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The biggest bank failure in almost a generation explained

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Photo above - TV host Art Linkletter interviews someone for "Kids say the darndest things"
Not shown - PBS reporter interviews a fed official about the SVB bank failure

“Silicon Valley Bank are dead!" (Apologies to Shakespeare)

Silicon Valley Bank. Not exactly a household name, is it? I don't have a checking account, credit card, or mortgage there. Bet you don't either. Don't dismiss this as small potatoes though. SVB is one of the 20 largest banks in America. It has (had) $200 Billion (with a B) in assets. Now you know.

Evidently, SVB has very few "branches”. A couple in the ACTUAL “Silicon Valley”. And another on Wall Street. Yesterday afternoon, the bank was closed – permanently – by the federal government. Earlier that morning SVB's wall street branch manager called 911 to have his customers arrested. They were lining up in the lobby, and becoming 'unruly' while 'trying to get their money back" before SVB failed. Which, in fact, it did, later that same day.

SVB's own president (Greg Becker) had better timing. Last month he sold 12,500 shares of his personal SVB stock at $287 a share (!!!!). Today those shares are worth zero. Some luck, eh? And just a week or two ago realty TV financial guru Jim Cramer ("mad money") was exhorting his sheep - er, viewers - to buy SVB shares. Hey, Cramer - talk much with Becker?

Clearly SVBs kingpin knows his way around money, even if Cramer is an idiot. And Becker should. He's also a Federal Reserve Board member (San Francisco/Silicon Valley district). Geez Louise – does this look shady, or what?

I withdraw that slur. I'm sure Mr. Becker – if he's ever charged – will have months (years?) of thorough investigation, before government officials decide not to charge one of “their own”. Quick - name a fed governor/bank president who EVER went to jail. Keep googling this, while i move on.

Back to those unfortunate, “unruly” depositors at the wall street branch of SVB. Who the heck deposits millions in a weird bank nobody ever heard of? One with almost no branches? Evidently “wall street traders” and “start up entrepreneurs” with $10 million in cash, and no better ideas. Fortunately, NYC's finest declined to arrest these customers. They left the bank premises quietly. And then were impoverished hours later. Well, that's the job of police, right? To keep unruly bank customers at bay. Their job certainly doesn't seem to be preventing drive by shootings, drug dealing, and carjackings. Do you doubt me? Quick - call 911 right now about the corner meth dealer and see how quickly police come - if at all.

So why did SVB collapse? PBS - our official government news channel - was interviewing “Julia Coronado, economist for the federal reserve” last night. On how great the Biden economy is doing. You know – lots of new jobs; inflation might possibly be tamed soon; tax increases are good. Exactly the sort of thing you'd expect a government economist to say. Then, poor Julia went COMPLETELY off the rails. Unscripted TV. Ms Cornodo - live via a Zoom hookup from her dining room - was ALSO asked about the collapse of SVB – which had happened only an hour before. Was this bank failure going to be "significant”? I'll paraphrase Julia's reply (the entire PBS news hour episode is already available online): “Well maybe. Probably not that much. They failed because of high interest rates and risky loans”.

Wait . . what? High interest rates? You mean like the TRIPLING of fed funds rates over the past year by “government economists” and “federal reserve officials”? Geeze Louise, Julia - you CAN'T say that on live TV! Isn't there a 10 second audio delay, and a censor, like on SNL?

Okay. Let's accept Julia's impulsive honesty at face value. Until her bosses reach out, and she “walks back” her comments. Let's move on to Julia's reason #2: SVB has “risky loans”. Nobody disputes that startups with sketchy cash flow and scruffy management talent are “risky”. That's why “normal banks” - like Chase, Citibank, Wells Fargo, Bank of America – rarely touch the hard stuff. Regulators keep "good" banks away from that kind of risky business. But clearly our regulators DIDNT have qualms about all those risky loans flowing downhill to SVB. Regulators like “the federal reserve”, “office of the comptroller of the currency”, etc.

