Broker Check


March 31, 2023

The recent collapse of Silicon Valley Bank and Credit Suisse, Switzerland’s second largest bank, has shaken people’s confidence in the banking system. Again.

As things go, this current banking crisis is minor compared with the global financial meltdown we endured in 2008. Have we seen the worst of it? Time will tell.

The entire episode is instructive, however. As we all know, Silicon Valley is home to global tech titans such as Google, Facebook, and many others. Equally well documented is that they employ the best and brightest from around the globe.

Techies all over the world are hitting the books right now, dreaming of the vast riches they will acquire solving the world’s most pressing technological challenges. Questions like “How can we keep people’s eyes glued to their phones even longer?” Or “How can we collect and aggregate people’s personal data such that our advertisers can sell them more crap they don’t need, with money they don’t have, to impress people they don’t know?”

Okay, fine, that might be a bit harsh, but only a little bit. The lesson here is that “They” cannot rescue us if we are unwilling to save ourselves. And who are “They,” exactly? I have given this some real thought, and this is my take.

“They” are, first and foremost, never “us.” “They” are other people who we want to believe possess the knowledge and skills we lack. Given that, we expect them to be able to perform the kind of magic we cannot.

Theoretically, this makes sense. If there are people who know stuff we do not - and there are - they should be able to do stuff we cannot. There is just one problem; it does not always work out that way.

In fact, many of the solutions “They” come up with do not ameliorate the problems they are intended to. Worse, those same solutions often act as the seeds of the next calamity.

Let us go back to the banking crisis of 2008. The global financial system nearly collapsed because financial institutions took on far too much mortgage risk.

To be sure, there were other factors such as financial derivatives, which were highlighted in excellent movies like “The Big Short.” But we must remember that derivatives were derived from bad mortgages. They did not cause the mortgages to be bad. Lax lending standards did.

The years leading up to the collapse were some of the most profitable in the history of the industry.  The government, that is to say the taxpayers, bailed out many of the banks. Most of the authors of the calamity were given a pass. Some of them even received their bonuses or were reelected to office.

A few years after the crisis there was an article in Barron's in which they interviewed a New England area money manager. He was an old timer.

The interview focused on all the things that went wrong and the many signals of impending disaster. Some signals presented themselves repeatedly but were ignored. The thing he said that has stayed with me all these years is this:

Question: What do you think we will learn from all this?

Old Timer’s Answer: In the short term an extraordinary amount. In the medium term, quite a lot. And in the long term, absolutely nothing.

And here we are, a decade and a half later, bailing out banks again for taking on too much risk.

Recently, someone wrote that major banks’ profits are private, but their losses are public; meaning that when they make money, they keep it and when they lose money they get bailed out by taxpayers. Heads they win, tails we lose.

As a taxpayer, I agree it is frustrating but the alternative, allowing banks to fail, might be worse. That is a post for another day.

The important thing to realize is that some of the most brilliant engineers in the world had their money at SVB and did not see this coming. Presumably, the best and brightest in banking led SVB to this disaster and did not see it coming. Or if they did, they could not change course in time to prevent it.

As famed economist Thomas Sowell once joked, “The road to hell is paved with Ivy League degrees.” It is not that “They” are not smart. They are. It is not that “They” do not possess knowledge or abilities we do not. They can and often do.

The issue is twofold. First, even though “They” do possess abundant know-how, they might not possess as much knowledge or ability as they have allowed themselves to believe. Second, sometimes “They” might not be focusing on our problems but their own.

I know this might sound cynical but perhaps to some folks problem number one is buying a mansion, problem number two is buying a super car, and whatever problem comes after that is a distant third. I think most would agree that people putting their own selfish interests above all else is not exactly a novel premise in human history.

It all comes back to us. I believe that, at bottom, “They” represents the abdication of “our” responsibility.

In my practice, I work with folks who are willing to soberly accept responsibility and take the action necessary to protect themselves and those they love from the slings and arrows of outrageous fortune - to the degree possible.

“They” cannot save us and might not even be interested in doing so. A good friend of mine often says “If it is to be, it’s up to me.” I like to think, if it is to be, it is up to we. Wisdom often trumps intelligence, particularly when intelligence is used for nothing other than preening and personal gain.

If you are tired of seeing “They” lead us from one folly to the next and would like something better, consider working with a financial professional who has your best interests at heart and take action.


Scott R. McGimpsey March 31st , 2023

This material was prepared by Scott McGimpsey and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Neither Cetera Advisor Networks LLC nor Scott McGimpsey is engaged in rendering legal, accounting, or other professionally services. If such assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any federal, state, or municipal tax penalty. Moreover, a diversified portfolio does not assure a profit or assure protection against loss in a declining market. UNIFIED PLANNING GROUP is an independent firm.