"this is very different from “bailing out” Silicon Valley Bank, by the way—it simply means that depositors won’t lose their money". From the point of view of protecting tax payers, or encouraging people to do some due diligence on where they put their money, how do you think these differ? Every finanical manager I have talked to in the last 48 hours agrees that SVB has been bailed out, if not in words then in deed.
No, no, no. What you think you see isn't what you really see. Look over there! This is just a trick of the internet and you are starting to believe that up is up. If it weren't for some soothing gurus to point out that you have no way of really understanding what is happening, you might conclude (erroneously of course) that two plus two somehow equals four. Keep trying and spend some more time on twitter.
Banks get funds to make investments from three sources, equity, bonds and deposits. People who invested in SVB (purchased their equity or purchased their bonds) are going to get hurt financially. The equity purchasers will get nothing, lose everything, and the bond holders will probably get cents on the dollars. The bankruptcy process is long and contentious.
Bailing out depositors is nuanced. I personally despise bailouts of any kind; however, our fractional banking system is built on trust and if depositors lose trust in the banking system then bad things happen, very bad things.
I don't mind backstopping the depositors. It's going over the 250K stated limit that bothers me. If the policy is full backstop, then state that policy and accept the moral hazard. Instead, we have "250K most of the time unless the depositors are people we know, in which case we back them to the hilt." It's different rules for different classes of people, and America isn't supposed to be built on that sort of aristocratic crap.
I could not agree more! The people and companies that deposited their funds at SVB knew the guarantee was only for $250K. There’s a little sign at each teller window stating that fact. The adults turned out to be financial children plunking down their money with eyes wide shut. Like any other child they need to take their knocks and learn from experience. Why are we rewarding bad behavior???
Because we allow these people to make chumps of us. (This has been pointed out already by others here.) Americans, some time ago, started going around with little signs taped on their backs : "Kick me".
Washington politicians-- the Democrats who brought you the Steele dossier and election-fraud of 2020 above all-- and their colluding partners in the civil service did not need more than that in an invitation.
Things take time to trickle through to the wider general public's television-addled consciousness. When they come to grasp the full extent of this episode of conspiratorial graft at high levels--that is, if and when they catch up with people who have your understanding-- they may react with force which Washington cannot resist. Then maybe some of those responsible shall be held to account--and the ill-gotten gains indemnified by taxpayers clawed back. "Big enough to fail (fraudulently), small enough for jail."
I agree but differ slightly. If the FDIC is in fact going to guarantee all deposits, not just those $250K and below, then the premiums banks pay will be MUCH higher and the customer will end up paying for it, as it should be. Most likely in the form of higher bank fees or lower interest.
Sorry, Hutch. All forms of insurance need to set limits somewhere. The bank buys FDIC insurance from and through the federal government. The GOVERNMENT sets the rates and the limits to coverage. It’s the only way to know what is the limit, over the whole banking system, of possible risk. If you want to bargain for greater coverage try, say... maybe Lloyds of London or some such. I believe there are some U.S. insurance companies that will accept that kind of risk. Probably less today than a couple of weeks ago...
Bailing out companies that knowingly left millions of dollars in uninsured bank accounts creates a moral hazard. I read somewhere that over 90% of depositors were over the $250K threshold, which is significantly higher than most commercial banks. These companies made risky financial decisions just like management at SVB who took way too much interest rate risk and customer risk. Shareholders and creditors could sue the management team for fiduciary negligence and potentially fraud too. A thorough reading of SVB’s financial statements exposed a lot of this. No internet needed.
They poorly managed their portfolio and interest rate risk, two of the most important things in banking. Subsequently, those companies that had millions of dollars in their accounts also mismanaged their assets as they are multiple vehicles they could have used to reduce that risk.
Fractional Reserve Banking is borne on legalized fraud. Not trust! We never needed this system in the first place. And bank failures are the one way to keep banks honest and accountable.
If these were solid quiet banks in, say, eastern Ohio, they’d drop dead and nobody in gov would lift a finger.. but these? Silicon Valley and barney frank?
Ah yes, the impetus to create the Creature from Jekyll Island. A great record it has, mind you, what with more recessions and depressions from the prior century, comparatively insane levels of inflation and lower rates of actual wealth creation to boot.
The Jeffersonians and Jacksonians were right. Central banking is a viper. And it enables the fragile, fraudulent FRB system.
Besides, if this is an F.D.I.C.-covered bank--as I assume it to be--then depositors' accounts are insured up to 250k per account. Now, of course, in Sili-Con Valley, 250k only covers the costs of the kids' private annual schooling, annual vacations and the private club memberships and the luxury car leases.
Oh, well. When these people tighten their belts, they still have beautiful living-standards which many of us would envy.
A hallmark of recent years has been the government redefining traditional terms for a variety of things to their benefit. Bailout, recession, vaccine, etc.
"First, they came for our language; but I didn't really give language that much thought. 'Big deal', I thought, 'it's just words.' So I said nothing. Then they came for our rules, but I thought,'Rules? We've seen them made and un-made' so, again, I said nothing" ...
This is everything. What and how much egregiousness will it take for people to act? They know where that action will lead. We’re still in ‘this really doesn’t affect me directly, so I can go on with my life, and hopefully it will go away” mode.
Exactly. The government has essentially said that deposits will be covered, even if that has to be done using bank insurance that was intended only to cover deposits up to $250K -- and which both the bank and its depositors KNEW would only be covered up to $250K. Which means other banks will be compelled to help cover these deposits (through the premiums they've paid into FDIC, presumably) if SVB assets are insufficient to cover them.
Whether or not that actually DOES turn out to be necessary is hardly the point. The government has made it clear that depositors who knowingly took an outsized risk here will be made whole, even if it must be done at the expense of other banks (and their depositors). (Because the FDIC bucket is presumably not limitless, after all ... paying out to customers of any one bank presumably reduces the amount in the bucket that's available for the next.)
That is a bailout. It is a bailout of depositors who should have known better, but decided to take the gamble because they liked the perks that SVB provided depositors.
Worst, it sends the message to other banks that there are zero real consequences (at least, up until sudden death) of taking outsized risks to maximize bank profits and attract depositors.
It signals to depositors that there are zero consequences to taking outsized risks by signing up for whatever ill-advised perks/returns a bank might offer, and to not taking even basic responsibility for managing their assets prudently.
And because there no consequences, other banks -- banks that might otherwise have remained conservative and responsible -- will feel massive pressure to engage in the same risky behavior in order to remain competitive with banks that do.
taxpayers will bear the cost as banks shift the burden , the president and his enablers lied. in a high inflationary period banking costs are going to increase .
Unless the depositors are given rates that should signal caution, they should be able to bank their funds on trust.
Investors are a different story.
They need to be much more cautious and, in this case, they were not and will be paying for their negligence given it does not appear the bank attempted to mislead them.
Very insightful. Bank runs caused by social media panic. It’d be funny if it wasn’t real.
In our modern age, it’s easy to forget how primitive we really are. We may have AI and nuclear bombs, but psychologically, we’re just getting out of the trees.
Blaming the SVB bank run on psychology is the perfect analogy for the “anti-agency” view of humanity that is now pervasive across western cultures. It wasn’t the risk of the bets, it wasn’t all the bad credit lines given to insanely overfunded terribly run startups and it certainly wasn’t the especially risky bond structure of a bank that only invests in unprofitable companies - it was “psychologies” fault.
No, that premise is nonsense. in 2008 (though really WAY before that - that was just when the chicken came home to roost) we turned the entire banking industry into one giant moral hazard. All the upside goes to the banks, all the downside goes to debt on the tax payers. And SVB played the game and they played it especially aggressively. They financed SOOO many unprofitable startups it would blow your mind if you actually went through the details. But as long as money was free (it was actually better than free in real dollar terms) it didn’t matter because valuations kept going up (based on nothing but that capital was cost negative) so their amassed assets kept going up, so who cares that the entire thing was a house of cards built on something like a 3% real-asset (cash flow positive) asset base.
Until we unwind federal income taxes and dismantle the fed we’re just going to see more and more of this. It started small when the interest rate and debt swings were small - now the debt is HUGE so even tiny interest rate swings cause contagion after contagion. Your psychology doesn’t matter - the broken market matters.
Just wait till all the startups with no cash left empty their bank accounts (6-18 months) and an actual bank run happens - not on panic, but on bankruptcies. This is just the beginning, and it has nothing to do with psychology and everything to do with a HEINOUSLY broken system built entirely on the moral hazard of privatized gains and socialized losses
You would have thought banks would have recognized bubbles, bad real estate deals, investing in building office space, gouging the general workers whenever they could as bad for business. They never invested on a community level, redlining, closing bank branches in small communities, doing everything they possibly could do to shortchange the daily person. They wanted to be with the sports figures, the moneyed old and new, the derivatives, wanting special favors from the government and bailed out every 10 years due to “market changes.”
They made their future and present problems and now I am being told don’t run on the bank because that will cause bigger banking problems. BULLSHIT. Personally I say to those who invested 250,000 or less you get your money. Apple, Microsoft, Zuckerberg, etc. welcome to the real world. This is where you get bloodied, learn from it. Let the banks and their CFP, CEO, and company see and feel prosecution and real pain. For once hold them accountable. Going to have a drink and it is only 11am.
I did a very long piece on this - https://butthedatasays.substack.com/p/has-the-american-dream-been-eaten - but fundamentally I don't accept blaming the banks. Should we be disappointed in them/there leadership? Sure. But as I argue in my thesis, they are just responding to incentives. The government created the moral hazard, and banks are simply playing the game within the defined rules. if you tell them they get to privatize the gains and socialize the losses, they're going to gamble. They'd actually be irrational not too. It's simple game theory - if you every time you flip heads you keep the money and every time you flip tails someone else pays your debt, you're going to flip that freaking coin as many times as humanly possible.
If we want actual change - stop blaming the banks, or the Zucks of the world, and let's get serious of changing the rules of the game. If the fed stays, interest rates can never go below REAL inflation (there HAS to be a carrying cost of capital, or again, there is no risk), and we need to DRASTICALLY reduce federal tax income so it is infinitely harder for them to borrow against OUR assets. We reduce the debt/spend cycle and maintain interest rates above the real cost of capital and banks will respond to a whole new set of incentives. In the short term the middle class will suffer. In the long term, the billionaire class will be de-structured, and we'll return class mobility to the U.S. But it's going to be an awkward and painful march to get there. That, or we keep becoming a worse version of Russia, but with better weather and more natural resources.
Again consider me your cheer squad. This comment also illustrates other government issues as well and not just federal government. It matters what the rules are and thus who we elect to make them. We are not doing a good job of it.
"If we want actual change - stop blaming the banks, or the Zucks of the world, and let's get serious of changing the rules of the game."
Change the rules of the "game"? There are already rules --and laws--which make conspiracies to commit banking fraud a crime, rules which require accurate reporting of financial conditions, rules which prohibit withholding, hiding or altering financial records to create a false impression of financial soundness.
When the financial authorities get to the bottom of this case's history--if they do an honest and thorough job and meet _their_ legal responsibilities,--they're going to find that this rotten mess was very clearly understood by the bank's principals to be and to have been going on.
The suggestion that this sort of debacle could happen while dotting all the regulatory "i"s and crossing all the "t"s is scandalously outrageous. It makes chumps of all of us, not just customers of SVB.
"Our tax dollars literally go to paying regulatory agencies to lie on behalf of their real clients (the companies they supposedly regulate) and we pay the price. Don’t EVER blame the company because of corrupt political systems. That’s like blaming NBA players for “traveling.” If the refs don’t call it traveling it isn’t traveling. The rules of the game are irrelevant – rules that aren’t enforced aren’t actual rules – the players simply play within the ACTUAL rules of the games. The rules are broken, not the players."
