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Why the US Backstop After SVB’s Failure Is a Bailout
Posted
March 13, 2023
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1,978
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March 13, 2023
1,978
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2.68%
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0:51Now PlayingHere's why the US backstop of Silicon Valley Bank is a bailout akin to what happened during the Great Financial Crisis, according to Bloomberg’s Joe Weisenthal.
In the end, all of Silicon Valley Bank’s depositors were protected, while the shareholders and executive team got nothing. This is what a bunch of people were calling for to happen.
It has a whiff of tough-mindedness to it. It sounds like you’re not just describing a bailout. You still believe in real capitalism. You don’t want a repeat of anything like what happened in the Great Financial Crisis, with TARP and all that.
But the difference between this time and that time is not as wide as it seems. The bailouts in that crisis were largely about protecting depositors as well. For example, it’s commonly claimed that Citigroup Inc. (C) was bailed out. And yet Citi shareholders ended up losing about 98% of their money over the course of that bank run. Yes, not 100%. But clearly the massive bailout was not about protecting shareholders, who are still to this day down over 90%.
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