Silicon Valley Bank and Donald Trump

by Errington C. Thompson, MD –

For the past two to three years, I’ve complained that I’m extremely tired of talking about and writing about Donald Trump. It is hard to adequately tell you how sick and tired I am of discussing Donald Trump.

Since 2015, he has dominated the headlines like no other person during my lifetime. There have been various celebrities over the last several decades that have dominated headlines—like Madonna, Michael Jackson, the Bee Gees, Taylor Swift, the Beatles—and there have been politicians that have had their time in the spotlight like Spiro Agnew, Richard Nixon, and Ronald Reagan, to name a few. But no one has been constantly in the news like Donald Trump. So, I’m going to start off this month’s column by talking about finance and the Silicon Valley Bank.

Savings-And-Loan

Some readers remember the hundred-billion-dollar bailout of the savings-and-loan industry from the 1980s. Savings and loans used to be the neighborhood bank. They were a place you could put your money, and your money would steadily grow over time. You could get small loans, like a mortgage or car loan, but nothing risky.

Then, in the early 1980s, Congress, in its infinite wisdom, decided to deregulate the savings-and-loan industry. Very quickly many of these S&Ls began investing in highly speculative real estate. At the same time, many of them began using fraudulent lending practices, because there was little or no oversight. They were loaning money to friends with no collateral. They were loaning money to shell corporations that existed only on paper. They were loaning money to politicians to make sure oversight stayed away.

Finally, interest rates began to rise. Many of these savings-and-loan institutions had invested in real estate at a fixed interest rate. As interest rates began to rise, profit margins began to shrink and disappear. In order to rescue this industry we poured billions of dollars into what seemed to be a black hole.

Remember the Keating Five? Five senators— Alan Cranston (D-CA), Dennis DeConcini (D-AZ), John Glenn (D-OH), Donald W. Riegle, Jr. (D-MI) and John McCain (R-AZ)—intervened to keep the Federal Home Loan Bank Board from investigating Lincoln Savings and Loan and its chairman, Charles H. Keating, Jr. When the bank collapsed in 1989, the scandal went public—and Charles Keating went to prison.

Remember this tale. Deregulation. Risky investments. Rising interest rates. Failure. Government rescue.

Silicon Valley Bank

Until about four weeks ago, I suspect none of us had heard of Silicon Valley Bank. Why would we? It’s headquartered in California. It was a regional bank. Yet, it was the 16th largest bank in the country.

The original idea behind Silicon Valley Bank was relatively simple. They wanted to cater to Silicon Valley startups. The bank opened in 1983 (this is somewhat ironic since the savings-and-loan collapse began right around this time). Over the next several years, the bank found its niche in the technology sector. It developed a symbiotic relationship with several of the biggest venture capital groups. Slowly, they began to open branches throughout the country—but strategically located those branches in technology sectors. The bank continued to grow steadily.

In 2017, the Trump administration decided that small and regional banks did not need onerous oversight and regulation. Therefore, these banks were placed under what would one could call light supervision. So, a bank that had assets of less than $200 billion was considered small or regional. Banks would only get increased scrutiny when they had assets of over $200 billion.

This regulatory change allowed Silicon Valley Bank to become top-heavy with risky loans to start-up companies that have a high rate of failure. SVB also had a large number of loans that were unsecured.

One of the final pieces to this complex puzzle was the fact that Silicon Valley Bank had invested heavily in treasury bonds. Treasury bonds are a great investment when interest rates are low. So, Silicon Valley Bank grew rapidly in a two-to-three-year period with little or no oversight—until they reached that $200 billion threshold in late 2021. At that point, regulators were seeing problems in Silicon Valley Bank. Citations were issued, but it appears that they were too late to avoid the disaster that was ahead. Covid hit the world. Inflation started to grip our economy. This was followed by an increase in interest rates. Those treasury bonds switched from being an asset to being a debt. (Do you see the familiar pattern emerging?)

You don’t have to be a Nobel prize-winning economist to predict that interest rates wouldn’t stay low forever. This was predictable. The executives at Silicon Valley Bank were either stupid or reckless, or both. The big unanswered question is how many other banks have taken advantage of these looser regulations and will need to be bailed out in the near future?

