Published at 06:27 h on March 16, 2023
Last update: March 16, 2023 at 06:39h.
Count David Portnoy, founder of Barstool Sports, among those who are annoyed by President Biden’s rapid move to bail out now insolvent SVB Financial (NASDAQ : SIVB), the parent of Silicon Valley Bank.
In an interview with Fox Business earlier today, Portnoy said Silicon Valley Bank operated a poor business model, and that the government shouldn’t be supporting financial institutions in that position.
When banks fail, it’s a tough one, because, again, the average ‘Joe Schmo’ puts their money [in], I want to get their money back, but I don’t think banks should necessarily be rescued because you’re running a bad business,” Portnoy said in the interview. “Nobody rescues me when I run out of money.”
President Biden maintains that assistance for Silicon Valley Bank, which counts a slew of left-leaning political donors and Gov. Gavin Newsom (D-CA), one of its clients, will not be covered by the taxpayers. However, speculation arose that other regional banks might be in financial precarious situations after the last week’s SVB and Signature Bank of New York bank runs. This led to rapid share price erosion while some institutions were sent to the Federal Reserve’s discount windows to the tune of $152.85billion. That’s well in excess of the $111 billion banks borrowed from the central bank during the 2008 financial crisis.
Venture capitalist and GOP megadonor Peter Thiel confirmed he had $50 million in deposits at Silicon Valley Bank despite cautioning associates to yank cash from the institution.
Portnoy Blasts SVB Business Model
Now officially a consultant to Penn Entertainment (NASDAQ: PENN) following that company’s $388 million February purchase of the 64% of Barstool it didn’t previously own, Portnoy believes Silicon Valley Bank took on too much risk.
“They were basically attracting risky companies, startups, crypto companies. This is their business. Stuart Varney, Fox host, said that this creates more risk. Portnoy claimed that the bank was not prioritizing risk management. The bank’s 2023 proxy filing indicates Chief Risk Officer Laura Izurieta departed last October, but ceased performing that role in April 2022.
Additionally, the bank has been criticized for having a board of directors lacking investment banking experience. Meanwhile, a video surfaced earlier this week of Jay Ersapah, head of financial risk management at SVB’s UK branch, boasting about the company’s Pride Month celebrations and its blog dedicated to LGBTQ+ youth, stoking criticism SVB’s priorities were misplaced prior to its collapse.
SVB Woke to Broke?
Perhaps surprisingly given his penchant for rankling those on the left and the right, Portnoy didn’t address allegations SVB’s “woke” agenda had a hand in the bank’s demise, but some market observers and political pundits on the right argue the bank did stray from its core missions of taking deposits, making loans and effectively managing risk.
A so-called fact checker for the
New York Times reported that it wasn’t the bank’s diversity, equity and inclusion (DEI) agenda that contributed to its downfall. However, the article doesn’t mention the bank’s 2022 pledge to allocate $5 billion to sustainable finance causes nor does it highlight SVB’s $73.45 million in donations to Black Lives Matter and other social justice groups.The
Times article also fails to mention an August 2020 report from the bank in which CEO Greg Becker boasts about two-thirds of the company’s staff meeting diversity criteria and its matching programs dedicated to “pandemic response, social justice, sustainability, and supporting women, Black and Latinx emerging talent, and other underrepresented groups.”“Latinx” is vilified in much the Latino community with polls suggesting they view it as woke vernacular and they much prefer ethnic terms such as Hispanic, Latino or those identifying specific countries. You would prefer Latinx to be Colombian-American, Mexican-American, or Mexican-American.