But there's another side to SVB. One which Julia the fed economist failed to mention. It's a MAJOR, MAJOR crypto currency player. Huge deposits from, and loans to, crypto players like “Circle” (billions and billions). FTX, which has already failed, and IT'S founder Sam Bankman-Fried, Arrested, but free on "mortgage bail".

Why aren't crypto-scam-companies better regulated? Because they make HUGE donations to political officials. Both parties. No foolin'. Check out Sam Bankman-Fried, if you doubt me. That's why he's chillin' at his 'rents mansion, instead of in the hoosegow.

Crypto markets plummeted $70 billion yesterday. Before the closure of SVB was even announced. Bet crypto traders they wish they were better friends with Greg Becker, lucky SVP/president and federal reserve official, eh? Their own timing might have been better if that was the case.

Okay - so here's the important part - especially for people who graduated after 2008. There's been one (and only one) bank failure this century bigger than SVB. The collapse of Washington Mutual in September 2008. Hundreds of Billions – same scale as SVB. How did the stock market react? The Dow Jones Industrial Average declined 40% (from 14,000 to 8,000). Because Washington Mutual was a (big) “canary in the coal mine”. Just like SVB.

More corporate and bank failures are likely. And a major stock market decline. You believe what you want, though. I've been dissin' crypto for years. And now I'm finally right.

Thank you, Ms. Julia Coronado, for appearing on PBS last night to assure us that this probably isn't going to be a problem.

Government economists say the funniest things, no?

This sort of chicanery is why nobody trusts government officials, the media, lawyers, or bankers.
 

bdtex

Administrator
Staff member
I tend to agree. Biden totally owns this. If he wants to keep issuing executive orders, he could have drafted one regulating crypto.
And you know exactly who would've reamed him for it too...the same ones crowing and trolling over the SVB failure.
 
And you know exactly who would've reamed him for it too...the same ones crowing and trolling over the SVB failure.
Ive been recommending crypto regulation since before the trimp administration. Basically, its only utility is ransomeware payments and money laundering.
 
SVB, crypto, and Silvergate?

https://wallstreetonparade.com/2023/03/fdic-investigators-are-on-the-premises-of-collapsing-federally-insured-crypto-depositor-bank-silvergate-its-not-a-friendly-visit/

"A very peculiar headline appeared at Bloomberg News yesterday concerning the collapsing federally-insured bank,

"Silvergate Bank, which became the go-to financial institution over the past few years for crypto exchanges around the globe.

"The headline read: 'Silvergate Is in Talks With FDIC Officials on Ways to Salvage Bank.'

"That headline moved quickly to other news outlets, which dutifully regurgitated that there was an effort underfoot by the Federal Deposit Insurance Corporation to save Silvergate Bank..."

"Here’s an alternative theory: the FDIC bank examiners are on the premises of Silvergate Bank to find out how big a hole there is between what the bank owes to depositors, its cash on hand, and what its liquidated assets might be worth.

"Silvergate’s ability to find a white knight bidder to 'salvage' the bank ended when gutsy U.S. Senators Elizabeth Warren (D-MA), John Kennedy (R-LA), and Roger Marshall (R-KS) released a letter on January 30 to the bank’s CEO, Alan Lane.

"The letter revealed that the bank had been stonewalling the Senators on their inquiries about the bank’s dealings with Sam Bankman-Fried’s collapsed crypto exchange, FTX, and his hedge fund, Alameda Research.

"Federal prosecutors have charged that Alameda and its principals looted more than $8 billion from FTX customer accounts and the money is missing."
 

Addy

Rebuild With Biden!
So why did SVB collapse?
Elizabeth Warren... has another informative explanation to consider.
___________________________________________________

President Trump and congressional Republicans' decision to roll back Dodd-Frank's 'too big to fail' rules for banks like SVB—reducing both oversight and capital requirements—contributed to a costly collapse," said Sen. Elizabeth Warren.


