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Mar 16, 2023Liked by Matt Welch

Matt and Michael going full white supremacy by showing up on time to work.

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https://www.fair-for-all.org/dr-tabia-lee/

Get a load of this. From the article:

“In her first week at De Anza College, Lee was accused of “whitesplaining” as she tried to set a meeting agenda, and she was told that she was perpetuating “white supremacy” by valuing punctuality & engaging in strategic planning.”

😳😂😂😂

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deletedMar 17, 2023·edited Mar 17, 2023
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Valid observations. I agree. As they say: If you go far enough to the left you end up holding hands with the right.

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Mar 16, 2023Liked by Matt Welch

Matt & Michael!!!! I can’t believe you two had a lengthy discussion of gay rights and policies, yet never mentioned the first VP to support gay marriage, Dick Cheney! He did it in like 2002 - a decade before Biden. #facts

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Who is this Kmele fella they keep mentioning? I've heard rumors of his existence, but he's seen less frequently than Sasquatch.

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I think it's spelled “K’meal”

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I still don't get the antipathy towards Rufo/DeSantis when it comes to dismantling DEI departments from public universities. Money should not be doled out from the public treasury for state-sponsored racism.

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author

Yeah, I'm not sure where I land on the issue yet, tbh.

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I guess I would implore you to consider the issue from first principles. I can only speak for myself, but from reading the other comments, I think a large cohort of the audience besides just myself are loyal consumers of your product because of a frustration with what we all see as the vapidity of the whole 'DEI' thing, and how you generally discuss the mess they've all wrought in a reasoned fashion. Our trusted institutions are, as Iowahawk would say, skin-suits at this point, which is a big fucking problem moving forward.

But then let's take this episode in particular. You were in my estimation rightfully critical of the Stanford Dean and her behavior. However, some of the criticism of her wasn't her content so much as she was providing more grist for Chris Rufo and Ron DeSantis, and less that she's a dangerous fucking moron. Here's an analogy: there are Zebras in the Serengeti that are getting eaten by Lions. You're blaming the Zebras for being eaten by the Lions because the Zebras have stripes and they're easy for the Lions to identify. Meanwhile, they're fucking Zebras. They have stripes. There's nothing they can do about that fact. Their whole lives are devoted to having stripes, because that's how they make their living. The second those stripes are taken away, they would no longer have value, and they really have no other skills to fall back on. And don't go blaming the Lions for the predicament of the Zebras; they just have to eat, so let's all be glad they're feasting on the goddamn, dumbass Zebras. By the way, the Zebras in this analogy are the DEI folks... :-) I guess if you want to be critical of the methods the gentlemen in question are using, that's certainly fair. But I would implore you to put forth your own solutions in addition to the criticism.

One more thing: Moynihan has to put away the hypothetical about "well, what would these people say if there was an economics course that only taught Hayek? Wouldn't they be okay with that?" That's the very definition of a strawman argument. That hypothetical isn't happening in the real world. These taxpayer-funded departments at public Universities that pay six-figure salaries to people whose only skill is to peddle racist horseshit do exist in the real world.

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author

My intention with the analogy was more as a cautionary tale toward those people who believe they are being righteous in opposition to Rufo/DeSantis, while sitting on their hands with the much-more-numerous cases of institutional skin-suit capture by insane people.

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It’s a poor analogy as well, because the true straw man is not a course, but an entire degree and department in economics in a public university system that solely taught the Austrian school and said all others were harmful, evil, violent, unworthy of all but shame, and otherwise shite. Not only do these entities not exist, good luck finding the reasonable supporter at all, much less on faculty with tenure.

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By the way, I'm just now seeing the Wokal Distance tweet threads where he uses a Zebra/Lion analogy. Holy fuck, that's some crazy-ass serendipity.

https://twitter.com/wokal_distance/status/1636252869090328577

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I can’t be clear minded on this topic bc Rufo is such a fucking insufferable nerd

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founding

Somewhat related, from a New York Times editorial authored by Kmele and other:

"A wiser response to problematic elements of what is being labeled critical race theory would be twofold: propose better curriculums and enforce existing civil rights laws. Title VI and Title VII of the Civil Rights Act prohibit discrimination on the basis of race, and they are rooted in a considerable body of case law that provides administrators with far more concrete guidance on how to proceed. In fact, there is already an Education Department Office of Civil Rights complaint and a federal lawsuit aimed at programs that allegedly attempt to place students or teachers into racial affinity groups."

