SVB Fail: Catastrophe Profiteering and the Crisis of the Commons
Throughout the recent banking turmoil in the United States, catalyzed by the implosion of Silicon Valley Bank, and then extending broadly into the regional banking sector, one undeniably obvious phenomenon has been the migration of capital from its location in smaller banks, where it is ‘uninsured’ beyond the current $250,000 FDIC limits, to the largest Systemically-Important-Banks (SIBs) deemed too large to fail. Over the past few weeks, aggregate deposit outflows from regional banks into the five largest banks in the United States have been extraordinary.
If we take a step back from the particulars of this situation, the individual banks involved, and look at this flow simply as the movement of energy in a complex networked system, what we are seeing is a migration of energy (capital) from the smaller regional nodes into larger and more consolidated centralized locations. Flows of capital are drying up in the tributaries, and reservoirs of capital are consolidating in centralized locations. There are many people who have noted the risks of this phenomenon in creating essentially a two-tiered US banking system, where one set of a smaller number of exceedingly large banks controls an ever-increasing percentage of capital, and another set of smaller regional banks shrinks because they are viewed as increasingly collapse-prone.
I want to examine this as a psychological and sociological phenomena, noting first my own complex and at-times contradictory relationship to these events as they unfold, and interrogating my own motivations in the conflict I am experiencing. As a connection phenomenologist, I am focused on studying the nature of relatedness, and the way that modernity has systematically undermined our complex interdependence with one another and the Living World of which we are a part. The construction of a modern notion of individuality locates our sense of identity in the interior of our individual bodies, and our modern medical and mental health systems take as a foundational axiom the notion that what ails us is a matter of the individual. Yet our participant-action research over the past 15 years, with many thousands of patients and clients, has demonstrated to us otherwise. Whereas modern psychology de-contextualizes suffering from the context of community and ecology (Watkins and Shulman, 2008), we have found in our work, repeatedly and predictably, that wellbeing arises when individuals are renatured into connection with community and place. We heal through relatedness, by mending the separations between mind and body, and between Self and Other (human and more-than-human). Modernity, and the mind it has taught us to wear, as we have come to understand it in our work, is largely a byproduct of alienation, and it is making us sick.
This alienation extends quite thoroughly into how we position ourselves in the modern west in relationship to resources, of which money is one obvious example. Modernity has trained us that resources are generally scarce. Nevermind that every day the sky is illuminated by a solar reactor capable of providing all the energy humanity would ever need if we were simply more able to harvest it. Nevermind that a plant is a perfect solar collector (John Stokes, Gratitude Lectures at the Haiku Aina Permaculture Institute). Nevermind that creative capital is infinite. From within this mandate of scarcity, we have been (I have been) trained that I need to accumulate capital, take care of myself first, save for retirement, and make sure I have all kinds of insurance (for my health, my life, my car, my computer, my hard-drive, etc.). This mandate to accumulate, woven through a protestant work ethic, a form of salvation through capital, is one of the invisibilized cultural norms tensioned to breaking by the systemic transformations playing out around us during this present moment vibrating on the edge of collapse.
Having been acculturated to a worldview of scarcity, I have been trained that it is rational to hoard money. We think of ourselves as islands and fortresses; boundaried selves. I have been acculturated to accumulate private reservoirs of capital, and if the bank I use presents a risk to this accumulation of treasure, I will then migrate my reservoir elsewhere. Makes perfect sense, right?
The problem I’m personally having with all of this is that I find my reflexive fear that requires me to preserve capital at all costs is coming up against my own deeply-held values around relationality and reciprocity, and a sense of relatedness to my own regional bank, which I like, a lot.
