Loading ...Didn’t Yellen initially oppose FDIC’s bailout of SVB?
This is a possible reason why she changed (or was pressured to change) her stance so quickly
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CHEERING SILICON VALLEY BANK BAILOUT, GAVIN NEWSOM DOESN’T MENTION HE’S A CLIENT
At least three of the California governor’s wine companies are held by SVB, and a bank president sits on the board of his wife’s charity.
Ken Klippenstein
Ken Klippenstein
March 14 2023, 9:03 a.m.
ON MONDAY, California Gov. Gavin Newsom praised the Biden administration’s decision to intervene on behalf of Silicon Valley Bank’s clients after the bank was taken over by the FDIC on Friday amid a bank run. The White House “acted swiftly and decisively to protect the American economy and strengthen public confidence in our banking system,” Newsom said in a statement. What Newsom didn’t mention is that it also protected his own companies if they held over $250,000 in deposits.
CADE, Odette, and PlumpJack, three wineries owned by Newsom, are listed as clients of SVB on the bank’s website. Newsom also maintained personal accounts at SVB for years, according to a longtime former employee of Newsom’s who handled his finances, and who requested anonymity to avoid professional reprisal.
“Governor Newsom’s business and financial holdings are held and managed by a blind trust, as they have been since he was first elected governor in 2018,” Nathan Click, a spokesperson for Newsom, told The Intercept in an email.
Newsom also didn’t mention his wife Jennifer Siebel’s professional ties to the bank. In 2021, Silicon Valley Bank gave $100,000 to the charity founded by Siebel, the California Partners Project, at the request of Newsom. John China, president of SVB Capital and responsible for SVB’s funds management, is himself a founding member of the California Partners Project’s board of directors.
Newsom added on Monday that he had been in close contact with the administration about SVB. “Over the last 48 hours, I have been in touch with the highest levels of leadership at the White House and Treasury,” Newsom said of SVB’s collapse in a statement released on Saturday. Asked about the nature of the interactions, the governor’s deputy communications director Brandon Richards did not respond.
NEWSOM, A MULTIMILLIONAIRE who was a businessman before becoming a politician, has been dogged for years with ethics questions about his corporate holdings. When asked during his 2018 campaign for governor if he would sell his companies, Newsom reportedly replied, “These are my babies, my life, my family. I can’t do that. I can’t sell them.”
Instead, in December 2018, Newsom announced that he would establish the blind trust and give control of his trust to a family friend and attorney, Shyla Hendrickson. Under the arrangement, his sister, Hilary Newsom, retained her role as president of the governor’s PlumpJack Group, which includes hotels, wineries bars, restaurants, and liquor stores founded by Newsom.
The move echoed President Donald Trump’s decision in 2017 to move his companies into a blind trust that would be run by his sons. Ethics experts criticized the move as misleading, saying it was not meaningfully blind since Trump knew which companies he owned and put his sons in charge of his businesses in his stead. Walter Shaub, then the director of the U.S. Office of Government Ethics, slammed Trump’s arrangement as “not even halfway blind.”
Newsom also recently came under fire in the California press for allegedly abusing what are called behested payments: donations requested by politicians for any “legislative, governmental or charitable purpose.” Though California law stringently regulates campaign contributions and gifts to elected officials, there are no limits on behested payments like the $100,000 donation that Newsom requested from SVB for his wife’s charity. Last year, Newsom reported at least $23.7 million in payments to such groups at his behest.
SVB’s implosion on Friday represented the second-largest bank collapse in U.S. history and the first since the financial crisis of 2008. Over 90 percent of the bank’s depositors have over the $250,000 amount federally guaranteed by the FDIC.
The unmistakable class overtones of a bank whose clientele includes many tech investors — and wineries — has made for a bitter debate over the merits of the intervention.
“There is definitely a class element,” economist Dean Baker of the Center for Economic and Policy Research said of the federal intervention in an email to The Intercept. “Look at how easily we can toss tens of millions of dollars at people who couldn’t figure out how limits on FDIC deposit insurance work, but the idea of giving $10k in debt relief to a student who might have used bad judgment in taking out a loan when they were 18, gets so many people upset about moral hazard and individual responsibility.”
Perhaps no one embodied this contradiction more than Larry Summers, former Treasury secretary and a vocal critic of student debt relief. “This is not the time for moral hazard lectures or for lesson administering or for alarm about the political consequences of ‘bailouts,’” he said in a tweet on Sunday.
CONTACT THE AUTHOR:
Ken Klippenstein
ken.klippenstein@?theintercept.com
@kenklippenstein
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