By Jo Nova
SVB or Silicon Valley Bank is the US’s 17th biggest bank, or it was until last week when it became the US’s second biggest bank failure instead.
Interest rate rises are supposed to squeeze out the dumbest investments, so it is fitting that one of the first casualties of this boom-bust cycle is a green banker, mostly doomed by loaning half their cash to the same bankrupt Big-Government that created the green improbable fantasy industries which SVB was largely serving.
SVB was a “Green” Banker. We know this, not because newspapers are saying that now, but because of the emergency flares released on behalf of the victims. The New York Times tells us that the collapse of SVB is going to hit green tech hard because SVB clients included 1,550 companies dedicated to “fighting climate change”.
If only SVB had served coal miners or gas frackers instead they might still be in business? The deposits they needed would have kept on coming as the profits flowed in.
David Gelles, New York Times, naturally, misses the whole point:
In reality, climate start-ups threaten the bank, and climate finish-ups threaten the country.
The bank had relationships with more than 1,500 companies working on technologies aimed at curbing global warming.
The bank, the largest to fail since 2008, worked with more than 1,550 technology firms that are creating solar, hydrogen and battery storage projects. According to its website, the bank issued them billions in loans.
Groupthink strikes again. The majority of the solar or climate market just banked with the herd:
“Silicon Valley Bank was in many ways a climate bank,” said Kiran Bhatraju, chief executive of Arcadia, the largest community solar manager in the country. “When you have the majority of the market banking through one institution, there’s going to be a lot of collateral damage.”
It was a Ponzi scheme
During the pandemic, fluffy money, made from nothing by Big Government to “save the economy” was put into stupid businesses to “save the planet”. The businesses put their cash into Silicon Valley Bank, which got so much cash, it couldn’t do anything with half of it it — except give it back to Big-Government in the form of a loan called a Treasury Bond — thus completing one full Cycle of Stupid. Money printed from nothing, achieved nothing, and went back home. On the way a whole lot of people got paid to pretend to change the weather. But money printing causes inflation, and in inflationary times interest rates have to rise. So it follows that when easy money flows into your wallet, easy solutions, like fixed loans with low interest are the stupidest possible solution.
SVB was promising to guard Green-tech money, but it was locking it away in long term loans, and essentially relying on a regular flow of deposits coming to keep earlier depositors happy:
Silicon Valley Bank Collapse Is A Blow To Clean Energy Tech
by Mark Le Dain, Forbes
…this will be a massive blow to the cleantech ecosystem.
After COVID the assets of SVB rapidly grew. New spending dynamics meant money was flowing into tech vs the traditional economy, and those companies were also able to raise funds as well. This money had to be parked somewhere and a lot of it ended up at SVB. It’s rare for a bank to have a concentrated deposit base grow so quickly but, in any regard, they needed to invest it. To invest the deposits the bank targeted long-dated treasuries, with slightly higher interest rates but less liquidity. Even if this was a bad decision banks usually find a way out of it because deposits keep coming, allowing the bank to layer on other types of investments. Many banks will also typically hedge their interest rate exposure. There doesn’t appear to have been hedging though and deposit growth slowed as interest rates rose. The companies were no longer raising funds and instead using their existing funds to run the business. These dynamics meant deposits were now declining at the same time the investments, these long-dated treasuries, were losing value. As the bank announced it had to sell some of these instruments at a loss, and raise capital, people were worried and it resulted in an old-fashioned bank run.
There is no free lunch. By definition, if someone is making windmills to change the weather, and people are still throwing money at them, then money is “easy” and inflation is coming.
Ultimately, because the government was already broke, and money printing causes inflation, it meant interest rates would have to rise… As sure as night follows day and birds fry midair at Ivanpah.
Government committee to stop bank collapses, didn’t see this coming…
The USA has a committee to stop this sort of thing, but even they were more worried about climate risks than national ponzi schemes:
SVB’s collapse on March 10 begs the question where were the regulators?
By Liz Peek, Fox Business
Authorities should have been on high alert. They were not. Consider the Financial Stability Oversight Council, the body created in 2010 after the financial crisis, which was meant to avert just this sort of collapse. The council is chaired today by Treasury Secretary Janet Yellen and includes 9 other voting members including Fed Chair Jay Powell, the heads of the FDIC and the Bureau of Consumer Financial Protection (CFPB), Gary Gensler, head of the SEC.
The council’s website defines its task as “identifying risks to the financial stability of the United States…”
The council last met on February 10 via videoconference. The readout of that meeting shows the group previewed its 2023 priorities, which included “climate-related financial risks, nonbank financial intermediation, Treasury market resilience, and risks related to digital assets.”
Climate change, which it describes as “an emerging threat to U.S. financial stability,” is identified in the 2022 annual report as a “key priority” and has been one of the council’s principal preoccupations for the past two years.
Devotion to climate change is a pathological social disorder. Whole civilizations get swept away…
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March 13, 2023 at 04:00PM