Because here's the truth - they absolutely would have passed a stress test, right up until the bank run started and they couldn't any longer. every single time the FED drops interest rates below inflation, banks are literally stealing from the American people. Period. it isn't just allowed, they're being TOLD to do it. Then the fed started jacking rates, and now the rules have changed mid-game, but the regulators can't do anything about it, because it's their game in the first place. SVB had a ton of assets that were insanely overpriced due to free money - but they didn't set the asset value of those cash-negative businesses - and they didn't determine that the lending rates were 0++ and they didn't set that the threshold for fractional reserve banking is based on "book" value, not marked to market values (that is, if the last time I priced a building I own was 3 years ago, I'm still using that book value as the value of the building even if, were I to reprice it tomorrow it was worth half. We CAN force banks to mark to market, but the regulators don't do that today - so this is on them).
Blame bottom up never works. It isn't traveling if it doesn't get called. You want traveling called, change the rules ,and most important, change the referees. Or keep screaming that the gather step isn't being called and let me know how oblivion is...
My take (rant) is that most of, what seems to me, the slide toward a kind of anti-human sterility and psychology in the American national dialogue springs from what I think of as criminal finance. International financiers hold no loyalty to America and (it seems) are pushing a world agenda to dismantle nations, human rights and peoples cultural cohesion altogether. I see most of the D.E.I./"woke" blather as a means of talking over the top of legitimate social concern and I believe criminal finance funds it. Most of our comments across Substack are reports and discussions about the symptomatology and realpolitik human damage that springs from the bad social and economic policy we witness every day across the American landscape.
I agree with your take on a compromised bureaucracy maintained for the benefit of self-interested financiers. The rule seems to be "whatever I can get away with". We need a shift in national psychology (I think it's happening) and more real time reporting on the cause and effect consequences of the people manipulating our lives and economy much as Taibbi did on the '08 crash.
The bank had to have fraudulently misrepresented its lawful reserve obligations--and committed a host of other violations of banking regulations or it could not have come to that sorry pass in the first place.
Read your blog? I've read your nonsense reasoning here. Why would I follow that up by wasting more of my time reading it where you first spout it? I have a _lot_ on my reading list and your stuff--outside of this blog, and, now, maybe _inside_ this blog, does not meet my minimum quality standards. You see, _I_ have standards, too, and I _apply_ them to my choices of how I spend my time.
Off topic but you'll love this. It's why the Dems love the ever senile Joe. This is why comprof and his pals are so proud to be Dems. Leader of the free world. Scary, huh?
Even if it is scary to think this idiot has the codes to launch nuclear weapons, it is grimly funny.
The Dems know he shouldn't be in office running the country but they won't remove him because instead of thinking about the welfare of the country, all they think of is power and their self interests. They are in an impossible position. The next in line is the equally incompetent Kamala Harris and next after her is Nancy Pelosi who even scarier than Harris.
I think that's true. However, institutions and societies are composed of individuals, each with her/her own individual psychology. What I was trying to point out (and what I believe the author of this article was trying to point out as well) was only one individual facet of what is obviously a multi-faceted problem brought about by what you point out in your comment.
You are totally right, and I apologize, because I was in no way demeaning your comment. I think you were spot on - I was more attacking the laziness of the article to analyze the SIMPLEST explanation (the one without agency) as opposed to the complicated explanation that lays the agency very heavily on those creating the rules of the game.
I'm glad you brought it up, though. A lot of times, financial or other catastrophes are assumed to just have happened, when really there is a pretty definitive (or at least mostly definitive) cause and effect chain leading up to it.
I think you've nailed a part of our problem, Data - but the 'dismantle the Fed' solution you propose will create the very bank run you rightly fear (only national), along with a rampaging stampede to the exits on equity markets that will annihilate and turn to desert sand every single adult American's 401K. Pennies on the dollar? It would be worse than that.
Of course after all of that, when companies can't make payroll or pay their bills because there is nothing to guarantee their deposits (since the Fed is gone..) and their liquidity has disappeared there go all the jobs, and then mortgages won't get paid and well..
As my daddy taught me, "Lynne if you cannot pay for it you don't need it."" Best.Advice.Ever. Mama said be prepared to make a car payment and trade every year. I am really glad I listened to daddy. And while I accept what you say as true the longer we kick reality down the road the harder the course correction will be. And looming over this banking dust-up is $32,000,000,000,000. We have had 120 years of the Federal Reserve. All it has created is a house of cards. It is time for the grown-ups in the nation to say enough, dismantle the house and start to build a firm foundation. Americans are tough and hard people. We can, and should, do it. It should be done from the local and state level.
A house of cards is what we have. I agree with you. I'm afraid, though, that the time for a course correction of the stature you mention is past us. We're already too deep. It was very revealing that the Fed, Treasury and all the usual suspects over the weekend made all depositors whole for not only Silicon Valley Bank but for Signature Bank as well. That tells me that these two events are but the canary in a very deeply connected coal mine involving debt and too much leverage, and that there is a lot more at stake than two seized banks. They realize that many banks are holding assets declining in value and will not withstand a run on deposits. They need more liquidity, ie more regulation - maybe revisit Dodd-Frank and vote in more legislation. But it's clear authorities are worried. This is a deeper issue than people realize.
Lee I am a hard person, not a cold person, but a hard person. So I say this knowing that. It needs to fail. I fear that is the only course correction for the nation at this point. We should have let it fail in 2008. Yes it will be hard, some, including myself, might perish. But out of the ashes a better America might (I believe WILL) rise. We can face it now or we can face it later but it is only going to get worse. The only alternative I see is to 1) recognize that the Federal Reserve system has failed and is not viable; 2) have a planned dismantling thereof which does not mean no federal currency or national banks but rather both backed by something of value and governed by stakeholders who will sink or swim based on merit of policies not federal government guaranteed safe spaces; 3) time-out for the over-reaching federal government accomplished by a return to the notion of governance close to the governed at the local and state government. Will it be messy. Of course it will. But as you point out, and I agree, the "Schmoosing and Vibes Bank" failure is just the tip of the iceberg. That $32,000,000,000,000 is a ticking time bomb as is the planned use of the votes of those we-don't-even-know-how-many-millions-of-illegals to entrench the ruling class' power and those people do not care about you or me or our welfare. I am a proponent of America and her people. We have cancer and it needs to be removed before it metastasizes further.
I differ from you in the sense that the banks are certainly scary beasts because many of them are unstable, and we have a trillion too many dollars floating around out there - but it is the equity markets that worry me most. They've been massively overvalued for years due to speculation and I feel in my bones a meltdown is coming, regardless of Fed monetary policies etc..
And no one will save anyone in a massive market crash. Investment banks along with every small investor and pension fund will be swept down the toilet. The losses will be in the trillions and the government will not have the means to clean up the mess.
The course correction you seek might be the result of a calamity like that.
You know I thought the revolution would be louder, with lots of gunfire, bombs, like the Ukraine. I didn’t think it would be collapsing as it is. Bank failures, government failures, greed on all sides, distrust of medical staff, of anyone in authority.Shit. I am 63 and I am already realizing things are going to get really rough. Ugly even.
Personally, we are already in the path of dismantling certain parts of our society. The country is going to start breaking apart. Like a marriage, this is no longer working, let’s move on for all our sakes. Whether it is part of the great reset, or something totally different we are part of it and there is going to be a lot of hurt and anger.
I know to keep my powdered dry. I live in the South. I know to make friends with my neighbors.
That's really interesting. Possibly. I am holy anti the "regulation, failure, more regulation, more failure" cycle of governance we've used for the last 200 years, so I'd always support less regulation, but in an era of less data transparency there's certainly an argument to be made that any strict checking account should be marked to market and the fractional percentage of my bank account held in cash very clearly visible to me as the consumer.
"We" or the people who believe that gender is determined by one's mood, borrowing doesn't matter, energy comes from a light switch, body piercings make one attractive and sex with children is normal? In other words, the DNC and its minions.
Sure we are all capable of violence, but humankind would not have advanced without some iconoclastic types who decided to take a different path. Not go over the cliff with the herd.
Come on Ben. I usually like your comments but pick a lane here. Are we a violent breed (fighters)? Or runners? The truth is some of us are fighters and some of us are runners. Which is likely why we are still here at all. There are in my estimation very few situations where one size fits all.
The same man could be a lot of different things, including to himself.
The point that I'm trying to make is that we like to think that we have modern sensibilities and attitudes towards how we live our lives, but that only goes skin deep. It's what gives the saying, "the veneer of civilization" it's ring of truth.
Oh I agree with that. Our technology has far outpaced our evolution. My instinct is that this is an old, old story and that very advanced societies have existed on earth before only to fail when their technology outpaces their humanity. I believe there is a sweet spot for everything.
Yes, but _this_ "stupid" is now, and rather unusally (fortunately) dangerous for _where_ it's located rather than its extent or virulence.
Society needs some general good sense in a few very important places and types of people. Medicine, transport, agriculture, energy, government and education, journalism and communications (and a few others I've overlooked) must be managed competently or very important life matters can and shall go badly wrong--even if "only"one is or a few of these are very poorly managed.
In our case, _several_ of them _at once_ are being very poorly handled and _that_ "stupid" is extremely important and dangerous and it's worse by orders of magnitude than the typical course of human stupidity over the first 1700 years of recorded modern history--to say nothing of the span of humanity's pre-history existence.
Art museums, fashion design, pop music, vacation spot trends, movies, pulp fiction (but _not_ "high literature"!)--these may (and frequently do) sink into shocking states of "stupid" without seriously endangering human civilization itself. But that same is not true for any--and certainly not all at once--of the other aforementioned matters of human culture.
It turns out that _some_ aspects of human culture are simple vitally important. And part of present-day "stupid" is a gross failure to properly appreciate this fact.
"Stupid" is always "everywhere" at "all times" but it is not always everywhere in quite the way we are now experiencing it. And that is a very, very big problem.
---------------------------
VIDEO BONUS:
Bill Maher was warning us as recently as 9 months ago:
"New Rule: The United States of Dumb-merica | Real Time with Bill Maher (HBO)"
I’m going to be honest and say that I never considered how raising rates would destabilize HTM bank reserves. But that’s not my job.
I saw the Linkdin of the hot Asian chick who was running SVB risk management and I will say *if* I had her job I would have realized the problem week one. But she was focused on equity and inclusion.
Equity and inclusion of what, though? The bank didn't diversify. It entered the pyramid scheme in the middle at the height of printed money with no substance or value and increased its asset base five-fold and didn't leverage accordingly. That's not diversification. That's elite exclusion. And greed. It always goes wrong. The herd (those who wish to follow rather than think) jumps on and then reacts. Primitive.
Good point Rosemary, while the idea of equity and inclusion has merit in practice it is a farce and winds up solidifying more power in the hands of those who already have plenty while convincing the subscribers thereto that they are included.
You’re absolutely right, Rosemary. *Actual* diversification is the furthest thing from the goal of DEI. Elite exclusion is the do-it-all-hammer social contagion enforcer, whether that contagion is intentionally deployed (DEI, et al) or unintentionally sparked (SVB.)
But it did happen because of DEI. When you're so focused on meaningless optics within the herd, you lose the substance where it counts. DEI actually caused exclusion because the DEI didn't occur in the fiscal management.
"I’m going to be honest and say that I never considered how raising rates would destabilize HTM bank reserves. But that’s not my job."
You hit the crux of what I consider the biggest issue here: Why do we spend billions in tax dollars hiring millions of employees to perform the specialized work that we have neither the time nor expertise to handle . . . and nothing is caught before the collapse or disaster? Where are all these smart people when it counts? We pay so much money for guardians--physical and financial--and to what end? SVL should have been caught the first week by some regulator or another that we paid a whole lot of money to head off these disasters, and the disaster happened anyway.
If we're going to regulate banks, then let's fucking regulate them correctly so this never happens again. I'm sick of wasting my tax money on bad job performances.
It sure did, in the savings and loan meltdown of the Eighties, the mortgage-backed securities fraud that nearly took down our economy, and other deregulation disasters. We had to regulate companies and markets for a reason Back When--poisoned food, water, and medicines, anyone? The only thing I want is efficient and competent regulation, since we pay so damn much for it.
