Techies should know that. Should.
Believe it or not, a pair of tweets about last Friday’s collapse of Silicon Valley Bank are still current.
Eugene Robinson writes about those conditionalities this morning:
Question: What is a socialist?
Answer: A libertarian tech bro who had money in Silicon Valley Bank.
There is nothing funny about the second-biggest bank failure in the nation’s history, which has roiled financial markets at a time when the economy is already unsettled. It is richly ironic, though, to hear luminaries of the tech sector, after years of complaining that “big government” was the problem, suddenly clamoring for massive federal intervention and largesse.
I’m talking about people such as David Sacks, an entrepreneur and venture capitalist who is a member of the so-called PayPal mafia, a group of founders and early employees that includes bombastic anti-government billionaires Elon Musk and Peter Thiel. On Twitter, Sacks has railed against “profligate spending and money printing coming out of Washington” and the evils of what he calls “Bidenomics.”
But on Friday, Sacks was frantically calling for big government to come to the rescue of Silicon Valley Bank. He tweeted: “Where is Powell? Where is Yellen? Stop this crisis NOW. Announce that all depositors will be safe. Place SVB with a Top 4 bank. Do this before Monday open or there will be contagion and the crisis will spread.”
If Veruca Salt worked in Silicon Valley.
All that libertarian tech bro “Keep Your Government Hands Off My Startup” is bullshit when the shit hits the fan, isn’t it? There’s a reason we regulate engines and mechanical watches so they don’t overspeed and fly apart. That bit of engineering wisdom seems lost on our tech and financial wizards. Repealing the Depression-era Glass-Steagall Act led to the financial collapse of 2008 and the Great Recession. Donald Trump repealing Dodd-Frank contributed to the collapse of SVB and other banks last week.
If the original Dodd-Frank rules had been in place, Sen. Elizabeth Warren (D-Mass.) wrote to Greg Becker, the erstwhile chief executive of SVB, his bank “would have been required to maintain stronger liquidity and capital requirements and conduct regular stress tests that would have required SVB to shore up its business.” But no.
“Rules are not the enemy of markets,” Warren observed years ago. “Rules are the necessary ingredient for healthy markets,” as I mentioned in 2015:
That is why my business law textbook is 2-1/2 in. thick. It is chapter after chapter of real-world examples of who did what to whom, who gets paid, and who gets left holding the bag, demonstrating precisely why rules exist in business. It only works if everyone understands and plays by them. Rules need to be enforced again.
How many collapses will it take for them to learn? So long as the pain is felt by others, that question has no answer.