My regional bank knows me. I have a twenty year relationship with them. In addition to great courtesy, they have done many things that my friends and I do on a regular basis, namely exchanging value that is not monetized. (Dee Hock, Founder Emeritus of Visa, taught me that the difference between a company and a community is that a community doesn’t try to monetize all exchange of value.) My regional bank treats me like a human being, not a machine. They have phoned me if I was going to bounce a check, extended my business credit temporarily when I was waiting for client receivables so I could still pay our vendors, and gone out of their way to be of service to me. None of this was contractually required, but they have done it consistently. Since they know me, and have stood by me through the inevitable ups and downs of starting and growing a company, I don’t find it hard to believe that they might be willing to take a risk on loaning me capital, or underwriting a mortgage, even if my banking résumé was not algorithmically perfect. Because they are prudent I think they would want to understand an anomaly in my record, but because they know me, I think they would give me a chance. That is, again, because we have a relationship. I am not simply an object to them, an Other, a transaction.
My concern, banking with one of the top 5 banks, one of the SIBs, is that I would once again become simply a number. And we don’t go out of our way to help numbers. (I probably don’t have to tell you that when we want to dehumanize people, one way we do this is by putting a number on them.) I don’t think I’m the only business owner who would be harmed by this. I imagine there are hundreds of thousands of small businesses out there that have survived in part because they have a capital partner, in the form of a small bank, that has at some point gone out of their way to assist them because they have a personal relationship with the business based in some human element of care. I also don’t think I’m the only homeowner, or prospective homeowner, who would be harmed by this. Although banks clearly must have lending standards, relationship is a support to all of us who have ever made a mistake in our credit history, or weren’t born affluent, or, frankly, are not white. Extending this logic more broadly, my concern is that if regional banks fail, or are undermined as a sector, what is really being undermined is a form of the commons.
Regional banks are the banks that provide capital into the smaller, less populated, less centrally-networked parts of the country. They loan money to businesses that are not going to get written about in The New York Times. They write mortgages in markets that are not considered top-tier. They are smaller, granular, with relational contact points that go deep into communities. They have texture, and history, and place-based differentiation. These are the kind of banks that It’s a Wonderful Life is about.
One of the things that characterizes modernity, and this goes back to laws that govern the enclosure of the commons in Britain beginning in the 12th century (The Enclosure Acts), is to take public community resources, and privatize them. My arguments with capitalism, as a system, arise from the degree to which it is extractive: a byproduct of an alienated worldview. We mine the commons for oil, for minerals, for timber– extracting a public wealth, turning this into a commodity, and then externalizing the costs of this depletion. We steal from the commons, and then we pollute it. From the perspective of a communitarian ethos, this is insane. What we need to do is regeneratively preserve the commons.
And so I find myself recognizing that this flight of capital away from regional banks will invariably reduce the quality, diversity, and granularity of the banking system. It will de-root it from local soils. At one level what we are talking about is monopoly, but what this fails to convey is the granular loss of texture and differentiation in the total ecology of capital flows that this would entail. It is a movement from crop diversity to monoculture. And monoculture is defined by conformity. If this happen, it makes us collectively poorer. And it makes the banking system less resilient, not more.
And so, how to fight against it? In myself, I observe that the thought, “How can I profit from this crisis?” is a form of dissociation, and a manifestation of mental illness. Why is it a form of mental illness? Because it is detached thinking. It is thinking devoid of the anchoring awareness that I cannot stand outside of the crisis. And if I am standing within the crisis, then seeking to profit from the crisis is to actively participate in perpetrating harms against myself and those who are part of my community. How can I, I ask myself, deploy money, which is simply a form of resource, in alignment with my values around community? The answer it seems to me is to keep interrogating my own excessive fears of scarcity, and to keep banking regional.
Human wellbeing is relational in nature. We are not islands or fortresses, and those who become these things cannot truly thrive. Our wellbeing is woven through our relationships, and these relationships create community. The more uncertain the world becomes, the more our very survival is contingent upon reciprocal relationships. It seems to me that we are being faced with increasingly stark choices about whether to lean into interdependence or withdraw into increasing isolation. I hope my advocacy here is clear. I’m opening another account with First Republic.