The trains would in all seriousness come off the tracks with deregulation, as we saw in the S&L meltdown of the Eighties. We need is much more intelligent and efficient regulation, via
government or, preferably government plus private sector.
Me, I'd have the FDIC insure all deposits to a million bucks and require all deposits above that amount to carry private-market insurance. Let the flinty-eyed risk managers of for-profit insurance companies assign premiums based on real risk. Time to let the free market do some regulating, I'm tired of paying billions for federal risk management that doesn't manage risk very well.
It did happen because of DEI. When you're so focused on meaningless optics within the herd, you lose the substance where it counts. DEI didn't occur in the fiscal management of SVB. It was elitist, unsmart and greedy. That's the primary foundational issue with the new elites. They are only DEI within the herd, but they are not the herd.
It’s interesting to me that the author, who has his own Substack called Anti-Mimetics, likes this comment, which is true yet simplistic, but has sparked a dialogue that is complex. There will always be mimetic behavior because we are social animals and some prefer to permanently stay out of the game for a number of reasons (it’s too complex and difficult). In herd mentality in animals there is usually a leader and a supporter(s) of the leader that carries out the actions the rest follow. We are animals and we are not. That’s the dualistic challenge.
Human behavior is a strange thing, isn't it? I'm constantly trying to study it (in myself and others, although I'm not sure which is more challenging to understand).
I do make my posts a bit simplistic, but they're just my first take after reading the article. There are more thought out comments out there that don't get as many likes, but I tend to get up pretty early and FP posts their articles at around 0610 EST (at which point I've already been up for an hour or so). So that usually means a not as well thought out comment that has a bit of truth in it (or at least resonates with most of FP's audience's sentiments) tends to get boosted if posted at the right time.
Oh gosh, I'm so sorry, I didn't mean you are simplistic! My sincerest apologies. I just thought it interesting that Mr. Burgis liked your in-a-nutshell response, which was beautifully simple yet generated some rich complex thoughts!! I thank you very much for kicking us off so well!
lol don't worry about it. There's no way a 50 word or so comment can really capture all the complexity that a topic truly deserves, but it feeds my vanity to get a bunch of likes.
They couldn’t pay depositors because Democrats spent too much money bribing weak people with welfare over the last 100 years which is what necessitated the provision of low interest rates for 15 years which resulted in the banks holding a bunch of long-term low-yield securities which were under water because Democrats spent too much money on welfare during the pandemic (which was also caused by Democrats) which caused inflation which caused the Fed to raise rates which is what caused the aforementioned otherwise very safe low-yield securities to lose value and voila.
Hey Kevin, don't look at reality and draw your conclusions. Instead just read the entrails of animals and watch the flight of birds and use some rather trendy words and discover that humans are good at imitation and you will at last be brought to the insightful discovery that "orange man bad". Now doesn't that feel better?
It's tough to stitch up a $16,000,000,000 hole on the fly when nobody is interested in taking your US treasury bills at the price that you paid for them.
What the Democrats did or not do, Republicans too, in the past is irrelevant to a sane resolution in the time frames of a healthy bank run!
Not when it's value is reduced. And reduced. And reduced. And then reduced some more. Every time they fire up the presses that is what happens. And now thanks to the actions of the war-mongers in Ukraine, China is making inroads on the preference status of US currency. We really need a business minded person, preferably with military experience, in office. Until them I am thinking bullion as a backup to dollars. With bullets and booze as a Plan C.
My son (mid 20s, very successful day trader) says (only a little bit tongue-in-cheek): there are only three long term investments: water, bullets and the S&P500.
That made me laugh out loud. I do think it is true. In the event of a financial crash or grid failure bullets will be necessary to survival during any transition because wildlife will flourish.
" And now thanks to the actions of the war-mongers in Ukraine, China is making inroads on the preference status of US currency."
Huh?
Nothing would do so much to "make the U.S. 'safe for moral and financial ruin' " (which go hand-in-hand) than a Putin victory in Ukraine. Hollywood wouldn't celebrate that, but Sili-Con Valley (privately) would.
As for "China is making inroads on the preference status of US currency", I ask what that's supposed to mean.
First, unless there's been a major time-warp and I missed it, China holds more U.S. debt than any other single foreign nation. If the dollar's real market-value became relatively even more worthless, the Chinese could use their US dollar-reserves for confetti and distribute them as tokens in the little red envelopes handed out to youngsters during Moon Festival and New Year celebrations.
How would any of that make a Yuan more valuable on any international market? If SVB teaches any lesson, it's that cultural solidity, transparency and honest, above-board dealings are what ultimately underpins all social trust--and that it's that trust which underpins the deposits at the Bank & Trust. China, with perhaps only Russia as a rival, holds the title for the World's Greatest Hokum-&-Bunkum Nation of Official (& Murderous)_ Grifters."
Would _you_ buy and hold Chinese bonds? Seriously? Would you stuff the matresses with Yuan notes? Before you do that, try and find some Chinese who, when asked, would be so brave as to give you their candid appraisal of their government's and their currency's trust-worthiness.
I neither said nor implied that MY preference was changing. I said the US warmongering in Ukraine was allowing China to make inroads on the long-established (longer than climate fear-mongering so a really long time in some folks estimation). I stand by that. One of the middle east nations has just signed an agreement to supply oil valued on and paid for in a currency other than US dollars. Egypt has withdrawn from a UN trade agreement regarding grains (wheat) it has been a member of for decades. A founding member as I recall. The dominoes may be falling in a way not anticipated by the DC clown show because all they could articulate beyond Putin bad was but, but, but Putin!!! moving across Europe!!!! Like Hitler!!!!! I doubt that, not in the least because the man has been the Russian leadership since the fall of the Berlin Wall (30 years) and made no such moves. So it certainly was not a blitzkrieg. Now a multi-million dollar drone has been struck by a Russian fighter jet and the drone ditched into the sea. Little Blinken said this morning that ""it [the downing] is an act of war." I am not a Putin or Russian proponent. Neither am I blind as to the shortcomings of my government. Glaring shortcomings. As for the rest of your comment about banking and US dollars, that is a lot of woulda, coulda, shoulda and does not describe events on the ground. Either we have rules that are not being followed, which is no surprise as the rule of law and respect therefor is THE foundation of our Constitutional Republic and it is seriously eroded, or the rules are insufficient. The Federal Reserve System is an abysmal failure. It has spent 120 years trying to regulate the economy by tinkering with currency and financial markets. To no avail. All it has accomplished is the further enrichment of the 1% that the left is always screaming about. All we have right now is a suppressed economy, massive federal debt and the value of my dollars shrinking daily. Thanks JB.
..."All it has accomplished is the further enrichment of the 1% that the left is always screaming about. All we have right now is a suppressed economy, massive federal debt and the value of my dollars shrinking daily. Thanks JB."
Right. JB is incompetent and a moron. But if it had not been for Biden's "backing," however woefully hapless and late, Putin would have rolled over Ukraine about a year ago despite the surprising and brave resistance organized and inspired by that so-called "despot", V. Zelensky and which has, till now, stopped that outcome for all the time being.
Had that help not materialized, had that resistance not proven effective, I don't see how any of the things you lament in the above-cited excerpt would have been any different or better than they are now. The 1% should still be richer, our economy still poor, we'd still have a massive federal debt and the value of your dollars should not have shrunk any less. And Putin would be in control of Ukraine's grain products.
As I see it, these Ukraine policy matters are only very tacitly related to the SVB debacle. No important relation except in their being examples of the ineptitude which is typical of the Biden administration's handling of everything.
Are you sore and smarting from having lost policy battles regarding Ukraine? Or is your annoyance similar in foundation to mine: just an expression of personal disappointment over policy matters which, had it been up to you or to me, should have been dealt with very differently than they were and are being handled?
Regarding the banks that is my feeling as well. At some point there is simply not enough money a la Zimbabwe. On looming over us all is $32,000,000,000,000. As for safety and food, that is what the bullets will be for during the transition. The booze will be for barter until I can get the still operational.
I’m one of very few people in the county who can turn animal hair and plant fibers into fabrics and yarns using my hands and feet. No electricity required though it is time consuming.
That’s my ultimate fallback, along with the aforementioned three Bs.
There is a train of thought that you buy what is called trash or junk silver and use that as currency. Junk silver is usually sold in bags and it is old US silver coins that has no collector value but is recognized a valid currency and is made of silver.
I don't know if that would work. If the US currency completely collapses, we would enter a barter market. Buy up freeze dried food. Everybody needs to eat and use it to barter.
You may want to read the recent column discussing CBT. That is textbook catastrophizing.
And it is very obvious to me that Trump was never supposed to get elected the first time, yet it happened. It can happen again. I think much of our Federal bureaucracy was in denial about the extent of the corruption of their agencies, but that is no longer true. Most of it is simply undeniable.
If widespread vote-counting is rigged again--as it has been demonstrated to have been--and if the major mass-media can call the election (at any time--January would do, so would June, or August; why even bother holding an election? just ask Hillary who won.) in favor of just any Kamala-like moron with a "D" next to the name, then, how does a fair election result in a Trump victory when the system's corruptors don't want to see a Trump victory?
A new research paper published in the journal Nature Human Behaviour suggests party loyalty and partisan motivation may be interfering less with Americans’ thinking than previously believed. The study, done by MIT behavioral researchers, suggests both Democrats and Republicans are more open to being challenged than previously thought. “Our results are clear and unequivocal: Learning the in-party leader’s position on an issue certainly did influence partisans’ attitudes — but it did not cause the partisans to ignore or discount arguments and evidence that ran counter to the leader’s position,” David Rand, who was involved in the study, said. You can read more about the study here.
It is not catastrophizing at all. I have a firsthand view. We live in a trickle up economy not a trickle down economy, which is based on our guaranteed herd mentality. And, it was meant for Trump to get elected the first time. The storied money preferred his fiscal agenda to Hilary and Soros. Dynasties work like we do (we are all human after all). They create an elite class where few reside and don't get involved until they have to. They must get involved now because things have become so disastrous and untenable. It will be DeSantis. Biden won't run, and even if he does, he will not survive the onslaught. The Democrats have no one else. They are throwing all the money away and creating no future value. It is more than predictable, as Trump was predictable, but few want to see.
I’m not sure. A perspective from what I see locally. DeSantis and trumpet are nominees, but their base is split. DeSantis voters won’t vote for Trump and vice versa. So that leaves a couple of possibilities: Biden wins second term, or republican DeSantis wins by the slimmest of margins. If it is Trump that wins a guaranteed call of election fraud throwing everything into turmoil, hell, if DeSantis wins call of election fraud, turmoil. No election at all, civil rights temporarily suspended.
Kevin is not off base guys. Think about it more with less enthusiasm for quibbling. But DeSantis will win. And I believe he’s aware of the setup (and that dies make him a bit crazy but not Trump crazy).
In recent years, for many reasons and on many topics, I have taken to quoting Yogi Berra: "It's hard to make predictions. Especially about the future".
I can certainly make myself feel smart saying THIS is what is going to happen. But I don't know. This is a confusing, complex situation. I do strongly believe that Trump won in 2020 by a good ten million votes, and that he can win again. I would be fine with Ron DeSantis too. You really can't get worse than a senile President who takes bribes from our enemies and rivals, and who has undertaken the destruction of our national sovereignty and well being as a matter of more or less conscious and planned policy.
America First should be a given. It should tell anyone with half a brain all they need to know that that slogan has somehow become controversial. We should be debating what is best for America, not that our leaders should prioritize our own well being over that of other nations.
I think your "compassion" would most effectively be exercised through silence. But those with nothing to say can't stop saying it. That's not what the internet was invented for, but seemingly one of the principle uses to which it is put. Nobody actually stuck in the room with you could but fail to excuse themselves and leave. Here, though, you can butt in anywhere and any time you like.
