How SVB exposed tech’s tortured relationship with Washington

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US VS THEM — Stocks rallied and investors exhaled Tuesday on the heels of a weekend where the Biden administration scrambled to manage and suppress the fallout created by Silicon Valley Bank’s sudden collapse late last week.

Many tech investors initially predicted Washington would refuse to shore up the failed bank — the largest to crumble since the 2008 financial crisis — because of D.C.’s rocky relationship with the tech industry.

But in the end, nerves were calmed when the federal government provided SVB’s depositors with access to all their funds and Signature Bank, which had followed SVB into insolvency, received the same guarantee.

Nightly spoke with Brendan Bordelon, a POLITICO tech lobbying and influence reporter, on what this outcome means for the relationship between tech and Washington going forward, and what it reveals about the fraught politics between Silicon Valley and Washington.

Over the weekend, it seemed as if many tech investors and venture capitalists were convinced the SVB collapse would become highly politicized, to the point where Washington would use it to try to punish the tech industry. Then, on Sunday, the feds announced the government would guarantee all deposits at the affected banks. What explains the tech industry’s misread of the situation?

I don’t want to paint the entire industry with a broad brush. But in certain sectors of Silicon Valley (and especially among the “extremely online” venture capital types), there’s an accelerating Us vs. Them mentality when it comes to their relationship with Washington. Lawmakers in both parties have spent years criticizing Silicon Valley over a dizzying array of topics — from its outsized market share to its privacy practices, the impact of its products on kids’ mental health and even the potential perils its platforms pose to democracy. While those attacks usually make some political or policy sense — at least when viewed through a D.C. lens — they’re often incomprehensible to your average techie out West. There’s an assumption in Silicon Valley that Washington’s fury towards the tech industry is largely irrational, and that it will inevitably lead to irrational actions. And so they assumed that policymakers would risk financial contagion and the solvency of the banking system, as long as it hurt their tech industry foes in the process.

Even so, while the collapse of SVB is a bank crisis, it’s still got a distinct political angle to it because of the tech connection as well. What are the political fault lines that you’ve seen so far?

While tech is typically a political lighting rod in Washington, there’s so far been remarkably little anger directed towards the industry over the collapse of SVB. Lawmakers that usually never pass up an opportunity to knock Silicon Valley have largely blamed other factors for the bank’s failure — Democrats have instead highlighted loose bank regulations and mismanagement by SVB executives, while Republicans like House Oversight Chairman James Comer (R-Ky.) blamed the bank’s “woke” ESG policies. Even D.C. advocacy groups that routinely criticize the tech industry have been largely silent on its role in SVB’s failure. There are a couple exceptions: Vivek Ramaswamy, a long-shot presidential candidate in the GOP primary, has spent the last few days attacking the feds’ decision to rescue SVB’s depositors, calling it a “bailout of Silicon Valley itself.” And former Rep. Barney Frank (D-Mass.) has suggested the cryptocurrency panic is partially to blame for the budding banking crisis. But those are pretty lonely voices, at least so far.

How will Biden’s handling of SVB impact his relationship with Silicon Valley?

Only time will tell. But I suspect that the contempt and distrust many in the tech industry feel for Washington won’t go away just because the Biden administration decided to bail out SVB depositors. While they may be applauding the action taken on SVB, many VCs and tech executives think the federal government is fundamentally a drag on innovation and the industry’s more ambitious efforts. That mentality is now kind of baked into the culture of Silicon Valley, and it won’t be easy to dislodge. On top of that, the Biden administration continues to push for aggressive antitrust action against top tech companies, stricter data privacy rules and a rollback of the broad liability protections provided to online platforms. As long as the Biden administration continues to pursue those policies, the adversarial relationship is almost certain to continue.

Do you expect to see any changes in the way tech executives interact with Washington or engage politically as a result of this experience?

Last weekend’s social-media freakout among tech VCs over SVB didn’t seem to land well in political circles. You had a bunch of techies tweeting in all caps about how the U.S. financial system would collapse if they and their companies weren’t bailed out immediately. While neither I nor the people I’ve spoken to think those tweets had any impact on the Biden administration’s decision making, there could be a recognition within the industry that those kinds of frantic messages often do more harm than good. More generally, I think the tech industry could try to better distinguish between the big companies that everyone loves to hate and the start-up community, which also banked with SVB. Politicians of all stripes are generally quite supportive of tech industry underdogs that are working to out-innovate the giants, and they’re less likely to try and hurt them or otherwise put them at risk.

Welcome to POLITICO Nightly. Reach out with news, tips and ideas at [email protected]. Or contact tonight’s author at [email protected] or on Twitter at @katherinealong.

What'd I Miss?

— Santos files paperwork for reelection bid: Rep. George Santos (R-N.Y.), the embattled freshman who has faced a slew of scandals following his election, has filed paperwork to run again in 2024. The statement of candidacy filed to the Federal Election Commission on Tuesday — turned in on the final day allowed — keeps the door open for Santos to seek another term but does not guarantee he’ll run. The controversy-stricken lawmaker has yet to officially say whether he’ll try for reelection but has indicated he is open to such a run. The paperwork comes as lawmakers from his own party call for his resignation.

