On the latest episode of the Drill Down podcast, Government Accountability Institute President and New York Times bestselling author Peter Schweizer and GAI Vice President Eric Eggers tackle the recent failure of Silicon Valley Bank – and reveal California Gov. Gavin Newsom’s personal interest in the bank’s bailout.
As Peter explains, “It’s what you call an incestuous relationship between government and business.”
The Silicon Valley Bank (SVB) collapse sent shockwaves through the financial sector and heightened worries issues at other banks. However, the SVB collapse can be attributed to its poor decision-making, its questionable business practices, and investments in so-called Environmental, Social, and Governance (ESG) initiatives.
Those kinds of investments “generally don’t make money,” Schweizer says, adding that SVB got caught with its pants down by having too much money in too many ‘green’ businesses. “This was the Silicon Valley elite,” Schweizer said of the SVB depositors, adding that much of SVB’s cash was invested in so-called Environmental, Social, and Governance (ESG) initiatives which, in many cases, don’t make a profit.
“Maybe people are right to be worried,” Eggers says of SVB’s demise.
On the one hand, the bailout of SVB exceeds the $250,000 per-account limit that the FDIC is supposed to insure is not capitalism, but crony capitalism, as Schweizer says.
However, Eggers notes that if some of the cutting-edge tech companies doing business with the bank were allowed to fail, China could swoop in and buy everything “on the cheap,” putting America in a potentially compromised, weakened position.
The Drill Down hosts also examine a new wrinkle in this story – California Gov. Gavin Newsom’s connection to the failed bank. Newsom has a personal interest in bailing out Silicon Valley Bank. Three wineries owned by Newsom, CADE, Odette, and PlumpJack, are all listed as clients of SVB on the bank’s website, according to a new report from The Intercept. Newsom had personal accounts at the bank for years, according to a former employee of Newsom’s who handled his finances, the report said..
Not only that, but Newsom’s wife Jennifer Siebel also had professional ties to the bank. In 2021, Silicon Valley Bank gave $100,000, at the request of Gov. Newsom, to the charity founded by Siebel known as the California Partners Project. John China, president of SVB Capital and responsible for SVB’s funds management, is himself a founding member of the California Partners Project’s board of directors.
Business Insider pointed out that as an elected official, Newsom is prohibited by state law from influencing a governmental decision “in which the official knows or has reason to believe the official has a financial interest.” A spokesman for Newsom deflected that criticism by saying that Newsom’s holdings are held and managed by a blind trust.
Schweizer gives a rare tip of the cap to Sen. Bernie Sanders (I-VT), who pointed out that the CEO of Silicon Valley Bank was also serving as a director of the San Francisco Federal Reserve, the body in charge of regulating his bank.
The CEO of Silicon Valley Bank, who successfully lobbied for the deregulation of his financial institution, was allowed to serve as a director of the same body in charge of regulating his bank.
Today, I am introducing legislation to block that from happening again.
— Bernie Sanders (@SenSanders) March 23, 2023
As Schweizer says, government bailouts are wrong because of “moral hazard.” If people take loans, they take risks, and there may be consequences. So be careful when you take out loans. This applies to banks, too… You are only encouraging that kind of risky behavior by bailing them out when they do stupid things.”