Donald J. Trump

The H-U-G-E question surrounding Trump was, “Could our system of Justice handle his celebrity, his bravado, and his legion of lawyers?” The question was never whether Trump broke the law: that has always been obvious. The good thing about him is that he broke so many laws that you can take your pick: obstruction of justice, violating the emoluments clause, lying to authorities, extortion of a foreign government (Ukraine), and removing classified documents from the White House. Those are just a few broken laws that come to mind. He broke the law before he was in the White House, while he was in the White House, and after he left the White House. John Gotti, the notorious mobster, looks like a boy scout compared to Trump.

At the time of this writing, we have just learned what Trump has been indicted for by the Manhattan grand jury: 34 counts of falsifying business documents. We don’t know what underlying crimes this falsification was done to hide, but any of them is enough to change misdemeanors to felonies: hiding the payoffs to a porn star just before the election; breaking US and NY election contribution limits; false tax reporting for the reimbursements to Michael Cohen. We’ll find out.

Yet, Republicans are outraged. Outraged about what? They were outraged long before the charges were unsealed. Now they’re outraged about the NY District Attorney doing his job. They’re outraged that the law applies to their former (Republican) president—though they were the same ones calling “Lock Her Up” about Hillary Clinton—and the funniest thing about the chant was that they never said what they wanted to lock her up for. Crimes? What crimes?

Their faux outrage needs to be understood for what it is. It is a peacock-type of display for Trump. They must show their support and loyalty to the almighty Trump or Trump will get angry and send his mob of zombies after those who have not knelt down and kissed his ring.

I would encourage everybody to take a deep breath and relax. Nothing is going to happen anytime soon. There are many steps between arraignment and a final verdict. So let’s just slow down.

Besides, it seems to me that the case in Georgia may be the most cut and dried. Donald Trump, as you recall, was caught on tape pressuring a Georgia election official to find the votes he needed to win Georgia. To misquote George Tenet, the director of the CIA under George W. Bush, “This is a slam dunk.”

Many of us have images of Donald Trump handcuffed or in prison fatigues dancing in our heads. Let’s put those images away for now. I doubt that Trump will be handcuffed, and we are so far from sentencing … let’s get to indictments, arraignments, trials, and a guilty verdict—then we can think about prison.

What is more interesting to me is what restrictions the judge might place on Donald Trump over the next several weeks/months. Trump can’t control his impulses. We know that he wants to run his mouth on social media. We know that Donald Trump will say something outrageous, inappropriate, and inflammatory about the judge, the prosecutor and/or the judicial proceedings—even about the judge’s adult daughter. He will try to poison the jury. So, what steps will the judge take? Will the judge ban him from social media?

It is important to remember that politicians have been tried and found guilty plenty of times in the past. This is not unusual. To both Republicans and Democrats, having power can be intoxicating, which leads to criminal activity in some people. What is unusual is that we are talking about criminal charges and a former president.

The GOP seems to be a magnet for presidential misconduct. Reagan had Iran-Contra. Reagan violated US law. Just before Reagan, we had Nixon, who was guilty of obstruction of justice. He was going to be tried and found guilty but was pardoned by Gerald Ford, who thought the nation couldn’t stomach a former president being tried as a common criminal. I think that Gerald Ford was wrong. We really needed to try Nixon so that everyone in America understands that no one is above the law.

Okay. The arraignment has come and gone. The earth did not stop. There wasn’t a mighty thunderbolt from Zeus. There were not huge protests. It was simple and straightforward. Trump was charged with 34 felonies regarding paying hush money. Basically, to me, this is an election fraud case. Nothing fancy. I’m not a lawyer, but we’ll see.

The classiest thing surrounding Trump’s arraignment was a full-page ad in the New York Times taken out by Yusef Salaam (one of the “Central Park 5” who would prefer to be called “The Exonerated 5”).

As you may recall, back in the late 1980s, Trump, as a private citizen, took out a full-page ad in the Times and other New York papers calling for the execution of these five teenagers. Yusef correctly mentions that Trump never apologized for asking for five boys to be put to death, even after their cases were overturned (when someone else confessed to the rape and murder and DNA evidence proved it).