Some argued it would take too much time to go to the courts or have new curriculums approved, but I don't think so.

https://www.nytimes.com/2021/07/05/opinion/we-disagree-on-a-lot-of-things-except-the-danger-of-anti-critical-race-theory-laws.html

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I would agree that it's prudent to challenge these people in the courts in certain circumstances in order to get them to defend their positions, much in the same way that I think it has been effective to drag Trump and his lawyers in front of courts to plead their case with regards to election fraud; their arguments/positions fall apart pretty quickly. But when we're talking about institutional rot that wastes millions of dollars of taxpayers money, I would argue cut the fat first, and then put the onus on the crazies to file their lawsuits in the other direction. They've effectively motte-and-bailey'ed their way to setting the whole house on fire, while the position in the rational center seems to be "hey, be careful using water to put out that fire, it might cause mold." Well, yeah, it might, but the there won't be anything left if you don't stem the flames.

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These “departments” are not contributing to the general welfare and education of students at all. They serve as a haven for otherwise unemployable grievance studies devotees, and are a complete waste of tax payer money and a net negative to campus culture. Good riddance.

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1:20: I'm really glad you mentioned this. I think the combined efforts of a lot of very intelligent people including you three, John Mcwhorter, Jess Singal, Bari, etc. etc. have created a really solid pendulum swing back toward sanity when it comes to Woke Politics and the excesses of the tenets of Woke ideology (Critical theory, etc.). However, there is one aspect that is really underappreciated. It is the long term affects of this theory in crucial levers of our political structure. In particular, law schools. Many people, myself included, were very pleased when the courts shot down Trumps absolutely ridiculous "Muslim Bans" almost immediately. Courts are a very useful balance against executive overreach. But, we always assume that the courts will retain their purpose which we often assume to be what dictates them currently. So, we might be confident that a teacher could sue their school after being fired for having a blue lives matter sign in their yard (Or Black Lives Matter, etc) and win because it is a violation of his right to free expression. But what happens if the majority of the top law schools are pumping out "Lawyers" that no longer believe in things like free speech? I still see a very scary possible future where less and less judges and lawyers believe in concepts like due process, free speech, etc.

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"all the people you hate are, in fact, to blame."

Conveniently for me, this is always true.

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founding

I’m here to take me medicine. I prefer street drugs, but I’ll settle, this time.

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"A spoon full of heroin makes the medicine go down, makes the medicine go down."

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That’s not all it makes go down.

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The proposed banking regulations, such as upping the FDIC insurance limit at $500k, remind me so much of the gun control debates that are had and the legislation that is passed in the wake of many of the mass shootings that we've seen in recent years, in that the measures discussed would do nothing to actually prevent the event in question from happening in the first place or again.

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Mar 16, 2023Liked by Matt Welch

You're doing god's work, brothers.

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This is my favorite podcast, and I have listened to every episode for the last 2+ years. The financial discussion in this episode was very disappointing. Short sellers are some of the most intelligent people in finance, and the shorts on this bank had been relatively modest. It was not obvious SVB would fail. Second, a collapse of SVB and First Republic would be a disaster for the innovation economy and severely jeopardize the long-term economic health of the US. Disclosure: I am a VC in the biotech community and undoubtedly biased.

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Counterpoint #1: If the collapse of two banks would be enough to devastate the entire tech sector and jeopardize the long-term economic health of the US, then the tech sector is a house of cards with little real value, and it's better for it to come tumbling down before we build on top of it even more than we already have. But I'm suspicious that it's actually that fragile.

Counterpoint #2: The secret sauce of the innovation economy, and capitalism more broadly, isn't actually innovation. It's failure. It's really, really hard to know a priori which innovations are worth pursuing, but by failing quickly and with only moderate pain we let experience trim the fat for us. And then the innovators can dust themselves off and try something new. They might (might!) even learn some valuable lessons that they'll remember for a decade or so. Preventing small failures is like suppressing small forest fires. Eventually you get a huge and much more damaging conflagration.

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Ryan - look at VC return rates and interest rates in the 90s. There are plenty of other time periods where interest rates are between 2-5% and tech returns have been favorable. For 1: it’s the venture debt that may not work - which is the only reason for SVB to exist. The innovation economy does not rely on such instruments. Many of my successful companies over a 30 year investment history did not rely on venture debt.

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I'm having trouble reconciling your earlier statement:

"a collapse of SVB and First Republic would be a disaster for the innovation economy and severely jeopardize the long-term economic health of the US."

With

"it’s the venture debt that may not work - which is the only reason for SVB to exist. The innovation economy does not rely on such instruments. Many of my successful companies over a 30 year investment history did not rely on venture debt."

Can you clarify?

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These banks issued debt too risky for other banks. In exchange, they are required debtors to leave their deposits with them. This caused the concentration. Many startups don't require these instruments. Companies without debt put their money there too because banks cultivated personal relationships with the VCs and CEOs. That's the part to be mad about. Super high-risk debt is now gone, so now startups will bank elsewhere. Make sense?

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founding

1) There was no elevated short positions in either SIBV or FRC.