That's enough from me. I myself become progressively more foolish the more I interact with you. But telling people to shoot themselves would get you banned, if I were a moderator. That's beyond the line.
You took all these drugs, met "God", and presumably even now think that your political views are enlightened, humane, and beneficial. Yet here you are, acting like a little turd, rejoicing every time you can get a rise out of someone. It's childish.
And I will say to the moderators that people like RT here can dramatically lower the quality of a forum, and do so quickly. The people who actually have interesting things to say look at people like him, and say goodbye to the whole mess.
If you want to protect this as a quality forum, give warnings to the people who seem to be here just to cause trouble, ban them for a week if they don't change, then ban them permanently if you need to ask a third time. That will ENCOURAGE thoughtful discourse, not discourage it. Asinine trollery is everywhere on the internet. RT is likely only here because he's either in the majority on leftwing sites--which reliably ban conservative opinions--or banned everywhere else with an active and alert moderation staff. It's not his opinions that are the problem: it's the patent desire to demean, bully, insult, and create chaos.
You would not talk like that in front of me. You are an internet hero, and I have no doubt that in any actual physical rooms you occasionally darken, you have nothing to say to anyone, because you are at heart a coward.
It's always interesting to me how the people who want the government to be "compassionate" are actual a-holes to everyone outside their cult. Small wonder that genuine horrors ensue every time the "compassion" and "justice" people get their claws into a society.
Trump will 100% definitely lose but DeSantis will also lose and I’m rooting for Biden to win anyways.
Obviously, it would be idiotic to set it up so DeSantis get blamed for the collapse that is going to occur as a result of 100 years of Democrat policy.
One trick pony, "Trump, Trump, Trump". The song of the mentally deficient.
Can't you bring anything else to the table, like civil, logical, debate on any other topic besides Trump? There is a lot out there besides Trump. Put down your weed long enough to unscramble what is left of your brain and give it a shot.
I am skeptical of and curse both parties. You only, like comprof, curse one. The Clinton crime family sold presidential pardons and the Clinton Foundation was a slush fund for the Clintons.
I am no fan of Trump but I can't support socialism. We are trapped in a no win situation. We need term limits and a balanced budget amendment. That won't solve all of our problems but it might help.
Also, we need a neutral (If that is even possible.) investigatory legal branch that does nothing but investigate congress, the presidency and all senior government officials for corruption and start putting these thieves in prison and I don't mean Club Fed. I mean supermax prisons where they take long hot showers with a muscled up, tattooed person named Knuckles.
I do not understand blind loyalty to a corrupt political party. maybe you can explain that to me and while you are at it how members of congress and the President get rich while in office. Nancy Pelosi for example is estimated to be worth 150 million dollars. Biden has two mansions worth between 6 and 8 million dollars all on a senator's salary.
I am sure there are Reps equally as guilty of profiting off their office, Truman said, "Anyone who makes money while in office is a crook." and I believe that.
You assume a lot. Why are Democrat-party Sorcerer Apprentices now now frantically beside themselves trying to figure out how they're going to find and put up a candidate who'll rid them of the double problem of a Biden who's too frail, stupid and dangerous to allow a second run and his idiot-vice-president---whose place is owed to her being an electoral "insurance-policy" of catastrophic proportions--- think, Nixon's Spiro Agnew, or, in case you've forgotten, Obama's Joe Biden--- a vice-president who's just too stupid even for California, home of SVB stupidity? It's a question. That's right: Obama chose--or assented to--Biden on the ticket because he'd reasoned that no public would be so monumentally stupid as to want to see him (Obama) succeeded by such a completely corrupt and moronic figure. And that was openly joked about. Obama joked about Biden's being a dim-wit.
I can see why you are enamored with this disastrous, corrupt, clown. Do you have a laminated picture of the idiot in your wallet so you can take it out a few times a day and kiss it?
Let's hope the Socialists run another socialist beside Biden, at least someone who knows what planet he is on. However, unlike you I can never bring myself to vote for a socialist.
As odious as Trump is, he is no socialist. History shows socialist countries are run by mass murdering dictators. History bears out that socialist regimes are far bloodier than Hitler's NAZIs.
I find them disgusting. You on the other hand will vote for them.
I will say it again. We do not elect the best and the brightest to high office.
It doesn't matter who it is. The Dems are already orchestrating the necessary ballots. Two more years of the "Vote Blue No Matter Who" idiots, I mean babies + illegals + convicts = victory. That is why you keep seeing so many polls - gotta know what numbers they need.
"I’m grateful that the Treasury and Fed guaranteed deposits on Sunday afternoon (this is very different from “bailing out” Silicon Valley Bank, by the way—it simply means that depositors won’t lose their money). I only wonder what may have happened if this were announced earlier, without the 48-hour panic before the statement. " Then tell me what is the value of an FDIC statement that deposits are guaranteed up to $250K. You are suggesting guarantee should be stated as unlimited. That absolves the institution of any responsibility for managing investment risk. When does the gambling stop? Depositors should understand the bank balance sheet and risks if they want to deposit more than the $250K guaranteed. I think $250K is all they should get from the Fed.
This insanity won't stop until people are investigated, prosecuted and stripped of their ill-gotten gains. There is credible information about stock sales by execs and massive bonuses paid just days before the bank failed. That's not misfeasance, it's malfeasance.
The guarantee is just a minimum. When someone comes over to my house for a dinner party, I guarantee them at least a meal. They may get seconds or thirds, or they may not, but they will at least be fed.
The $250K guarantee is adequate for the average individual, but makes no sense for larger companies that have multi-million dollar payrolls. Imagine the bureaucracy if, say, Microsoft had to keep its money in 50,000 different banks so it would be insured and could always make payroll.
The ONLY part of this that really bothers me, though, is how quickly the Feds jump when the interests of the wealthy are at stake but, for everyone else, it takes years to get any kind of meaningful action.
People coming over to your house are your guests, not your customers. And whether you give them seconds or thirds is your decision based on what you have available in your fridge, pantry and bar. So your analogy does not fly. I
I doubt that this government would help a heavily O & G bank in Texas or Oklahoma. When the government decides who it will and who it will not help it is picking winners and losers. Which is not the job of the government. I do agree that the $250,000 may need to be revisited but largely based on the fact that the same government has so devalued the dollar. They are like hamsters on a wheel and I want out of the cage they are running.
Yes, the "too big to fail" is bullshit but Nancy Pelosi, Mitch McConnell, etc. are ALWAYS going to protect their multimillions.
In my town, people run for office because they care about the town. They may have differing views on what's best but they're not going into it to become multimillionaires.
Going into Congress for a $174K a year job then becoming a multimillionaire within a few years just isn't possible without corruption. The problem is, our corruption is LEGALIZED.
I posted this in another thread, but again THIS should have been one of the central points to the article. Hypocrisy. For a group who supposedly cares so much about the “average Joe”, would they have given 💩💩 if this was a small local or regional bank? How many of those depositors were donors? Supporters? Friends? These are all just questions swirling because I’m not going to assume or claim my conclusions as fact without any actual hard evidence.
I would like to be invited for dinner and I will have seconds! But, insurance is paying for a level of risk. The level is set at $250K. Are the fees assessed large companies for FDIC insurance based on $250K or something more? If my deposit is $1M and yours is $10K, do I pay 100x more fees than you do for the $250K insurance? If big companies are to be insured to higher levels of deposits, the rules need to state that.
Maybe they should form banks that only hold money for payroll.
My daughter works for a big tech company and was telling me pretty much the same thing you just said. She and her colleagues were all fearful of not getting paid as well as the possibility of losing their jobs.
What?!?! No, it isn't. The F.D.I.C.'s 250k is the _maximum_ insured value of your deposits in any _single_ account--the only way to hedge that is to divide greater wealth into multiple accounts, which many very rich people _do_ for just that reason. Anyone who thinks otherwise is not mentally competent to hold a bank account. There's a reason those little signs read "Up to..."
Honestly, I cannot believe the level of naïveté here.
My understanding is that what happened Sunday is that they guaranteed above the $250k threshold. The Dems say they want to stick it to the rich, but they change the rules afterwards and do the exact opposite!!
FDIC insured up to $250,000. Unless your depositors include Oprah. The CEO cashed out stock before it crashed. How is this not insider trading? And employees responsible for decision making got their bonuses just before the hammer fell. Amazing timing.
What all this says to me is that banking regulations and the regulators enforcing them are a joke.
The CEO's stock sale was properly and legally announced well before it transacted. It may or may not have been a coincidence. It will certainly be clawed back if it wasn't.
This is absolutely a bail out. SVB's collateral (treasuries) were repurchased at par (full value) by government when they were worth $0.60 on the dollar. Who is paying for that $0.40 on the dollar difference? Taxpayers.
The Fed will hold them on their balance sheet to maturity and there will not be a loss.
The taxpayers do not fund the money that the Fed uses to purchase assets. It is fake printed money.
Not doing this would have resulted in the elimination of every regional bank which would have expedited Democrat tyranny which is why I’m surprised they didn’t let it happen.
"fake printed money" is where the rub is. Real labor or goods enter somewhere, increasing M2 still has downstream effects seen in velocity and/or inflation
For the most part, that's true, but we still had inflation when the money was printed and started chasing stonks. Just because the prices of chicken aren't rising doesn't mean there isn't inflation. It's just somewhere else in the economy.
Multiple things are true at the same time here. You are correct on the lack of a hedge for interest rate risk. It’s also true that SVB used their increased assets to make higher risk loans to further their ESG and DEI objectives. Both are contributing to the problem.
Apparently, SVB didn't even have a chief risk officer between April 2022 and January 2023.
Classic asset-liability mismatch. Might have been avoided had the Trump Administration not neutered Dodd-Frank. I mean, at least they would have been required to do stress tests.
Exactly. The psychology of bank panics is less important than not creating them in the first place by doing the things that SVB was doing. And it looks like their "hedge" was, like the crypto fraud dude, to curry favor with the people supposedly watching over them. Democrats always talk like there was Magic Regulation that existed in a golden year before Bad Republicans removed it to help the rich. News: there are still (reams of) bank regulations and an entire structure of regulators.
To borrow from someone else:
"Either SVB was incompetent or this is a case of moral hazard, taking excessive risk and expecting political favors and bailouts. It turns out SVB’s real “hedge” was to curry favor with the Biden administration. In 2022 SVB publicly committed $5 billion in “sustainable finance and carbon neutral operations to support a healthier planet.” SVB’s 2022 ESG report lists a litany of “cross-function working groups,” including a “Sustainable Finance Group” that monitors progress against SVB’s Climate Commitment and an “Operational Climate Group” that “monitors implementation of operational greenhouse gas reduction initiatives.” Rather than apply basic risk-management practices, SVB resorted to lobbying for looser risk limits."
Although I also think had Dodd-Frank not been undermined, the situation _might_ have been mitigated—the key word there being "might." Interestingly enough, SVB CEO Becker apparently lobbied hard for that relaxation of Dodd-Frank. Be careful what you wish for, eh? 😀
Anyway, the loan program the Federal Reserve has opened to help keep money flowing through the banking system will be backed by taxpayer money. But, hey! It's NOT a bailout.
I think Biden has just lost all chance of winning the 2024 election.
Never forget that it is now about ballots not voters. If the Republicans are smart they will realize there are lots of Alzheimer’s patients in red areas that should not be “denied” the vote.
You're on a roll today, Madjack! 😀 That made me laugh out loud.
And, of course, those among us with progressive leanings are already combing the 2020 census findings for unexploited pockets of dementia-addled perps in blue states! 😀
Absolutely not a bailout under any possible definition 😅😅
Per 2024 hard to say. On the one hand people’s memories are short, and there will be endless shiny news cycles to distract us between now and then. On the other, I was just reading somewhere that there are many banks not quite as reckless as SVB but nevertheless holding piles of treasury bonds and mortgage backed securities whose value has plummeted and without having hedged against rate hikes. So we could be looking at a wild ride.
