SVB, Are we Paying ANOTHER Hidden a Price for Green Wokery?

Monica Showalter, "SVB loaned millions to useless startups making greenie things no one wanted to buy --WSJ's Strassel"

Is there anything more ... Soviet ... than a bank that lends money to companies making things no one wants to buy?

That's the missing puzzle piece we needed on why Silicon Valley Bank went belly up, and Kimberly Strassel of the Wall Street Journal has found it, persuasively arguing that yes, the failure of the bank was indeed premised on ESG, which descended into wokester lending priorities, creating the abnormal conditions that left the bank ripe for a meltdown.

In a non-firewalled piece featured at the top of Real Clear Politics: she writes:

“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.”

What inspires a bank to disregard risk and shower money on products or services that nobody is clamoring to buy? One answer is easy money and misguided regulation, which washed dollars into the economy even as it pushed banks like SVB to load up on sovereign debt, lulled by a Federal Reserve-fed belief that interest rates would stay near zero forever. The other? Washington handouts, via President Biden’s effort to engineer a climate industry that otherwise wouldn’t exist.

So they loaned and loaned, to companies that couldn't turn a profit and knew they couldn't, so they stacked up the big cash at the bank where they were sure it would be "safe." The portfolios themselves were the trigger switch to the bank runs, when investors realized that the long-term assets of the bank (parked in Treasury bonds) couldn't cover the short-term deposits of the startup customers, so they all bailed at once.

They were greenie characters, in other words, taking the SVB loans in order to fulfill the Joe Biden dream of a green economy, and avail themselves of all that stimulus cash that Biden had passed in Congress to convert American industries green and "sustainable."

Well, they weren't sustainable, because the Fed's rate hikes to beat back inflation worked against the whole rosy scenario.

In effect, the bank lent to companies that couldn't sustain themselves without Joe Biden's centrally directed green economy to prop them up. When that created inflation based on all the money printed for it, the Fed stopped the green show and the party was over. Had the bank loaned only to companies that could stand up for themselves, the interest rate problem the bank had (and should have managed risk for) would not be an issue, and the bank run probably would have never happened.

Prior to this news about the SVB wokester lending portfolio, I could only see the miasma of wokesterliness surrounding the bank, the smoke surrounding it, but not the actual fire.

We know they donated a lot of campaign cash to Democrats, they made woke statements on their bank website, they failed to manage their risk profile (not even hiring a risk manager in through most of 2022), and they had no signficant investment banking experience in their bank's leadership. Their Democrat ties seemingly did make the regulators look the other way, and their ties to politicians ensured their prompt bailout when the run happened.

But the woke lending put them in the bind and created the trigger. That squares the entire circle now -- woke lending drove this bank to bust.

And that's on Joe Biden for creating the conditions that led to this situation -- from easy money, allocated for greenie projects in huge spending juggernauts, and easy money printed out to "pay for" all that green wokery, prompting rate hikes to beat back the inflation that followed. That's Biden on both ends of the problem, and opportunistic wokesters taking advantage of the incentives he laid out for them.

Now it's all come down, and wokery is clear as day the big reason.