— Biden EPA launches landmark push to curb ‘forever chemicals’ in drinking water: The Biden administration is proposing the first-ever federal drinking water limits for toxic chemicals used to make nonstick materials like Teflon, stain-resistant carpeting and military firefighting foam, which are estimated to be contaminating 200 million Americans’ drinking water. It’s an aggressive move that represents what health experts and community activists say is a long-overdue effort to begin reining in the widespread contamination from PFAS “forever” chemicals, which are linked with cancer, reproductive problems and a wide array of other health ailments. If finalized, the regulation would spark the first major upgrade to the safety of the nation’s drinking water in three decades.

— Russian jet collides with U.S. drone in ‘reckless’ maneuver: A Russian fighter jet collided with a U.S. drone flying in international airspace on Tuesday, sending the uncrewed aircraft crashing into the Black Sea, the U.S. military announced. The uncrewed MQ-9 Reaper drone was making a routine flight before it was intercepted by two Russian Su-27 fighter jets. The warplanes dumped jet fuel on the drone and flew in front of it in a “reckless, environmentally unsound and unprofessional manner,” according to a statement from U.S. European Command.

Nightly Road to 2024

CHICAGO SUGAR DADDY — Illinois politicians, including billionaire Gov. JB Pritzker, and wealthy corporate leaders are sweetening their pitch for Chicago to host the 2024 Democratic convention by pledging to make sure the Democratic National Committee can walk away debt-free, writes POLITICO’s Shia Kapos. In the city’s battle with other finalists, New York City and Atlanta, the governor, his sister and former Commerce secretary Penny Pritzker, businessperson Michael Sacks, Cubs co-owner Laura Ricketts and Illinois AFL-CIO President Tim Drea have been in talks about funding Chicago’s effort. It’s a lineup of resources designed to blunt the fears of repeating the 2012 convention in Charlotte, N.C., which ended with an $8 million tab.

IN THE SHADOW OF MAR-A-LAGO — Florida’s Palm Beach County, home to some of the nation’s biggest political donors and former President Donald Trump and his private club, Mar-a-Lago, has been a hive of 2024 GOP presidential activity, the Palm Beach Post reports. Gov. Ron DeSantis has made three visits to Palm Beach County since early February, and former South Carolina Gov. Nikki Haley has also visited. While Democrats hold a sizable lead among voter registrations, the populous county surprisingly went red in 2022.

TRUMP’S IOWA TRIP — Trump has made clear to his team he does not want a repeat of what happened in Iowa in 2016, when he felt he was out-organized by his primary opponents and finished second to Texas Sen. Ted Cruz, reports POLITICO’s Alex Isenstadt from Davenport. The former president has recalled to people that his daughter, Ivanka, showed up to an Iowa caucus site only to notice that the campaign had little presence there.

Speaking to reporters at the Quad City International Airport upon his arrival Monday, Trump expressed confidence in his prospects in the state in 2024 and remarked that he won Iowa in the 2016 and 2020 general elections. He also expressed optimism that he would have the support of the state’s Republican governor, Kim Reynolds, given that he has endorsed her previously. Those close to Reynolds, however, say she remains uncommitted in the race. In recent days, she has appeared with DeSantis, Haley and Scott.

AROUND THE WORLD

RATASTROPHE — In the French capital, the garbage collectors are on strike, which means there is stinking trash piled high in the streets, politicians screaming at one another, and a likely invasion by… rats!

Garbage bags could be seen piling up on the sidewalks of Paris over the weekend — especially in areas with many restaurants — forming shoulder-high piles of waste, writes POLITICO Europe’s Nicolas Camut. That’s because the city’s garbage collectors have been on strike since March 6 in protest at a controversial reform of France’s pension system championed by President Emmanuel Macron.

As a consequence, around 5,600 tons of uncollected waste lay in the streets of the capital on Monday — day eight of the strike — according to the Paris mayor’s office.

FINLAND FIRST — Turkey’s reluctance to approve Sweden’s NATO candidacy is hampering chances that Stockholm and Helsinki will join the military alliance together.

“It is not excluded that Sweden and Finland will ratify in different steps,” Swedish Prime Minister Ulf Kristersson said at a press briefing Tuesday, according to public broadcaster SVT. The likelihood of this scenario “has increased” in recent weeks, Kristersson added, highlighting the ball was now in obstinate Turkey’s court.

Spurred by Russia’s war on Ukraine and the rising threat coming from Moscow, Sweden and Finland officially asked to join NATO last May, and later committed to joining the alliance together. Most members of the transatlantic military alliance quickly signed off on the joint application — except Hungary and Turkey, whose national parliaments have yet to ratify the membership bids.

Although Stockholm has taken steps to ease some of Turkey’s concerns — including by passing a bill designed to prevent participation in terrorist organizations — Ankara has repeatedly blocked the Swedish candidacy because it refused to extradite dozens of Kurdish political opponents whom it considers to be terrorists.

Nightly Number

RADAR SWEEP

UNRECOGNIZABLE OCEANS — Using advanced climate models to simulate the effects of United States-Russia and India-Pakistan nuclear conflicts, scientists have provided the first detailed look at the impacts of nuclear war on the ocean — and their findings describe a planet transformed even more profoundly than earlier simulations suggested. Even at the tame end of their scenarios, with the nations using about one-quarter of the 400 to 500 warheads they’re expected to accumulate within the next several years, an India-Pakistan nuclear war would generate nearly 20 times the amount of smoke produced by the catastrophic Australian bushfires of 2019 and 2020. In all cases, within a week or two, a layer of smoke hovers above the entire planet. There’s less sunlight, everything starts to get just a tad colder, and unforeseen extinctions and shifts in migration patterns are almost a given, writes Haley Weiss in Nautilus.

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