..."The psychology of bank panics is less important than not creating them in the first place by doing the things that SVB was doing. And it looks like their "hedge" was, like the crypto fraud dude, to curry favor with the people supposedly watching over them. " ...
How is "not creating them in the first place by doing the things that SVB was doing" even possible, let alone more important, without first understanding "the psychology of bank panics"?
Corruption and fraud in dealings between bank management and elected officials does not constitute--or deserve the name of-- a financial "hedge".
"SVB misread its customers’ cash needs. Risk management seemed to be an afterthought. The bank didn’t even have a chief risk officer for eight months last year. CEO Greg Becker sat on the risk committee.
As customers asked for their money, SVB had to sell $21 billion in underwater longer-term assets, with an average interest rate around 1.8%. The bank lost $1.8 billion on the sale and tried to raise more than $2 billion to fill the hole.
Obviously my use of "hedge" was sarcastic. The point is, as many other commenters have noted, it's a little odd to focus on the psychology of bank panics rather than not letting your bank get into such a position in the first place. SVB got themselves into a non-tenable situation, as this concise summary from WSJ describes:
"Management screwed up interest rates, underestimated customer withdrawals, hired the wrong people, and failed to sell equity. You’re really only allowed one mistake; more proved fatal. Was management hubristic, delusional or incompetent? Sometimes there’s no difference."
You don't create this specific bank panic in the first place by not doing all the things in that list above. Like this from the same article:
"Everyone, except SVB management it seems, knew interest rates were heading up. Federal Reserve Chairman Jerome Powell has been shouting this from the mountain tops. Yet SVB froze and kept business as usual, borrowing short-term from depositors and lending long-term, without any interest-rate hedging. The bear market started in January 2022, 14 months ago..."
It would not at all surprise me to find out that the San Francisco Fed (supposedly the regulators watching over SVB) were also laser focused on ESG and diversity initiatives. They probably have detailed charts of the LGBTQ and race metrics for all the banks they regulate which they pore over daily. Actual banking practices? Yawn.
Is it possible that this piece is trying to blame analysis and journalism for this run on SVB? HUH!!!? They were criminally STUPID in their management of their portfolio in leaving their interest rate risk unhedged and having cash locked up long term and it’s the INTERNET’s fault that there’s a run on the bank? 🤦🏻♀️ Make it make sense.
I agree. The author is misplacing blame on social media and suggesting the solution is some sort of ‘control’ scheme that must be imposed on social media. Newsflash, bank runs have been around since way before social media.
"There are people who woke up on Thursday or Friday morning with deposits in SVB who withdrew their money in a panic—but the thought of doing that would never have crossed their minds had it not been first suggested to them"
I have read your book and thoroughly enjoyed it. I disagree with this statement in that the animals on the side of the herd that cannot see the lion only know there is a threat. When the animals next to them begin to run, they instinctively know there is a threat even though they cannot directly see it. This is one of the "benefits" of mimetic behavior. If it turns out there is no carnivore and just a meerkat trying to get some sunshine, then the herd recovers and moves back to a "watchful state". Even if I don't like the outcome of this specific crisis, this worked exactly like it was supposed to.
"SVB was the victim of an old-fashioned bank run. "
Uh—NO. That was the rocks further down on the avalanche. NOT the pebbles that actually started it.
The pebbles that actually started the SVB avalanche were 15 years of near-zero interest rates, a hike in those interest rates by 1,700% in a single year, and a short-sighted risk manager who wasn't smart enough to diversify SVB's investment portfolio between short-term and long-term securities.
I’ve been in markets for 42 years and love the myriad psychological aspects of them, including the ones you detail.
A crucial detail missing here is that SVB conditioned loan to startups on them then depositing their money with SVB. Stunning. Legal? Massive regulatory failure/capture by SF Fed (SVB Exec on SF Fed Board).
Depositors would have gotten 90-95% of their money back. SVB assets pretty transparent and liquid. (Mostly MBS BTW, not long dated treasuries)
Two “solutions”: Outlaw the quid pro quo, if it’s not already illegal. Make anyone who deposits more than $250K sign a statement acknowledging they know they are not insured.
No doubt there is plenty of language detailing that fact about the $250,000. And these people are billionaires and millionaires and somehow they didn’t know that?
They knew (I was referring to other depositors in the future; tho I'm quite sure anyone w >$250K to deposit knows this any way).
What I'd love to know is how SVB successfully pulled this off: conditioning loans on re-depositing. Did the startups get a lower interest rate on the loans they took out? Did their VC backers also have stock in SVB bank and wanted to see it grow so told the startups to do this? Lotta unanswered questions here.
Did we really need more evidence that our Democrat friends, who populate these precincts and venues, have the mentality of panicked and dull herd animals?
We saw it on full display during the pandemic. Their subservience, their smug superioriry, their totemic obedience to the creed du jour, their reflexive condemnation of apostasy and fealty to the tenets prescribed by their tribal elders (Cuomo, Whtmer, Murphy, Fauci and most laughably, the senile imbecile they installed in the White House). I am now fully of the view that if a progressive liberal says "good morning," the sun has set and it's time to retire.
The question now is, "are we going to follow these nitwits over the cliff's edge, or retake control of society and stop their madness?"
Make no mistake about it - there is a plan underway to get complete control of the People. Their pesky and unexpected pushing back on the China Virus Lockdown, the Green New Deal, the "trans" agenda, "Black Lives Matter," the Climate Hoax, the Eat Bugs, Own Nothing and be Happy scam, et al, is inconveniencing the globalists a bit, but the most direct method of control is to control the money. - and That's The Plan: chaos, until complete seizure of the system and central control becomes possible. The 2008 meltdown was just the beginning.
Superb. Let me give you another one that might apply:
"Upon this battle depends the survival of Christian civilization. Upon it depends our own British life, and the long continuity of our institutions and our Empire. The whole fury and might of the enemy must very soon be turned on us. Hitler knows that he will have to break us in this Island or lose the war. If we can stand up to him, all Europe may be free and the life of the world may move forward into broad, sunlit uplands. But if we fail, then the whole world, including the United States, including all that we have known and cared for, will sink into the abyss of a new Dark Age made more sinister, and perhaps more protracted, by the lights of perverted science." ~ Churchill June 18, 1940
Substitute globalists for Hitler, planet earth for Britain, and it could have been written yesterday. Lights of perverted science, indeed.
"the most direct method of control is to control the money"
Bingo! If anyone has doubts, just look what Prime Minister Trudeau did to the truckers in Canada last year. The end game is digital currency, which will be controlled by the government. The days of cash are numbered.
Re: "SVB was the victim of an old-fashioned bank run."
NO - SVB and it's depositors were victims of BAD SVB management that paid far too little attention to risk management and prudent investing practices. The bank run was simply many people finally realizing this when the facts could no longer be hidden.
The fact that the CEO was actually on the board of directors of the San Francisco Fed befuddles me. How in the world did he not believe the Fed's rate increases would not have consequences on his own bank's portfolio?
"this is very different from “bailing out” Silicon Valley Bank, by the way—it simply means that depositors won’t lose their money". From the point of view of protecting tax payers, or encouraging people to do some due diligence on where they put their money, how do you think these differ? Every finanical manager I have talked to in the last 48 hours agrees that SVB has been bailed out, if not in words then in deed.
No, no, no. What you think you see isn't what you really see. Look over there! This is just a trick of the internet and you are starting to believe that up is up. If it weren't for some soothing gurus to point out that you have no way of really understanding what is happening, you might conclude (erroneously of course) that two plus two somehow equals four. Keep trying and spend some more time on twitter.
Huh? Say whaaaa???
Banks get funds to make investments from three sources, equity, bonds and deposits. People who invested in SVB (purchased their equity or purchased their bonds) are going to get hurt financially. The equity purchasers will get nothing, lose everything, and the bond holders will probably get cents on the dollars. The bankruptcy process is long and contentious.
Bailing out depositors is nuanced. I personally despise bailouts of any kind; however, our fractional banking system is built on trust and if depositors lose trust in the banking system then bad things happen, very bad things.
I don't mind backstopping the depositors. It's going over the 250K stated limit that bothers me. If the policy is full backstop, then state that policy and accept the moral hazard. Instead, we have "250K most of the time unless the depositors are people we know, in which case we back them to the hilt." It's different rules for different classes of people, and America isn't supposed to be built on that sort of aristocratic crap.
I could not agree more! The people and companies that deposited their funds at SVB knew the guarantee was only for $250K. There’s a little sign at each teller window stating that fact. The adults turned out to be financial children plunking down their money with eyes wide shut. Like any other child they need to take their knocks and learn from experience. Why are we rewarding bad behavior???
Because we allow these people to make chumps of us. (This has been pointed out already by others here.) Americans, some time ago, started going around with little signs taped on their backs : "Kick me".
Washington politicians-- the Democrats who brought you the Steele dossier and election-fraud of 2020 above all-- and their colluding partners in the civil service did not need more than that in an invitation.
Things take time to trickle through to the wider general public's television-addled consciousness. When they come to grasp the full extent of this episode of conspiratorial graft at high levels--that is, if and when they catch up with people who have your understanding-- they may react with force which Washington cannot resist. Then maybe some of those responsible shall be held to account--and the ill-gotten gains indemnified by taxpayers clawed back. "Big enough to fail (fraudulently), small enough for jail."
I agree but differ slightly. If the FDIC is in fact going to guarantee all deposits, not just those $250K and below, then the premiums banks pay will be MUCH higher and the customer will end up paying for it, as it should be. Most likely in the form of higher bank fees or lower interest.
Sorry, Hutch. All forms of insurance need to set limits somewhere. The bank buys FDIC insurance from and through the federal government. The GOVERNMENT sets the rates and the limits to coverage. It’s the only way to know what is the limit, over the whole banking system, of possible risk. If you want to bargain for greater coverage try, say... maybe Lloyds of London or some such. I believe there are some U.S. insurance companies that will accept that kind of risk. Probably less today than a couple of weeks ago...
YES. And this is why only the FF&C of the US Treasury can offer the unlimited backstop.
Bailing out companies that knowingly left millions of dollars in uninsured bank accounts creates a moral hazard. I read somewhere that over 90% of depositors were over the $250K threshold, which is significantly higher than most commercial banks. These companies made risky financial decisions just like management at SVB who took way too much interest rate risk and customer risk. Shareholders and creditors could sue the management team for fiduciary negligence and potentially fraud too. A thorough reading of SVB’s financial statements exposed a lot of this. No internet needed.
They poorly managed their portfolio and interest rate risk, two of the most important things in banking. Subsequently, those companies that had millions of dollars in their accounts also mismanaged their assets as they are multiple vehicles they could have used to reduce that risk.
Fractional Reserve Banking is borne on legalized fraud. Not trust! We never needed this system in the first place. And bank failures are the one way to keep banks honest and accountable.
Everybody talks about 1929 but this in some ways looks more like 1907
Which was the final impetus for creation of the Federal Reserve. The truth is you cannot fix greed. So let them fail.
If these were solid quiet banks in, say, eastern Ohio, they’d drop dead and nobody in gov would lift a finger.. but these? Silicon Valley and barney frank?
This should have been the real focus of the article. They only gave a sh**t because of where it’s located and who the depositors are.
Ah yes, the impetus to create the Creature from Jekyll Island. A great record it has, mind you, what with more recessions and depressions from the prior century, comparatively insane levels of inflation and lower rates of actual wealth creation to boot.
The Jeffersonians and Jacksonians were right. Central banking is a viper. And it enables the fragile, fraudulent FRB system.
"The Jeffersonians and Jacksonians were right. Central banking is a viper. And it enables the fragile, fraudulent FRB system."
Bank frailties are all ultimately founded on human frailties. Only Mother Nature herself resists all fraud and collects all debts due in full.
Read about the history of state banks--after 1789--until the creation of the federal reserve system. It isn't "pretty".
