One highly effective doomsday weapon deployed by the opposition to the Israeli government’s proposed judicial reforms is the threat of removing large sums of money from Israel. This self-inflicted form of BDS has been orchestrated in large by what came to be known as Mecha’at HaHitechistim, or the High Tech Workers Resistance, who argued that the reforms, if passed, will make Israel’s economy too volatile to merit robust investments in the “startup nation.” The self-fulfilling nature of this prophecy is part of what has made it so effective: As threats to pull money out of Israel destabilize the economy, critics of the reforms can rightly argue that the economy is being destabilized and get more foreign economists and tech investors to express their fears of economic destabilization, which in turn creates an even more negative economic climate, which hits ordinary Israelis in the wallet for voting the wrong way.
Naturally enough, where high tech resisters saw their threats as saving democracy, critics saw them as rich people who were holding the government hostage by threatening to bankrupt the country unless the anti-reformist demands were met. Both sides traded heated accusations. Now, because Israel’s greatest natural resource is irony, comes a new twist on the tale, one that begins, again naturally enough, with a question: Where did the money go?
Many of the Hitechistim who heeded the call to boycott Israel took their shekels offshore. According to reports, at least 50 Israeli startups moved at least $4 billion out of the country since the protests began. Some of that money went into Silicon Valley Bank, which collapsed last week.
These savvy investors include Eynat Guez, the CEO and co-founder of Papaya Global, a payroll solution application valued at more than a billion dollars who, speaking at a protest earlier this year, announced that she was taking her money out of Israel. After SVB’s collapse became known, Guez changed her tune without admitting any mistake, tweeting to thank Israeli financial institutions for supporting the companies devastated by the American bank’s downfall.
Another major tech protest leader was Tom Livne, CEO and founder of AI transcription app Verbit, who declared in a recent interview that he was not only taking his company’s money out of Israel but also, in the interests of protecting democracy, is no longer paying taxes to the country’s elected government. Verbit currently has a reported $100 million invested with SVB.
The question of how so many impeccable Israeli democrats wound up moving their money out of Israel into a failing American bank that then collapsed gives further insight into the anti-reform protests. According to a senior Israeli banking official, one of the leaders of the anti-reform protest movement is Gadi Moshe, the director of SVB’s Israel office. Until days before his bank’s collapse, Moshe encouraged Israeli entrepreneurs to remove their money from Israel and deposit it with foreign branches of his bank—in the interests of protecting Israeli democracy, of course.
For some people, the idea of Israel’s best and brightest pulling all their capital out of the country in order to punish its misguided electorate in the name of democracy, only to lose it all in a classic American bank scam, is a humorous turn of the wheel—one that suggests that the self-importance of Israel’s tech sector may have outstripped its acumen. But that’s not how the best and the brightest, whether here or in Israel, see the story. According to people like David Sacks and Bill Ackman, the lesson of SVB’s collapse is that the federal government should be ensuring everyone’s deposits, no matter who they are banking with or how those institutions behave. After all, why should individuals and companies be punished for the behavior of banks that themselves did nothing wrong?
Risk, it seems, is in the eye of the beholder. According to the same folks who failed to foresee other rather obvious catastrophes, most recently the implosion of Sam Bankman-Fried’s crypto-currency powerhouse FTX—SVB’s collapse came about because of a regrettable yet understandable set of circumstances. The tech sector’s favorite bank, goes this story, took the billions it had from Silicon Valley’s darlings and bought U.S. government bonds back when interest rates were nearly zero. Then—who could see it coming?—the Fed raised interest rates to fight inflation and bond prices plummeted. Also, because borrowing money was now more expensive, all those startups needed more and more cash to repay their debts, while at the same time struggling to raise new funding rounds because of a bearish economy. When SVB announced it was forced to sell a lot of securities at a very significant loss, its stock began to tank and the aforementioned gold rush turned into a good, old-fashioned bank run.
The darling financial institution of the tech industry, which donates heavily and almost exclusively to the Democratic Party, is now bankrupt in part because it spent heavily on the Democratic Party’s pet causes.
