend, can only be the grasping, grabbing, profit-seeking capitalists. You know. The bums who make their riches (when they do) by supplying us with what we need.

This is Common Sense. I’m Paul Jacob.

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