Besides, if this is an F.D.I.C.-covered bank--as I assume it to be--then depositors' accounts are insured up to 250k per account. Now, of course, in Sili-Con Valley, 250k only covers the costs of the kids' private annual schooling, annual vacations and the private club memberships and the luxury car leases.
Oh, well. When these people tighten their belts, they still have beautiful living-standards which many of us would envy.
A hallmark of recent years has been the government redefining traditional terms for a variety of things to their benefit. Bailout, recession, vaccine, etc.
"First, they came for our language; but I didn't really give language that much thought. 'Big deal', I thought, 'it's just words.' So I said nothing. Then they came for our rules, but I thought,'Rules? We've seen them made and un-made' so, again, I said nothing" ...
This is everything. What and how much egregiousness will it take for people to act? They know where that action will lead. We’re still in ‘this really doesn’t affect me directly, so I can go on with my life, and hopefully it will go away” mode.
Next they coming for us! That’s the last of us (no pun intended)
Exactly. The government has essentially said that deposits will be covered, even if that has to be done using bank insurance that was intended only to cover deposits up to $250K -- and which both the bank and its depositors KNEW would only be covered up to $250K. Which means other banks will be compelled to help cover these deposits (through the premiums they've paid into FDIC, presumably) if SVB assets are insufficient to cover them.
Whether or not that actually DOES turn out to be necessary is hardly the point. The government has made it clear that depositors who knowingly took an outsized risk here will be made whole, even if it must be done at the expense of other banks (and their depositors). (Because the FDIC bucket is presumably not limitless, after all ... paying out to customers of any one bank presumably reduces the amount in the bucket that's available for the next.)
That is a bailout. It is a bailout of depositors who should have known better, but decided to take the gamble because they liked the perks that SVB provided depositors.
Worst, it sends the message to other banks that there are zero real consequences (at least, up until sudden death) of taking outsized risks to maximize bank profits and attract depositors.
It signals to depositors that there are zero consequences to taking outsized risks by signing up for whatever ill-advised perks/returns a bank might offer, and to not taking even basic responsibility for managing their assets prudently.
And because there no consequences, other banks -- banks that might otherwise have remained conservative and responsible -- will feel massive pressure to engage in the same risky behavior in order to remain competitive with banks that do.
taxpayers will bear the cost as banks shift the burden , the president and his enablers lied. in a high inflationary period banking costs are going to increase .
I agree that the depositors will be bailed out.
Unless the depositors are given rates that should signal caution, they should be able to bank their funds on trust.
Investors are a different story.
They need to be much more cautious and, in this case, they were not and will be paying for their negligence given it does not appear the bank attempted to mislead them.
Indeed. This betrays astonishing ignorance on the part of the author.
Very insightful. Bank runs caused by social media panic. It’d be funny if it wasn’t real.
In our modern age, it’s easy to forget how primitive we really are. We may have AI and nuclear bombs, but psychologically, we’re just getting out of the trees.
Blaming the SVB bank run on psychology is the perfect analogy for the “anti-agency” view of humanity that is now pervasive across western cultures. It wasn’t the risk of the bets, it wasn’t all the bad credit lines given to insanely overfunded terribly run startups and it certainly wasn’t the especially risky bond structure of a bank that only invests in unprofitable companies - it was “psychologies” fault.
No, that premise is nonsense. in 2008 (though really WAY before that - that was just when the chicken came home to roost) we turned the entire banking industry into one giant moral hazard. All the upside goes to the banks, all the downside goes to debt on the tax payers. And SVB played the game and they played it especially aggressively. They financed SOOO many unprofitable startups it would blow your mind if you actually went through the details. But as long as money was free (it was actually better than free in real dollar terms) it didn’t matter because valuations kept going up (based on nothing but that capital was cost negative) so their amassed assets kept going up, so who cares that the entire thing was a house of cards built on something like a 3% real-asset (cash flow positive) asset base.
Until we unwind federal income taxes and dismantle the fed we’re just going to see more and more of this. It started small when the interest rate and debt swings were small - now the debt is HUGE so even tiny interest rate swings cause contagion after contagion. Your psychology doesn’t matter - the broken market matters.
Just wait till all the startups with no cash left empty their bank accounts (6-18 months) and an actual bank run happens - not on panic, but on bankruptcies. This is just the beginning, and it has nothing to do with psychology and everything to do with a HEINOUSLY broken system built entirely on the moral hazard of privatized gains and socialized losses
You would have thought banks would have recognized bubbles, bad real estate deals, investing in building office space, gouging the general workers whenever they could as bad for business. They never invested on a community level, redlining, closing bank branches in small communities, doing everything they possibly could do to shortchange the daily person. They wanted to be with the sports figures, the moneyed old and new, the derivatives, wanting special favors from the government and bailed out every 10 years due to “market changes.”
They made their future and present problems and now I am being told don’t run on the bank because that will cause bigger banking problems. BULLSHIT. Personally I say to those who invested 250,000 or less you get your money. Apple, Microsoft, Zuckerberg, etc. welcome to the real world. This is where you get bloodied, learn from it. Let the banks and their CFP, CEO, and company see and feel prosecution and real pain. For once hold them accountable. Going to have a drink and it is only 11am.
Really!!! Banks do not deserve safe spaces.
Neither do these Tech companies
I did a very long piece on this - https://butthedatasays.substack.com/p/has-the-american-dream-been-eaten - but fundamentally I don't accept blaming the banks. Should we be disappointed in them/there leadership? Sure. But as I argue in my thesis, they are just responding to incentives. The government created the moral hazard, and banks are simply playing the game within the defined rules. if you tell them they get to privatize the gains and socialize the losses, they're going to gamble. They'd actually be irrational not too. It's simple game theory - if you every time you flip heads you keep the money and every time you flip tails someone else pays your debt, you're going to flip that freaking coin as many times as humanly possible.
If we want actual change - stop blaming the banks, or the Zucks of the world, and let's get serious of changing the rules of the game. If the fed stays, interest rates can never go below REAL inflation (there HAS to be a carrying cost of capital, or again, there is no risk), and we need to DRASTICALLY reduce federal tax income so it is infinitely harder for them to borrow against OUR assets. We reduce the debt/spend cycle and maintain interest rates above the real cost of capital and banks will respond to a whole new set of incentives. In the short term the middle class will suffer. In the long term, the billionaire class will be de-structured, and we'll return class mobility to the U.S. But it's going to be an awkward and painful march to get there. That, or we keep becoming a worse version of Russia, but with better weather and more natural resources.
Again consider me your cheer squad. This comment also illustrates other government issues as well and not just federal government. It matters what the rules are and thus who we elect to make them. We are not doing a good job of it.
"If we want actual change - stop blaming the banks, or the Zucks of the world, and let's get serious of changing the rules of the game."
Change the rules of the "game"? There are already rules --and laws--which make conspiracies to commit banking fraud a crime, rules which require accurate reporting of financial conditions, rules which prohibit withholding, hiding or altering financial records to create a false impression of financial soundness.
When the financial authorities get to the bottom of this case's history--if they do an honest and thorough job and meet _their_ legal responsibilities,--they're going to find that this rotten mess was very clearly understood by the bank's principals to be and to have been going on.
The suggestion that this sort of debacle could happen while dotting all the regulatory "i"s and crossing all the "t"s is scandalously outrageous. It makes chumps of all of us, not just customers of SVB.
You should read the article that breaks this down in detail - https://butthedatasays.substack.com/p/has-the-american-dream-been-eaten - or just read the section
But here's the key part:
"Our tax dollars literally go to paying regulatory agencies to lie on behalf of their real clients (the companies they supposedly regulate) and we pay the price. Don’t EVER blame the company because of corrupt political systems. That’s like blaming NBA players for “traveling.” If the refs don’t call it traveling it isn’t traveling. The rules of the game are irrelevant – rules that aren’t enforced aren’t actual rules – the players simply play within the ACTUAL rules of the games. The rules are broken, not the players."
Because here's the truth - they absolutely would have passed a stress test, right up until the bank run started and they couldn't any longer. every single time the FED drops interest rates below inflation, banks are literally stealing from the American people. Period. it isn't just allowed, they're being TOLD to do it. Then the fed started jacking rates, and now the rules have changed mid-game, but the regulators can't do anything about it, because it's their game in the first place. SVB had a ton of assets that were insanely overpriced due to free money - but they didn't set the asset value of those cash-negative businesses - and they didn't determine that the lending rates were 0++ and they didn't set that the threshold for fractional reserve banking is based on "book" value, not marked to market values (that is, if the last time I priced a building I own was 3 years ago, I'm still using that book value as the value of the building even if, were I to reprice it tomorrow it was worth half. We CAN force banks to mark to market, but the regulators don't do that today - so this is on them).
Blame bottom up never works. It isn't traveling if it doesn't get called. You want traveling called, change the rules ,and most important, change the referees. Or keep screaming that the gather step isn't being called and let me know how oblivion is...
My take (rant) is that most of, what seems to me, the slide toward a kind of anti-human sterility and psychology in the American national dialogue springs from what I think of as criminal finance. International financiers hold no loyalty to America and (it seems) are pushing a world agenda to dismantle nations, human rights and peoples cultural cohesion altogether. I see most of the D.E.I./"woke" blather as a means of talking over the top of legitimate social concern and I believe criminal finance funds it. Most of our comments across Substack are reports and discussions about the symptomatology and realpolitik human damage that springs from the bad social and economic policy we witness every day across the American landscape.
I agree with your take on a compromised bureaucracy maintained for the benefit of self-interested financiers. The rule seems to be "whatever I can get away with". We need a shift in national psychology (I think it's happening) and more real time reporting on the cause and effect consequences of the people manipulating our lives and economy much as Taibbi did on the '08 crash.
The bank had to have fraudulently misrepresented its lawful reserve obligations--and committed a host of other violations of banking regulations or it could not have come to that sorry pass in the first place.
Read your blog? I've read your nonsense reasoning here. Why would I follow that up by wasting more of my time reading it where you first spout it? I have a _lot_ on my reading list and your stuff--outside of this blog, and, now, maybe _inside_ this blog, does not meet my minimum quality standards. You see, _I_ have standards, too, and I _apply_ them to my choices of how I spend my time.
The commentators are fired up today another excellent post!!!
Another brilliant post by you - thank you easy to understand
The best post ever Pbr, enjoy the drink I’m doing the same, pink G&T putting my feet up!
Andrew Jackson hated the idea of a central bank and as president fought it tooth and nail.
Yeeeessssss! Consider me your cheer squad.
Off topic but you'll love this. It's why the Dems love the ever senile Joe. This is why comprof and his pals are so proud to be Dems. Leader of the free world. Scary, huh?
https://news.grabien.com/story-supercut-joe-biden-the-wanderer
That was good for a giggle.
Priceless loved the music
Even if it is scary to think this idiot has the codes to launch nuclear weapons, it is grimly funny.
The Dems know he shouldn't be in office running the country but they won't remove him because instead of thinking about the welfare of the country, all they think of is power and their self interests. They are in an impossible position. The next in line is the equally incompetent Kamala Harris and next after her is Nancy Pelosi who even scarier than Harris.
I think that's true. However, institutions and societies are composed of individuals, each with her/her own individual psychology. What I was trying to point out (and what I believe the author of this article was trying to point out as well) was only one individual facet of what is obviously a multi-faceted problem brought about by what you point out in your comment.
You are totally right, and I apologize, because I was in no way demeaning your comment. I think you were spot on - I was more attacking the laziness of the article to analyze the SIMPLEST explanation (the one without agency) as opposed to the complicated explanation that lays the agency very heavily on those creating the rules of the game.
lol you good.
I'm glad you brought it up, though. A lot of times, financial or other catastrophes are assumed to just have happened, when really there is a pretty definitive (or at least mostly definitive) cause and effect chain leading up to it.
Agree.