In fact, as a candidate in 2016 he still claimed they were guilty. Even after they served five to 11 years in prison for the crime they did not commit. Yusef asks for justice and fairness. This is what we all should want, isn’t it?

Another School Shooting

I truly wish I had something new to say about school shootings. This school shooting happened in Tennessee. It appears a former student legally acquired multiple weapons, which included an AR-15 assault rifle. When the carnage was over, three children and three adults were dead. The shooter was shot and killed by police.

Every now and then, we need to sit down and be honest about who we are as a people. Currently, it is easier to get a gun in many states than it is to vote legally. This is simply a fact. If we truly believe that life is sacred, we need to do more to protect Americans from gun violence. We need to have fewer guns and more gun regulations.

We have to remember that in the 1930s, every gangster had a machine gun. As a nation, we decided that machine guns did not belong in the hands of civilians, and we outlawed machine guns (National Firearms Act of 1934). After several years, machine guns disappeared from our streets. Our laws worked. As a matter of fact, during the Clinton administration, we banned assault rifles. Once again, we saw that these laws actually worked to decrease violence and death with assault rifles.

We have to remember that we have had multiple opportunities to act and save lives. This is our goal: to save lives! In 2012, Sandy Hook Elementary was one of those never-again moments in which 26 people were killed. In 1999, two high school students walked into Columbine high school and killed 13 people. This was another one of those never-again moments.

The problem is that deranged, diluted, and psychotic people can easily obtain high-powered, rapid-firing weapons and kill a lot of people in a short period of time. How do we fix this? We must decrease the availability of guns. It is that simple.

Do not tell me that knives kill people, and therefore we should ban knives also. This is a stupid, dumb, asinine argument. Simply point to the 2017 Las Vegas shooting in which over 60 people died, and more than 400 were injured as a gunman rained bullets from the 32nd floor of the Mandalay Bay Hotel down below concert goers below. Knives are not the problem. Guns are the problem.

Here’s how we fix this:

•   We must ban assault weapons. These are weapons of war and need to stay in the hands of the military.
•   We need real universal background checks on all firearm purchases. Gun owners must be responsible for their guns.
•   It should be mandatory that all gun owners have liability insurance. If someone steals their gun and shoots somebody with it, that is the gun owner’s fault. You must secure your weapons.
•   We need to have red flag laws in every state. If someone begins acting psychotic, we should be able to petition a judge to have those weapons removed from that person’s possession for six months or a year. Once that person proves they are no longer a danger to themselves or others, they can have the weapons back.
•   We need to have a national firearm buyback program. The government needs to pay some amount for guns that are turned in. Every gun off the street is a gun that cannot be used to kill or injure an American.

The system will never be perfect, but putting a system in place is better than the free-for-all we have now. Our goal must be to reduce gun violence. If we truly believe life is sacred, then every American should embrace this goal.

By the Way

There has been a lot of discussion about what America is about. America is about freedom, liberty, and opportunity. America is not about banning books. We are not about teaching a small piece of history. We are about teaching history. This includes the uncomfortable parts of history. This is how we learn that we aren’t perfect.

As a country, we have made mistakes, and for the most part, we have learned from those mistakes. In the old days, we ostracized Americans who were different. Anyone who was not heterosexual was placed out of sight. They were labeled as odd or deranged, or even psychotic. But over the last 20 or 30 years, we have decided this stance was wrong. They have decided that human beings are, in fact, human beings.

Being different is always hard. For the most part, I do not think anybody wants to be different or detested. America should be firmly against any legislation that legally discriminates against the LGBTQ community. I went to an all-boys private school when I was growing up. This was the late ’70s. It was common for guys that I knew who were high on testosterone, beer, and other substances to cruise gay bars in a despicable social event called “gay bashing.” Then, what makes matters worse, the police would be called but because these were “fine, upstanding young men” from a highly respected private school, they usually did not get arrested. They did not even get a warning. They were simply sent on their way.

It is this kind of behavior which exemplifies today’s GOP: take an already marginalized community and create a law which legally discriminates against them.

If America is about freedom, then we have to embrace those who are different. We have to do whatever we can to lift up those who have been pushed out. This is the America that I love.

NOTE: The views and opinions expressed here, as well as assertions of facts, are those of the author. They do not necessarily represent the views or opinions of The Urban News.