JAKE JOHNSON
Mar 12, 2023




In 2018, ignoring the vocal warnings of experts and advocacy groups, the then-Republican-controlled Congress passed legislation that weakened post-financial crisis regulations for banks with between $50 billion and $250 billion in assets, sparking fears of systemically risky failures and more taxpayer bailouts.
Silicon Valley Bank (SVB), the California-based firm that collapsed on Friday, controlled an estimated $212 billion, leading analysts and lawmakers to argue that the 2018 law made the institution's market-rattling failure and resulting federal takeover more likely.
Sen. Elizabeth Warren (D-Mass.), who was an outspoken opponent of the deregulatory measure, said in a statement Friday that "President Trump and congressional Republicans' decision to roll back Dodd-Frank's 'too big to fail' rules for banks like SVB—reducing both oversight and capital requirements—contributed to a costly collapse."
But the GOP wasn't alone in its support for Sen. Mike Crapo's (R-Idaho) Economic Growth, Regulatory Relief, and Consumer Protection Act, which critics dubbed the Bank Lobbyist Act.
As Warren noted as the bill was flying through Congress, a number of Democrats—including Sens. Mark Warner (D-Va.), Joe Manchin (D-W.Va.), and Jon Tester (D-Mont.)—were integral to the legislation's passage, which led almost immediately to more bank consolidation.
Prior to the enactment of the Crapo bill, which then-President Donald Trump signed into law on May 24, 2018, banks with more than $50 billion in assets were subject to enhanced liquidity mandates and more frequent stress tests aimed at ensuring they could weather economic turmoil.
The 2018 law raised the threshold for the more stringent regulations to $250 billion or higher, a gift to banks like SVB that had been working for years to gut post-crisis regulations implemented under the Dodd-Frank Act of 2010. The diminished oversight, some argued, is at least partly to blame for SVB's crisis.
"The collapse of Silicon Valley Bank was totally avoidable," Rep. Katie Porter (D-Calif.) wrote on Twitter. "In 2018, Wall Street pushed a deregulation bill that allowed banks like SVB to take reckless risks. It passed, even as I and many others warned of the risks. I am writing legislation to reverse that law."
As The Leverreported Friday, SVB specifically pushed Congress in 2015 to hike the regulatory threshold to $250 billion, with the bank's president touting its "strong risk management practices."
"Three years later—after the bank spent more than half a million dollars on federal lobbying—lawmakers obliged," the outlet noted.
Trump-Era Deregulation Deemed a Key Culprit in the Failure of Silicon Valley Bank (commondreams.org)
 
Elizabeth Warren... has another informative explanation to consider.
___________________________________________________

President Trump and congressional Republicans' decision to roll back Dodd-Frank's 'too big to fail' rules for banks like SVB—reducing both oversight and capital requirements—contributed to a costly collapse," said Sen. Elizabeth Warren.


JAKE JOHNSON
Mar 12, 2023




In 2018, ignoring the vocal warnings of experts and advocacy groups, the then-Republican-controlled Congress passed legislation that weakened post-financial crisis regulations for banks with between $50 billion and $250 billion in assets, sparking fears of systemically risky failures and more taxpayer bailouts.
Silicon Valley Bank (SVB), the California-based firm that collapsed on Friday, controlled an estimated $212 billion, leading analysts and lawmakers to argue that the 2018 law made the institution's market-rattling failure and resulting federal takeover more likely.
Sen. Elizabeth Warren (D-Mass.), who was an outspoken opponent of the deregulatory measure, said in a statement Friday that "President Trump and congressional Republicans' decision to roll back Dodd-Frank's 'too big to fail' rules for banks like SVB—reducing both oversight and capital requirements—contributed to a costly collapse."
But the GOP wasn't alone in its support for Sen. Mike Crapo's (R-Idaho) Economic Growth, Regulatory Relief, and Consumer Protection Act, which critics dubbed the Bank Lobbyist Act.
As Warren noted as the bill was flying through Congress, a number of Democrats—including Sens. Mark Warner (D-Va.), Joe Manchin (D-W.Va.), and Jon Tester (D-Mont.)—were integral to the legislation's passage, which led almost immediately to more bank consolidation.
Prior to the enactment of the Crapo bill, which then-President Donald Trump signed into law on May 24, 2018, banks with more than $50 billion in assets were subject to enhanced liquidity mandates and more frequent stress tests aimed at ensuring they could weather economic turmoil.
The 2018 law raised the threshold for the more stringent regulations to $250 billion or higher, a gift to banks like SVB that had been working for years to gut post-crisis regulations implemented under the Dodd-Frank Act of 2010. The diminished oversight, some argued, is at least partly to blame for SVB's crisis.
"The collapse of Silicon Valley Bank was totally avoidable," Rep. Katie Porter (D-Calif.) wrote on Twitter. "In 2018, Wall Street pushed a deregulation bill that allowed banks like SVB to take reckless risks. It passed, even as I and many others warned of the risks. I am writing legislation to reverse that law."
As The Leverreported Friday, SVB specifically pushed Congress in 2015 to hike the regulatory threshold to $250 billion, with the bank's president touting its "strong risk management practices."
"Three years later—after the bank spent more than half a million dollars on federal lobbying—lawmakers obliged," the outlet noted.
Trump-Era Deregulation Deemed a Key Culprit in the Failure of Silicon Valley Bank (commondreams.org)
It bears repeating:

