Silicon Valley Bank (SVB) was shut down by regulators on March 10, 2023, after account holders, wary of the bank’s stability, began quickly withdrawing their money. Its collapse constitutes the second largest bank failure in history. Described as the “backbone” of a tech industry dominated by white men, SVB served tech companies and their venture capitalists in the early stages of business development and growth. SVB financed the risky tech ventures that other private banks were unable or unwilling to underwrite.
The bank run and swift collapse of SVB, an institution with more than $200 billion in assets, caused regulators and pundits to discuss concerns about “contagion” — a term commonly used in banking to describe the concern that one bank’s failure could expose other financial institutions to losses and lead to wider problems in the economy. The Washington Post, Bloomberg News and Reuters all ran headlines that used this word.
But the idea of an “invasion” might be a more useful metaphor.
In their 2020 article in South Atlantic Quarterly, Indigenous author and environmental activist Winona LaDuke and geography scholar Deborah Cowen write that energy infrastructures “constitute the contemporary spine of the settler colonial nation.” Pipelines are invasive infrastructure that extract oil and gas from the ground, transporting and eventually converting these resources into the energy that technology companies and venture capitalists among others use to amass wealth.
The failure of SVB is akin to a ruptured pipeline. Any particular pipeline might be more or less prone to leakages and ruptures that contaminate surrounding ecosystems. Yet all pipelines are part of a network of invasive infrastructure that is designed to extract and dispossess. This infrastructure violates Native nations’ sovereignty, breaks treaty agreements, pushes Indigenous peoples from their ancestral lands, and harms the Earth for the purpose of accumulating wealth.
In a 2018 article documenting Indigenous resistance to energy infrastructures, Indigenous scholar Anne Spice describes how governments designate oil and gas pipelines as critical to the functioning of racial capitalism. Consequently, governments use this designation to apply their full, apocalyptic force against anything that blocks these pipelines. This includes violently removing Indigenous Water Protectors and Land Defenders that interrupt resources from being extracted and converted into energy.
Any ruptured pipeline must be quickly restored to keep energy and capital flowing. Contagion implies contamination, the spreading of disease. Invasion — or, the invasive infrastructure of private finance — infers a violent occupation.
SVB’s failure threatened to interrupt the flow of capital.
Restoring Private Finance
Over the weekend, the Department of the Treasury, Board of Governors of the Federal Reserve System, and Federal Deposit Insurance Corporation (FDIC) made a joint announcement outlining plans to “fully protect all depositors.”
Most of SVB’s customer deposits were reportedly uninsured: $152 billion uninsured deposits out of $173 billion as of December 2022. FDIC insurance is the government’s guarantee to replace account holders’ money up to $250,000 if a bank fails; though, in practice, this cap is often more a façade than a fixed limit. SVB had 37,466 accounts whose average $4.2 million balance exceeded the FDIC threshold.
As a comparison for the scale at which an individual person qualifies for the same kind of relief, lower-income people with bank accounts had a median cash balance (if any) of $1,300 in 2021. And, this amount is an overestimate because it includes deposits from economic stimulus and child tax credits — relief that was subsequently withdrawn since government responds with punishment when everyday people are struggling.
Yet a bipartisan coalition emerged in response to SVB’s failure, as is often the case on issues of private finance. Public monies are now being used to protect the bank’s depositors — the same tech companies and venture capitalists whose profits rely on everyone else absorbing the risks. In their early comments on social media, Rep. Eric Swalwell (D-California) and Rep. Ruben Gallego (D-Arizona) called for honoring all deposits above the FDIC insurance cap while Sen. Mitt Romney (R-Utah) warned against contagion. Sen. Elizabeth Warren (D-Massachusetts) decried lack of regulation and oversight, yet acknowledged SVB’s failure as a threat.
The mention of contagion and subsequent federal response treat SVB as systemically important. Indeed, there is truth to the concerns that regulations are antiquated, and that policymakers are unprepared for the myriad consequences of bank runs in the digital age. One irony of SVB’s failure is that the bank lobbied several years ago against regulations that would have imposed the benefits of oversight they now seek to claim.
SVB and their depositors are responsible for creating the emergency that resulted in a public bailout — and restored wealth — for tech companies and venture capitalists who are known for condemning or withholding relief from others. Tech companies exploiting the student debt crisis, for example, fear lost profits if these loans are cancelled. Venture capitalists gave only 1 percent of their financing to Black women entrepreneurs in 2022, and their negligible investment is declining.
If anything, SVB’s failure should serve as another reminder for how elite power can marshal resources to ensure the uninterrupted accumulation of wealth vis-à-vis invasive infrastructure. Often with the full backing of the federal government.
A Time to Move Politically
While SVB may have been the “backbone” of the tech industry, the bank’s failure exposes private finance as invasive infrastructure and a spine of settler-colonialism. There are other ruptures that expose this truth. Private finance hastens climate destruction by investing in fossil fuels, preserves white wealth by embedding racism into everyday operations, keeps people indebted by selling expensive credit, and funds violent police militarization by underwriting developments like “Cop City” in Atlanta.
To critique private finance as part of settler-colonialism is not to dismiss concerns for any frontline workers that lose their jobs. Many private banks sacrificed their lowest-paid employees in the early months of the COVID-19 pandemic to keep business operating as usual. Banks placed frontline employees at risk of exposure to the virus, required them to supply their own sanitizer and protective equipment, and limited or denied their time off. When the federal government provided economic relief to businesses, owners and shareholders kept most of the money. Workers only received 23 percent to 34 percent of the $800 billion doled out through the Paycheck Protection Program. There is no reason to expect that frontline workers would receive relief equivalent to their losses as provided to SVB or other affected banks.
Private finance, like settler-colonialism, is not inevitable. The aftermath of SVB’s failure is a time to raise awareness of the contradictions and learn how elite power preserves wealth. It is a time to question why tech companies and venture capitalists receive bailouts while elders have their Social Security checks garnished to repay loans for educational degrees they might never have received. It is a time to learn how activists are struggling against this invasive financial infrastructure by supporting the cancellation of cash bail and medical debt, establishing public banks that eschew shareholder profit, and creating solidarity economies.
SVB’s failure — a pipeline rupture interrupting the flow of capital — exposes ways to learn and move politically.
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