2) The dangers lurking in SIBV were the subject of a "seeking alpha" post in December of 2022. Since 2019, SIBV AFS book grew from $14 to $27B while its HTM book grew from $14 to $99B. At the end of 2022 SIVB’s had $173B of customer deposits of which $152B were uninsured. So there was a major duration mismatch between uninsured deposits and HTM funds. There was also a lack of regulatory oversight. On March 8, 2023 Moody's had an A1 rating on SIBV and FDIC had never flagged any issues. On March 8, 2023 Fed Chairmen Powell told the Senate he saw "no stress in the the banking system".

2) VC's had a very intertwined relationship with SIBV.

There was a lack of responsibility on the VC's part, as the fiduciaries in the room. The VC's were taking money from investors, parking some of it at SIBV, funding start-up's (that banked with SIBV) and then getting cheap debt from SIBV.

3) Then the music stopped. VC investments fell by 33% in 2022 & by Q4 VC fundraising was at a 9 year low.

4) All the sudden VC's, who had generously funded even the most ridiculous start-up's, stopped funding the start-ups. Then VC's stopped getting funded. Then the start-ups and VC's hit SIBV for their cash, at the same time.

5) In 1998 LTCM imploded due to the Russian crisis and the Fed cut rates to 0.25% . Those events kick-started the 1st tech bubble.

6) The 2nd tech bubble was getting started before the pandemic.

Then in March of 2020, as a response to Covid lockdowns, $6 trillion of central bank money got thrown at markets in 3 weeks, coupled with trillions in fiscal stimulus. The 2nd bubble inflated to implosion. In 2018 Google's headcount was 98,771, by Q2 2022 it was 186,778. The median salary at Google was $295, 884.

7) By the time the Fed started hiking in Q1 of 2022, VC's hadn't funded innovation for 2 years. They were funding stupidity. The valuations for the last seed rounds of start-ups are in the process of being cut by a minimum of 50%. In 2017 TPG gave Vice media $450mm when Vice was valued at almost $6 billion. Two weeks ago Vice media got 15 cents on the 2017 dollar bid, of $400 million, for the whole company.

8) Perhaps the innovation that came out of years of ZIRP and QE was Netflix?

9) Real innovation always gets funded. What won't get funded is $20k virtual Hermes Birkin bags for the metaverse.

10) The regional banks as are a very important part of the American economy. Fingers crossed someone much wiser than Yellen & Biden prevail in coming to a solution to stabilize those banks.

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See response above. I can only speak for biotech.

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Is it possible for "the innovation economy" to survive without 0% or almost 0% interest rates? Because it sure doesn't seem that way.

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Mar 16, 2023·edited Mar 16, 2023

Here’s the latest of three Substack pieces David Lat wrote about the contretemps at Stanford, including audio of the event. (Warning: it gets screechy.)

https://open.substack.com/pub/davidlat/p/the-full-audio-recording-of-judge?r=7enhd&utm_medium=ios&utm_campaign=post

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Sarah Isgur and David French had an absolutely epic Advisory Opinions episode on the whole ordeal. They had David Lat for the first part, the judge for the second part, and then their thoughts for the third part. It was amazing https://thedispatch.com/podcast/advisoryopinions/the-stanford-squeeze/

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Thank you! I just listened to that!

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founding

I was going to mention this pod episode, too! So, so fascinating! I couldn’t put it down.

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that show is always great but this was next level.

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I'm not going to subject myself to that, but I would like to know if the speaker pushed back at all?

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He did, as sj mentioned below. It’s a weird group dynamic: collectively self-congratulatory over their immaturity and boorishness. They’re behaving like feral children, but they’re not; they’re the future hotshot lawyers of America. Depressing.

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founding

Agreed, Kathleen. If it’s the case the DEI Dean rallied students ahead of time, I understand the argument for holding her more accountable than the students, but we let teens and college-age kids off-the-hook for an awful lot these days. I refuse to believe all these students weren’t taught, or expected to, behave respectfully as an audience member. I’m sure they attended assemblies in high school, where this shit wouldn’t be tolerated. They behaved that way because they knew they could, and the more they’re excused for it the more it’ll happen.

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"they’re the future hotshot lawyers of America"

Reality may have something to say about that...

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Unfortunately not. The days of "wait until the real world smacks you in the face" are long over. The activists completely captured HR departments years ago, and none of the big law firms will penalize you for a history of vigorous (left wing) activism. These students WILL be successful and widely respected members of the legal community, including some who will be judges and politicians in positions of real government power. Whether we like it or not.

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founding

He did. He was both ambushed and outnumbered, so it was a pretty futile attempt on his part. But he was no shrinking Violet.

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Do you want to know how fucking shocked I was to learn that Barney Frank, of all people, was connected to a bank that needed a bailout?

Not fucking shocked at all.