"SVB CEO Sold $3.6 Million Worth of Shares Before Bank's Collapse
Greg Becker sold his shares on Feb. 27, 11 days before Silicon Valley Bank was shut down by regulators."

https://www.thestreet.com/technology/svb-ceo-sold-3-6-million-worth-of-shares-before-banks-collapse
 

Addy

Rebuild With Biden!
It bears repeating:

"SVB CEO Sold $3.6 Million Worth of Shares Before Bank's Collapse
Greg Becker sold his shares on Feb. 27, 11 days before Silicon Valley Bank was shut down by regulators."

https://www.thestreet.com/technology/svb-ceo-sold-3-6-million-worth-of-shares-before-banks-collapse
It needed to be pointed out how they operate -always saving their own hides/interests first... thanks! :(
_____________________________________________________________
Yellen: No federal bailout for collapsed Silicon Valley Bank
Treasury Secretary Janet Yellen says the federal government won't bail out Silicon Valley Bank, but is working to help depositors who are concerned about their money
WILMINGTON, Del. -- Treasury Secretary Janet Yellen said Sunday that the federal government would not bail out Silicon Valley Bank, but is working to help depositors who are concerned about their money.

The Federal Deposit Insurance Corporation insures deposits up to $250,000, but many of the companies and wealthy people who used the bank — known for its relationships with technology startups and venture capital — had more than that amount in their account. There are fears that some workers across the country won't receive their paychecks.
 
It needed to be pointed out how they operate -always saving their own hides/interests first... thanks! :(
_____________________________________________________________
Yellen: No federal bailout for collapsed Silicon Valley Bank
Treasury Secretary Janet Yellen says the federal government won't bail out Silicon Valley Bank, but is working to help depositors who are concerned about their money
WILMINGTON, Del. -- Treasury Secretary Janet Yellen said Sunday that the federal government would not bail out Silicon Valley Bank, but is working to help depositors who are concerned about their money.

The Federal Deposit Insurance Corporation insures deposits up to $250,000, but many of the companies and wealthy people who used the bank — known for its relationships with technology startups and venture capital — had more than that amount in their account. There are fears that some workers across the country won't receive their paychecks.
I'm hearing politicians like Ro Khanna argue SVB has sufficient assets to cover all uninsured deposits WITHOUT using the word "bailout." o_O
https://www.cbsnews.com/news/ro-khanna-face-the-nation-transcript-03-12-2023/
 

Addy

Rebuild With Biden!
I'm hearing politicians like Ro Khanna argue SVB has sufficient assets to cover all uninsured deposits WITHOUT using the word "bailout." o_O
https://www.cbsnews.com/news/ro-khanna-face-the-nation-transcript-03-12-2023/
It seemed like he was saying that. Then he seemed to be in favor of a govt bailout for an immediate solution.
Those assets he was referring to, didn't appear to be liquid assets. Suggesting that 10 years down the road, likely.
That's what I got from the transcript. Thanks.
 
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