Ashley Rindsberg
Tablet, Mar. 22, 2023
“SVB’s collapse, far from being an unforeseeable “black swan,” represented “a very classic event in the very classic bubble-bursting part of the short-term debt cycle.”
It should go without saying that we are now in a financial crisis. We have just witnessed the collapse or near-collapse of five banks, including Credit Suisse, an institution of systemic importance. And yet it still needs to be said in light of the glib reaction following the collapse of Silicon Valley Bank (SVB) earlier this month, which many pundits claimed was only a problem for rich “tech bros.” But SVB was the 16th-largest bank in the United States and its speed-of-social-media implosion left observers and regulators grasping for answers, which made it easy to blame the bank’s failure on corrupt venture capitalists trying to cheat the system. After SVB, the San Francisco-based First Republic bank also started to melt down, while the crypto-focused Signature and Silvergate banks went into closure, a pattern that reinforced the notion that this was a Silicon Valley phenomenon being hyped up by wealthy venture capitalists looking for a government bailout.
As New York University professor Scott Galloway wrote on March 19 in a sneering tweet (since deleted but still cached), “Hunger games on the way up, Denmark on the way down,” a reference to scathing commentary he’d made on Face the Nation. There he argued that venture capitalists seem to want less government when times are good but government intervention when things go south. This was a tidy, retweet-friendly way of packaging the disaster in an easy to digest narrative primed for social media’s us-versus-them binaries.
Then Credit Suisse happened. After rapid outflows of deposits and a nose dive in its stock, Credit Suisse was acquired at the polite but firm suggestion of Swiss regulators by rival UBS, a development that put to rest the narrative that this was a Silicon Valley phenomenon and exposed the global nature of the banking failure, while pointing to its underlying causes.
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