I think you've nailed a part of our problem, Data - but the 'dismantle the Fed' solution you propose will create the very bank run you rightly fear (only national), along with a rampaging stampede to the exits on equity markets that will annihilate and turn to desert sand every single adult American's 401K. Pennies on the dollar? It would be worse than that.
Of course after all of that, when companies can't make payroll or pay their bills because there is nothing to guarantee their deposits (since the Fed is gone..) and their liquidity has disappeared there go all the jobs, and then mortgages won't get paid and well..
Time to bring out the muskets..
As my daddy taught me, "Lynne if you cannot pay for it you don't need it."" Best.Advice.Ever. Mama said be prepared to make a car payment and trade every year. I am really glad I listened to daddy. And while I accept what you say as true the longer we kick reality down the road the harder the course correction will be. And looming over this banking dust-up is $32,000,000,000,000. We have had 120 years of the Federal Reserve. All it has created is a house of cards. It is time for the grown-ups in the nation to say enough, dismantle the house and start to build a firm foundation. Americans are tough and hard people. We can, and should, do it. It should be done from the local and state level.
A house of cards is what we have. I agree with you. I'm afraid, though, that the time for a course correction of the stature you mention is past us. We're already too deep. It was very revealing that the Fed, Treasury and all the usual suspects over the weekend made all depositors whole for not only Silicon Valley Bank but for Signature Bank as well. That tells me that these two events are but the canary in a very deeply connected coal mine involving debt and too much leverage, and that there is a lot more at stake than two seized banks. They realize that many banks are holding assets declining in value and will not withstand a run on deposits. They need more liquidity, ie more regulation - maybe revisit Dodd-Frank and vote in more legislation. But it's clear authorities are worried. This is a deeper issue than people realize.
Your house of cards scenario..
Lee I am a hard person, not a cold person, but a hard person. So I say this knowing that. It needs to fail. I fear that is the only course correction for the nation at this point. We should have let it fail in 2008. Yes it will be hard, some, including myself, might perish. But out of the ashes a better America might (I believe WILL) rise. We can face it now or we can face it later but it is only going to get worse. The only alternative I see is to 1) recognize that the Federal Reserve system has failed and is not viable; 2) have a planned dismantling thereof which does not mean no federal currency or national banks but rather both backed by something of value and governed by stakeholders who will sink or swim based on merit of policies not federal government guaranteed safe spaces; 3) time-out for the over-reaching federal government accomplished by a return to the notion of governance close to the governed at the local and state government. Will it be messy. Of course it will. But as you point out, and I agree, the "Schmoosing and Vibes Bank" failure is just the tip of the iceberg. That $32,000,000,000,000 is a ticking time bomb as is the planned use of the votes of those we-don't-even-know-how-many-millions-of-illegals to entrench the ruling class' power and those people do not care about you or me or our welfare. I am a proponent of America and her people. We have cancer and it needs to be removed before it metastasizes further.
Radical, but in a way it sounds exciting..
Certainly not for the faint of heart.
I differ from you in the sense that the banks are certainly scary beasts because many of them are unstable, and we have a trillion too many dollars floating around out there - but it is the equity markets that worry me most. They've been massively overvalued for years due to speculation and I feel in my bones a meltdown is coming, regardless of Fed monetary policies etc..
And no one will save anyone in a massive market crash. Investment banks along with every small investor and pension fund will be swept down the toilet. The losses will be in the trillions and the government will not have the means to clean up the mess.
The course correction you seek might be the result of a calamity like that.
You know I thought the revolution would be louder, with lots of gunfire, bombs, like the Ukraine. I didn’t think it would be collapsing as it is. Bank failures, government failures, greed on all sides, distrust of medical staff, of anyone in authority.Shit. I am 63 and I am already realizing things are going to get really rough. Ugly even.
Personally, we are already in the path of dismantling certain parts of our society. The country is going to start breaking apart. Like a marriage, this is no longer working, let’s move on for all our sakes. Whether it is part of the great reset, or something totally different we are part of it and there is going to be a lot of hurt and anger.
I know to keep my powdered dry. I live in the South. I know to make friends with my neighbors.
Amen, brother.
Us too.
That's really interesting. Possibly. I am holy anti the "regulation, failure, more regulation, more failure" cycle of governance we've used for the last 200 years, so I'd always support less regulation, but in an era of less data transparency there's certainly an argument to be made that any strict checking account should be marked to market and the fractional percentage of my bank account held in cash very clearly visible to me as the consumer.
"We" or the people who believe that gender is determined by one's mood, borrowing doesn't matter, energy comes from a light switch, body piercings make one attractive and sex with children is normal? In other words, the DNC and its minions.
No, I mean “we” as in all human beings.
Homo sapiens are a pretty violent breed.
Sure we are all capable of violence, but humankind would not have advanced without some iconoclastic types who decided to take a different path. Not go over the cliff with the herd.
Come on Ben. I usually like your comments but pick a lane here. Are we a violent breed (fighters)? Or runners? The truth is some of us are fighters and some of us are runners. Which is likely why we are still here at all. There are in my estimation very few situations where one size fits all.
The same man could be a lot of different things, including to himself.
The point that I'm trying to make is that we like to think that we have modern sensibilities and attitudes towards how we live our lives, but that only goes skin deep. It's what gives the saying, "the veneer of civilization" it's ring of truth.
Oh I agree with that. Our technology has far outpaced our evolution. My instinct is that this is an old, old story and that very advanced societies have existed on earth before only to fail when their technology outpaces their humanity. I believe there is a sweet spot for everything.
Lynne, this is off topic but you gotta love this:
https://www.msn.com/en-us/money/markets/climate-activists-glue-themselves-to-a-tanker-full-of-cooking-oil-mistaking-it-for-crude-oil/ar-AA18zZND?ocid=msedgntp&cvid=1a3f6fd0acc04bae82d3cf8a00ac2b9e&ei=54
Oh my stars. As Ron White says you can't fix stupid and we are in an epidemic.
Yes, but _this_ "stupid" is now, and rather unusally (fortunately) dangerous for _where_ it's located rather than its extent or virulence.
Society needs some general good sense in a few very important places and types of people. Medicine, transport, agriculture, energy, government and education, journalism and communications (and a few others I've overlooked) must be managed competently or very important life matters can and shall go badly wrong--even if "only"one is or a few of these are very poorly managed.
In our case, _several_ of them _at once_ are being very poorly handled and _that_ "stupid" is extremely important and dangerous and it's worse by orders of magnitude than the typical course of human stupidity over the first 1700 years of recorded modern history--to say nothing of the span of humanity's pre-history existence.
Art museums, fashion design, pop music, vacation spot trends, movies, pulp fiction (but _not_ "high literature"!)--these may (and frequently do) sink into shocking states of "stupid" without seriously endangering human civilization itself. But that same is not true for any--and certainly not all at once--of the other aforementioned matters of human culture.
It turns out that _some_ aspects of human culture are simple vitally important. And part of present-day "stupid" is a gross failure to properly appreciate this fact.
"Stupid" is always "everywhere" at "all times" but it is not always everywhere in quite the way we are now experiencing it. And that is a very, very big problem.
---------------------------
VIDEO BONUS:
Bill Maher was warning us as recently as 9 months ago:
"New Rule: The United States of Dumb-merica | Real Time with Bill Maher (HBO)"
https://www.youtube.com/watch?v=6dMOfwUP0F0
I guess Barney Frank was "too smart" to watch Bill Maher--or to give a damn.
Yeah. Once we throw that first rock we fall right in line w the group.
Do you think the ever senile Joe is still groping little girls?
Sadly adolescent entitled little trends on display for all to consider. Thx
Lol. This bank run happend because of "wokeness" and pedophia?
Define pedophia. I mean after all you are a "college professor" (yuck, yuck, yuck). You should know the definition.
You made a big deal out of me misspelling Kurt's first name. Hypocrite!!! Everybody makes typos, except you, of course. Pathetic.
How did svb go bankrupt? Slowly through cringe, then all at once through Memes. Here are the full receipts on SVB: https://yuribezmenov.substack.com/p/svb-linkedin-receipts
I’m going to be honest and say that I never considered how raising rates would destabilize HTM bank reserves. But that’s not my job.
I saw the Linkdin of the hot Asian chick who was running SVB risk management and I will say *if* I had her job I would have realized the problem week one. But she was focused on equity and inclusion.
Equity and inclusion of what, though? The bank didn't diversify. It entered the pyramid scheme in the middle at the height of printed money with no substance or value and increased its asset base five-fold and didn't leverage accordingly. That's not diversification. That's elite exclusion. And greed. It always goes wrong. The herd (those who wish to follow rather than think) jumps on and then reacts. Primitive.
Good point Rosemary, while the idea of equity and inclusion has merit in practice it is a farce and winds up solidifying more power in the hands of those who already have plenty while convincing the subscribers thereto that they are included.
You’re absolutely right, Rosemary. *Actual* diversification is the furthest thing from the goal of DEI. Elite exclusion is the do-it-all-hammer social contagion enforcer, whether that contagion is intentionally deployed (DEI, et al) or unintentionally sparked (SVB.)
No, Rosemarie. Around here, anything that goes wrong is because of "wokeness" and/or diversity and inclusion.
But it did happen because of DEI. When you're so focused on meaningless optics within the herd, you lose the substance where it counts. DEI actually caused exclusion because the DEI didn't occur in the fiscal management.
"I’m going to be honest and say that I never considered how raising rates would destabilize HTM bank reserves. But that’s not my job."
You hit the crux of what I consider the biggest issue here: Why do we spend billions in tax dollars hiring millions of employees to perform the specialized work that we have neither the time nor expertise to handle . . . and nothing is caught before the collapse or disaster? Where are all these smart people when it counts? We pay so much money for guardians--physical and financial--and to what end? SVL should have been caught the first week by some regulator or another that we paid a whole lot of money to head off these disasters, and the disaster happened anyway.
If we're going to regulate banks, then let's fucking regulate them correctly so this never happens again. I'm sick of wasting my tax money on bad job performances.
Yes but if we deregulate then the trains will come off the tracks.
Which is exactly what happend.
It sure did, in the savings and loan meltdown of the Eighties, the mortgage-backed securities fraud that nearly took down our economy, and other deregulation disasters. We had to regulate companies and markets for a reason Back When--poisoned food, water, and medicines, anyone? The only thing I want is efficient and competent regulation, since we pay so damn much for it.
The trains would in all seriousness come off the tracks with deregulation, as we saw in the S&L meltdown of the Eighties. We need is much more intelligent and efficient regulation, via
government or, preferably government plus private sector.
Me, I'd have the FDIC insure all deposits to a million bucks and require all deposits above that amount to carry private-market insurance. Let the flinty-eyed risk managers of for-profit insurance companies assign premiums based on real risk. Time to let the free market do some regulating, I'm tired of paying billions for federal risk management that doesn't manage risk very well.
Why? Lobbyists.
No. We have a gigantic government that sucks balls because of people like you, Compost.
Lol. No. Lobbyist.
Lol. Yeah...that's why the bank run happened "equity and inclusion."
It did happen because of DEI. When you're so focused on meaningless optics within the herd, you lose the substance where it counts. DEI didn't occur in the fiscal management of SVB. It was elitist, unsmart and greedy. That's the primary foundational issue with the new elites. They are only DEI within the herd, but they are not the herd.
It’s interesting to me that the author, who has his own Substack called Anti-Mimetics, likes this comment, which is true yet simplistic, but has sparked a dialogue that is complex. There will always be mimetic behavior because we are social animals and some prefer to permanently stay out of the game for a number of reasons (it’s too complex and difficult). In herd mentality in animals there is usually a leader and a supporter(s) of the leader that carries out the actions the rest follow. We are animals and we are not. That’s the dualistic challenge.
Human behavior is a strange thing, isn't it? I'm constantly trying to study it (in myself and others, although I'm not sure which is more challenging to understand).