So what sort of investments did SVB make that went bad? One type of startup appears to have occupied a large amount of space on the bank’s balance sheet: eco-tech innovators, which traditionally require large upfront investments to get off the ground. According to the bank’s website, more than $3.2 billion of its funds were invested to finance companies in “clean tech, climate tech, and sustainability industry, including solar, wind, battery storage, fuel cell, utility storage and more.” The bank’s investment in such virtuous technologies is so massive that 60% of community solar financing nationwide involves SVB. Just last week, the bank hosted Winterfest, a shindig for the climate-tech sector, at the Lake Tahoe Ritz-Carlton.
In other words, the darling financial institution of the tech industry, which donates heavily and almost exclusively to the Democratic Party, is now bankrupt in part because it spent heavily on the Democratic Party’s pet causes. SVB’s demise was followed at the end of last week by the collapse of New York’s Signature Bank, which had former Democratic regulatory guru Barney Frank on its board, and which famously stepped into the political fray in January 2021 when it cut its long-standing ties with Donald Trump and urged the president to resign.
This may help explain why Democrat-supporting big-time investors are now pressing President Joe Biden to bail out SVB. But as the president announced, he doesn’t need to do almost anything to help the banks that fund his supporters and his party’s ideological agenda: For that, there are bank fees. According to a 2020 survey, bank fees are hitting record highs, with monthly service fees now at $15.50 on average for accounts that don’t meet an ever-increasing minimum monthly balance, now at an all-time high of $7,550.
Let’s put it simply: If you have a million dollars in the bank, you suffer no consequences. If you have $10 in the bank, you have to pay the bank $15 for the privilege of keeping it there, which means you owe the bank $5. Bank fees are among our most shockingly regressive forms of taxation. When the Biden administration promises that there’ll be no bailouts and that no one will lose any money from SVB’s collapse, what they mean is that the bailouts will be paid for by the poor, not by the banks.
What to make of all this? Two immediate lessons come to mind.
First, the collapse of FTX (which gave tens of millions to Democratic Party candidates and causes), SVB, Signature Bank, and the financial institutions that will surely follow isn’t part of some complex financial machination inscrutable to all but the savviest among us. It’s part of the very same rot that has already claimed our universities, our media, and other institutions crucial to the functioning of a civil society.
SVB was the financier of choice of one political party’s donor base. It overwhelmingly paid for projects that fit that party’s agenda. And it employed people who expended a lot of time and energy preaching its gospel: The bank’s head of financial risk management in the U.K., for example, Jay Ersapah, took to the internet enthusiastically to both identify herself as “a queer person of color” and announce that she had helped launch no less than six employee resource groups at SVB, designed to “raise the visibility of multiple dimensions of diversity.” As the saying goes, you get what you paid for.
These ideological convictions aren’t coincidences. They’re requirements. Just as you have to pledge your allegiance to the most woke of persuasions to get tenure, and just as you may no longer be a part of a major American newsroom unless you see yourself as fully committed to seeing virtually any Republican as an enemy of life, liberty, and the pursuit of happiness, you may no longer be a part of the financial system unless you’re ready to support leftist candidates and causes.
The consequences of party control spreading from universities and media to professional organizations and financial institutions are now plain. It’s one thing when the ideological rot on campus leads to a gaggle of law students honking at a circuit judge; it’s another when the same convictions lead investors and regulators to slow-clap as billions vanish from their accounts, knowing that doing so is now a requirement of their jobs, and the costs will be passed on to taxpayers.
The second lesson that may be learned from SVB’s collapse applies only to Israelis, but it’s no less urgent: Sure, the Jewish state’s local customs and arrangements are flawed in many ways, but importing American-style politics and culture, at this particular moment in time, is a very bad idea. America is no longer a liberal bulwark against the storm. It is the storm. Emulating America means more contempt for voters, more erosion of norms in the name of abstract virtue, more mistrust, and, eventually, bankruptcy.
The solutions are simple: Keep politics in the parking lot. Keep banks focused on banking. Bring back trustworthy, nonpartisan regulation—the loss of which, in all fairness, was brought about as much, if not more, by Republicans as it was by Democrats. Resist the whole-of-society blob model you get when a political party merges with the tech industry and federal bureaucracies and leading newspapers and professional organizations and financial institutions and everyone become too big to fail. And realize that what’s true for the richest and most powerful country in history is even more true for Israel, a country where failure would be truly catastrophic—and is always just around the corner.
Liel Leibovitz is editor at large for Tablet Magazine and a host of its weekly culture podcast Unorthodox and daily Talmud podcast Take One.