Oh, So That's How Much HSBC Paid to Take Over Silicon Valley Bank's UK Branch

Silicon Valley Bank’s UK branch is under new management. While reportedly a separate entity, walled off from the calamities of its US-based operations, it’s not a barrier impervious to the fallout that comes from a total collapse. In the US, SVB closed its doors and is under the direction of the FDIC. This news comes after a run occurred, sparked by the bank’s announcement that they needed a massive capital raise to cover the mountains of losses incurred by the tech industry’s drumming on Wall Street; SVB was leveraged heavily in this sector. It was where startups went and got their loans. There was also no risk assessment officer for months here.

Across the pond, they did hire one, but she was more concerned about creating safe spaces, pushing LGBT events, and promoting a ‘woke’ ethos than doing her job. They might as well not have hired one. It’s irrelevant now since HSBC paid a whopping one pound to purchase the SVB’s UK subsidiary earlier this week (via CNBC):

Until the people making these decisions feel pain, the madness will continue. SVB should have gone under. FDIC should have insured the deposits to the $250,000 limit. The rest of the deposits should have been paid out at their actual value which appears to have been about 60% of book value. Claw back the bonuses paid the week of bankruptcy. Let the stockholders, bondholders, and executives walk away with zero.

As long as these banks, and corporations, are 100% backed by the taxpayer through the US Treasury, there are no consequences for incompetence, malfeasance, and criminal behavior.

Republicans are just as guilty as Democrats. George W. Bush and his treasury secretary, along with Congress, bailed out the largest US banks in 2008. Within a year those same banks were paying executives millions of dollars in bonuses.

Our economy today is a blend of corrupt crony capitalism and socialism where the government chooses winners and losers based on political connections. The “invisible hand” Adam Smith wrote about has been removed from the economy, replaced by the visible hand of government.

The failure of SVB has been attributed to the Federal Reserve raising interest rates. What should be said is the management of SVB failed to adjust to changes in market conditions.

SVB management, like many other American companies, were focused on internal matters, not the external marketplace in which the company operated. Instead of getting ahead of announced Federal Reserve policy, and thereby protecting the customer assets on deposit, they were apparently focused on woke social issues inside the bank, and in the community, which had nothing to do with being a responsible custodian of customer money (i.e. the mission of the bank).

Letting SVB fall into bankruptcy, and allowing the employees, bondholders, stockholders, and depositors extreme financial pain, would have taught them a significant lesson. More importantly it would have been a strong signal to other banks, the stock market, and the business community to clean up their acts and become fiscally responsible.

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