The term “bailout” is a dirty word, and rightly so. When taxpayers are forced to pay for the mistakes of corporate executives, and investors who were supposed to be monitoring those executives, bad incentives for risk-taking are created.
This is what happened in the U.S. economy, stretching from the bailout of the Long-Term Capital Management hedge fund in 1998 to the Troubled Asset Relief Program of 2008. The government-led rescue of firms, and their investors who made risky bets, only encouraged even more risky behavior.But this is not what is happening to Silicon Valley Bank. Silicon Valley Bank is not getting bailed out. It is dead.
Making bad predatory loans is not what caused Silicon Valley Bank to fail. Quite the opposite. If anything, Silicon Valley Bank didn’t make enough loans. Instead, it bought a bunch of ultrasafe low-yield Treasury bonds. In other words, it did exactly what people like Sen. Elizabeth Warren wanted it to do: It bought safe assets.
The case of Signature Bank is different. Signature sold itself as a cryptocurrency expert. If you had your money in Signature Bank, you were making a decision about the safety of cryptocurrency assets.
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