Day by day, month by month, year by year, greed is ruining the tech industry’s image.
This time it was tech’s response to the failure of its primary financial institution, Silicon Valley Bank. When it comes to privacy, child internet protections, curbing misinformation or, now, protecting our banking system, tech companies repeatedly put profit before the public good.
The federal government bailed out tech this time, but the public’s patience with the industry is running thin, threatening its future.
Silicon Valley Bank was a niche institution catering to financing for the tech industry. Two weeks before its collapse, the bank’s CEO, Greg Becker, reportedly sold $3.6 million in company shares. That’s right. Becker apparently made sure he got his money knowing the potential that others could be caught holding the bag.
It was Becker who helped bring about the crisis. In 2015, he pleaded with Congress to weaken the Dodd-Frank Act regulations, created after the 2007-8 financial meltdown, that were specifically designed to stave off a bank run as we witnessed last week.
Becker called the regulations “regulatory scope creep.” He whined about the hours of staff time it took to comply with them, saying they would stifle SVB’s ability to provide credit to its technology clients “without any meaningful corresponding reduction in risk.”
Don’t blame the Bay Area congressional delegation for SVB’s ensuing collapse. No Bay Area senator or representative voted for a bill to weaken the regulations. But enough Democrats elsewhere joined with Republicans to pass it, and President Trump signed it into law in 2018.
Silicon Valley Bank’s failure threatened disaster for its 40,000 customers because most had deposits of more than the Federal Deposit Insurance Corporation’s insured limit of $250,000.
The vast majority of SVB’s customers are tech companies that generally take pride in their libertarian approach to government. They resist government efforts to protect consumer privacy, shield children from data collection and hold internet companies accountable for what’s posted on their websites.
But there they were last weekend begging the federal government for a bailout to protect their assets and using social media to successfully fuel fears of a full-blown national banking crisis if they didn’t get their way.
To be sure, Silicon Valley Bank’s failure was a major threat to the tech industry, which relies on funding for thousands of innovative startups. That’s one of the reasons why the federal government bailed out Silicon Valley Bank’s customers this time. But there might not be a next time if tech industry leaders fail to find the proper balance between profits and the public good.
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