Reading through the often frenzied commentary about the collapse of Silicon Valley Bank (SVB), it’s important to note how much that chatter conflates or confuses what are distinct if complex issues. The most high octane issue is watching the dyed-in-the-wool libertarians and anti-regulation voices who run Silicon Valley suddenly demanding a bailout. Specifically, many are demanding that the FDIC backstop all the bank’s deposits rather than simply those up to $250,000 because of the number of startups which could quickly go under without money to make payroll and cover other ongoing costs of doing business. (SVB’s deposits, roughly 95% of which are uninsured, are heavily concentrated in the tech start-up ecosystem.) It’s a hypocrisy that merits all sorts of guffaws and mockery. But hypocrisy isn’t new or terribly surprising.

One of our TPM Readers had a good sum-up of the collapse of Silicon Valley Bank, the implosion of which started in Silicon Valley, literally and figuratively, but likely won’t end there.

It’s a terrible terrible blot on Silicon Valley culture and a profound refutation of all those libertarian trolls out there.  They fought the regulation that would have subjected SVB to greater scrutiny. This was a valuable community facility that greed destroyed.  This is what “smart contracts” gets you.  My suspicion about Thiel is just that, no facts, but I hope some journo can press him (and some of the other SV bros) on whether they were short sellers in SVB stock before promoting the run.  I realize this stuff is not your natural beat but frankly it has political valence: why should we buy the don’t regulate/trust us from this crew when they would turn around and destroy a community facility that had provided such useful service.  Say what you want about JP Morgan in the early 20th century, but he at least knew it was his duty to insist on a joint effort to stop a panic rather than profit from one.  

The references here are to Peter Thiel. A key accelerant of SVB’s collapse was Thiel’s guidance to all his invested companies to pull their deposits as the bank’s position became more dire.