Having said that, this interview is actually pretty entertaining and worth a read. Honestly, neither Frank or Chotiner cover themselves in glory.

https://www.newyorker.com/news/q-and-a/why-barney-frank-went-to-work-for-signature-bank

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I think Barney comports as his usual irascible self, albeit slightly incoherent at times. I’m fully on his side though when the interviewer was asking him about sitting on the board of a bank. The best place to make a difference in an organization is within the organization itself. Saying he shouldn’t sit on the board of a bank because he supports tighter financial regulations seems bizarre to me.

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I get where Chotiner was coming from, but Frank had decent responses and made Chotiner look like a fool. I remember Barney Frank as being pretty smart and Chotiner didn't seem prepared.

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If I was going to try to take Frank to task over this, these are the types of questions I'd ask

You're a champion for greater financial oversight, and yet a bank that you helped govern went under and needed a bailout. What happened there? Did you realize the bank was at risk? If so, did you push for change? If you didn't see this coming, what did you miss, and how do you expect regulators to prevent these types of failures if you couldn't?

You say you wanted to make some money, and I think the vast majority of Americans won't begrudge you that. But the vast majority of Americans don't have the connections that you do as a former Congressman and chair of the Financial Services Committee. And I think a lot of people will wonder why you decided to make money in finance, of all places? Trust in Congress is nearly non-existent, so can you at least understand why people might think that you're profiting from your time in public service, or why people might be suspicious that a bank that you, with all your connections, are involved with received a bailout? Do you feel that you have a duty not only to avoid corruption, but to avoid the appearance of corruption, for the sake of trust in our public institutions?

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I think that's a smart line of questioning. I get the sense from reading his answers that what happened to him is what happens to a lot of finger-waggers: they talk a big game until they're actually in the shit. "Oh, damn, I didn't realize how much paper pushing was involved in these regulations and how much it's costing, when these resources could be going to something more productive. I also didn't realize how hard it is to attract regulators who are actually competent."

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Should colleges have a Department of Scientology? If not, please explain how and why you are against freedom of speech and freedom of expression.

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author

I mean, *department* sounds a bit much, but class I could definitely see. I don't think it would ever be proposed as a department by any publicly funded university, and on that nearly impossible scenario I don't think government action would even be required, so loud would the hoots of derision be.

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Fair enough. Along that line do you think american universities have justly earned a reputation in recent years for doing an appropriate job of filtering out nefarious ideas and ways of going about activism?

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Oh God no. But also, I don't see that either as their main job or my main concern. To the extent that they make themselves increasingly ridiculous -- and in my casual view, they are -- they will continue losing higher education market share, which America used to dominate but is now losing its grip on. I prefer that market corrective than having reactionary politicians start singling out departments or classes or ideas or professors for excision.

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founding

Allison Schrager was great and I'm generally not a fan of economists (too much abstract theory for a group of experts who have never run a business or worked on a desk).

It is a group of economists who are tasked with running the yearly Dodd-Frank stress tests. In 2022 they failed to stress test the banks for a rapidly rising interest rate scenario (not without precedent see 1980 and S&L crisis). The "extreme adverse scenario" in the 2022 stress tests had the 10-Year at 0.9% for all of 2023. It was 4.01% when SIVB started unloading their portfolio of treasuries. Regulators are never held accountable. Tim Geithner was head of the FRBNY (regulator assigned to oversee banks) during the largest banking failure in US history. For his stellar performance he was promoted to Treasury Secretary.

Doing away with the FDIC per-depositor insurance limit or increasing it to $500k would take an act of Congress. While one is sure Biden will politicize this in the weeks to come, one has their doubts about Congress committing acts of legislating.

The counter-factual on SIBV isn't the uninsured depositors would have been wiped out. The recovery by uninsured depositors for some of the most recent bank failures was between 80-95%. Obviously payroll and Oprah's money were a factor in the bail-out. Whether a liquidity crisis has turned into a solvency crisis remains to be seen. As of Wednesday March 15, 2023, the Fed had $318B in loans outstanding to the financial system (for context that is 50% of what they had extended during GFC).

90 years ago (when Biden 1st approved of gay marriage) FDR stopped a bank run by shutting the banks for a week, and having a single "fireside chat" with the citizens of his country explaining the banking system. A couple of months later his administration created the FDIC.

One can hardly imagine living in a time when a leader's mere words were so trusted, they soothed ones anxiety in a crisis.

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The Stanford thing made me feel bad for FedSoc student members everywhere.

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So, wait, this woman talking about banks is the new Kmele? Is this a reverse Central Park Karen situation? I'm so confused and I miss Kmele.

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I'm not so sure I miss Kmele...she was really good!

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Well, she showed up even though it's March Madness and America has run out of Adderall, so she's got that working in her favor.

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