HSBC buys bank for £1. A system based on crisis
It’s the anniversary of the death of Karl Marx on 14th March and he would surely have been interested in the news that HSBC has bought Silicon Valley Bank for £1.
SVB has gone bankrupt in the US and its smaller UK operation was wound up on Sunday. It also has operations elsewhere around the world, in Germany and China.
Reports indicate that it was the bank of choice for new start ups in the tech sector. HSBC will of course have taken on the liabilities and debts of SVB but that is the bank’s problem. Mostly.
In essence SVB failed to hedge (take financial account of) rises in interest rates which the US Government (as in the UK) is using to control inflation (whether that works is another matter). As a result the value of its assets fell and it found itself needing to seek additional funds. This set off the specific crisis.
It may lead as in 2008 to a wider banking crisis- Biden argues it won’t but this will become clear in fairly short order.
The wider point is that Marx, who was no stranger to personal financial crisis, wrote a lot about banking crisis in mid-nineteenth century England. The specific details of each crisis were of course different to that behind the issues at SVB. However Marx’s point was that capitalism itself is a system which revolves around crisis. Gordon Brown may have though he could go beyond boom and slump but 2008 proved otherwise and 15 years on may be back there again.
I seem to remember that taking another failing company over put the Co-op bank in problems.