I do make my posts a bit simplistic, but they're just my first take after reading the article. There are more thought out comments out there that don't get as many likes, but I tend to get up pretty early and FP posts their articles at around 0610 EST (at which point I've already been up for an hour or so). So that usually means a not as well thought out comment that has a bit of truth in it (or at least resonates with most of FP's audience's sentiments) tends to get boosted if posted at the right time.
Oh gosh, I'm so sorry, I didn't mean you are simplistic! My sincerest apologies. I just thought it interesting that Mr. Burgis liked your in-a-nutshell response, which was beautifully simple yet generated some rich complex thoughts!! I thank you very much for kicking us off so well!
lol don't worry about it. There's no way a 50 word or so comment can really capture all the complexity that a topic truly deserves, but it feeds my vanity to get a bunch of likes.
They couldn’t pay depositors because Democrats spent too much money bribing weak people with welfare over the last 100 years which is what necessitated the provision of low interest rates for 15 years which resulted in the banks holding a bunch of long-term low-yield securities which were under water because Democrats spent too much money on welfare during the pandemic (which was also caused by Democrats) which caused inflation which caused the Fed to raise rates which is what caused the aforementioned otherwise very safe low-yield securities to lose value and voila.
Hey Kevin, don't look at reality and draw your conclusions. Instead just read the entrails of animals and watch the flight of birds and use some rather trendy words and discover that humans are good at imitation and you will at last be brought to the insightful discovery that "orange man bad". Now doesn't that feel better?
I had to stop using animal entrails because it eats up too much of my monthly carbon credit allotment.
Lol button.
You get the best results out of a goat. Very accurate.
Do you how many Dems it takes to eat an armadillo? Three, one to eat the armadillo, two to watch for cars.
You are confusing syphilis and trichomoniasis I think. I do have hardcore syphilis but it’s not from the road kill.
Why is penicillin spelled with a “c” and not an “s”? Sure would clarify the link between cause and cure, if you ask me….
It's tough to stitch up a $16,000,000,000 hole on the fly when nobody is interested in taking your US treasury bills at the price that you paid for them.
What the Democrats did or not do, Republicans too, in the past is irrelevant to a sane resolution in the time frames of a healthy bank run!
Not when it's value is reduced. And reduced. And reduced. And then reduced some more. Every time they fire up the presses that is what happens. And now thanks to the actions of the war-mongers in Ukraine, China is making inroads on the preference status of US currency. We really need a business minded person, preferably with military experience, in office. Until them I am thinking bullion as a backup to dollars. With bullets and booze as a Plan C.
I have a friend that invests in ammo to use as currency if there is a societal crash.
My son (mid 20s, very successful day trader) says (only a little bit tongue-in-cheek): there are only three long term investments: water, bullets and the S&P500.
That made me laugh out loud. I do think it is true. In the event of a financial crash or grid failure bullets will be necessary to survival during any transition because wildlife will flourish.
Buy Swiss Francs.
Comedy gold.
Gonna need things to trade/barter after the initial shock.
" And now thanks to the actions of the war-mongers in Ukraine, China is making inroads on the preference status of US currency."
Huh?
Nothing would do so much to "make the U.S. 'safe for moral and financial ruin' " (which go hand-in-hand) than a Putin victory in Ukraine. Hollywood wouldn't celebrate that, but Sili-Con Valley (privately) would.
As for "China is making inroads on the preference status of US currency", I ask what that's supposed to mean.
First, unless there's been a major time-warp and I missed it, China holds more U.S. debt than any other single foreign nation. If the dollar's real market-value became relatively even more worthless, the Chinese could use their US dollar-reserves for confetti and distribute them as tokens in the little red envelopes handed out to youngsters during Moon Festival and New Year celebrations.
How would any of that make a Yuan more valuable on any international market? If SVB teaches any lesson, it's that cultural solidity, transparency and honest, above-board dealings are what ultimately underpins all social trust--and that it's that trust which underpins the deposits at the Bank & Trust. China, with perhaps only Russia as a rival, holds the title for the World's Greatest Hokum-&-Bunkum Nation of Official (& Murderous)_ Grifters."
Would _you_ buy and hold Chinese bonds? Seriously? Would you stuff the matresses with Yuan notes? Before you do that, try and find some Chinese who, when asked, would be so brave as to give you their candid appraisal of their government's and their currency's trust-worthiness.
I neither said nor implied that MY preference was changing. I said the US warmongering in Ukraine was allowing China to make inroads on the long-established (longer than climate fear-mongering so a really long time in some folks estimation). I stand by that. One of the middle east nations has just signed an agreement to supply oil valued on and paid for in a currency other than US dollars. Egypt has withdrawn from a UN trade agreement regarding grains (wheat) it has been a member of for decades. A founding member as I recall. The dominoes may be falling in a way not anticipated by the DC clown show because all they could articulate beyond Putin bad was but, but, but Putin!!! moving across Europe!!!! Like Hitler!!!!! I doubt that, not in the least because the man has been the Russian leadership since the fall of the Berlin Wall (30 years) and made no such moves. So it certainly was not a blitzkrieg. Now a multi-million dollar drone has been struck by a Russian fighter jet and the drone ditched into the sea. Little Blinken said this morning that ""it [the downing] is an act of war." I am not a Putin or Russian proponent. Neither am I blind as to the shortcomings of my government. Glaring shortcomings. As for the rest of your comment about banking and US dollars, that is a lot of woulda, coulda, shoulda and does not describe events on the ground. Either we have rules that are not being followed, which is no surprise as the rule of law and respect therefor is THE foundation of our Constitutional Republic and it is seriously eroded, or the rules are insufficient. The Federal Reserve System is an abysmal failure. It has spent 120 years trying to regulate the economy by tinkering with currency and financial markets. To no avail. All it has accomplished is the further enrichment of the 1% that the left is always screaming about. All we have right now is a suppressed economy, massive federal debt and the value of my dollars shrinking daily. Thanks JB.
..."All it has accomplished is the further enrichment of the 1% that the left is always screaming about. All we have right now is a suppressed economy, massive federal debt and the value of my dollars shrinking daily. Thanks JB."
Right. JB is incompetent and a moron. But if it had not been for Biden's "backing," however woefully hapless and late, Putin would have rolled over Ukraine about a year ago despite the surprising and brave resistance organized and inspired by that so-called "despot", V. Zelensky and which has, till now, stopped that outcome for all the time being.
Had that help not materialized, had that resistance not proven effective, I don't see how any of the things you lament in the above-cited excerpt would have been any different or better than they are now. The 1% should still be richer, our economy still poor, we'd still have a massive federal debt and the value of your dollars should not have shrunk any less. And Putin would be in control of Ukraine's grain products.
As I see it, these Ukraine policy matters are only very tacitly related to the SVB debacle. No important relation except in their being examples of the ineptitude which is typical of the Biden administration's handling of everything.
Are you sore and smarting from having lost policy battles regarding Ukraine? Or is your annoyance similar in foundation to mine: just an expression of personal disappointment over policy matters which, had it been up to you or to me, should have been dealt with very differently than they were and are being handled?
Bullets and booze together make a potent combination. But I do hope I can be on your team..
Regarding the banks that is my feeling as well. At some point there is simply not enough money a la Zimbabwe. On looming over us all is $32,000,000,000,000. As for safety and food, that is what the bullets will be for during the transition. The booze will be for barter until I can get the still operational.
I’m one of very few people in the county who can turn animal hair and plant fibers into fabrics and yarns using my hands and feet. No electricity required though it is time consuming.
That’s my ultimate fallback, along with the aforementioned three Bs.
There is a train of thought that you buy what is called trash or junk silver and use that as currency. Junk silver is usually sold in bags and it is old US silver coins that has no collector value but is recognized a valid currency and is made of silver.
I don't know if that would work. If the US currency completely collapses, we would enter a barter market. Buy up freeze dried food. Everybody needs to eat and use it to barter.
Thanks LP I will investigate that. It could also be melted for bullets.
I get it. It's all FDR's fault...
And I know that someone here will surely answer me with a resounding YES!!
Он мгт быть сонофой суки; но он НАШ сукин сын - И. Джугашвили
I'm smiling.
Thank God for Google translate..
Democrats caused the pandemic? That's a new one.
Anthony Fauci and Peter Daszak are Democrats, Compost.
Washington DC is 100% Democrat. If you don’t want Democrats to be responsible for everything then don’t support the totalitarian state next time.
But you’re one of their many parasite apes so you will always support them.
"Eat a bullet"? You really are mentally ill. I don't think I had quite grasped the scope of your problem.
His vote cancels out your vote and my taxes pay his rent. I cannot think of a more reprehensible set of circumstances.
rt gets ragdolled on every single thread and comes back to all of them because he likes getting ragdolled.
It’s not confusing at all. The storied money has already decided. We’re just trapped inside the game that ensues after that decision.
You may want to read the recent column discussing CBT. That is textbook catastrophizing.
And it is very obvious to me that Trump was never supposed to get elected the first time, yet it happened. It can happen again. I think much of our Federal bureaucracy was in denial about the extent of the corruption of their agencies, but that is no longer true. Most of it is simply undeniable.
Whose recent column, tah?
"CBT" ?
Cognitive Behavioral Therapy, I believe.
See my comment and link below to counter point:
https://www.nature.com/articles/s41562-023-01551-7
If widespread vote-counting is rigged again--as it has been demonstrated to have been--and if the major mass-media can call the election (at any time--January would do, so would June, or August; why even bother holding an election? just ask Hillary who won.) in favor of just any Kamala-like moron with a "D" next to the name, then, how does a fair election result in a Trump victory when the system's corruptors don't want to see a Trump victory?
From Tangle (you can find them on Substack):
A new research paper published in the journal Nature Human Behaviour suggests party loyalty and partisan motivation may be interfering less with Americans’ thinking than previously believed. The study, done by MIT behavioral researchers, suggests both Democrats and Republicans are more open to being challenged than previously thought. “Our results are clear and unequivocal: Learning the in-party leader’s position on an issue certainly did influence partisans’ attitudes — but it did not cause the partisans to ignore or discount arguments and evidence that ran counter to the leader’s position,” David Rand, who was involved in the study, said. You can read more about the study here.
https://www.nature.com/articles/s41562-023-01551-7
I think everyone knows the System is messed up, but it's hard to know what to do about it.
What I would suggest we NOT do about it is stop listening, or stop trying to build a better world, or assume that nothing we do matters.
It is not catastrophizing at all. I have a firsthand view. We live in a trickle up economy not a trickle down economy, which is based on our guaranteed herd mentality. And, it was meant for Trump to get elected the first time. The storied money preferred his fiscal agenda to Hilary and Soros. Dynasties work like we do (we are all human after all). They create an elite class where few reside and don't get involved until they have to. They must get involved now because things have become so disastrous and untenable. It will be DeSantis. Biden won't run, and even if he does, he will not survive the onslaught. The Democrats have no one else. They are throwing all the money away and creating no future value. It is more than predictable, as Trump was predictable, but few want to see.
I’m not sure. A perspective from what I see locally. DeSantis and trumpet are nominees, but their base is split. DeSantis voters won’t vote for Trump and vice versa. So that leaves a couple of possibilities: Biden wins second term, or republican DeSantis wins by the slimmest of margins. If it is Trump that wins a guaranteed call of election fraud throwing everything into turmoil, hell, if DeSantis wins call of election fraud, turmoil. No election at all, civil rights temporarily suspended.
Worse case scenerio?
Just curious: if things do not play out as you seem to think they certainly will, will you say to yourself and others "I was wrong"?
Kevin is not off base guys. Think about it more with less enthusiasm for quibbling. But DeSantis will win. And I believe he’s aware of the setup (and that dies make him a bit crazy but not Trump crazy).
In recent years, for many reasons and on many topics, I have taken to quoting Yogi Berra: "It's hard to make predictions. Especially about the future".
I can certainly make myself feel smart saying THIS is what is going to happen. But I don't know. This is a confusing, complex situation. I do strongly believe that Trump won in 2020 by a good ten million votes, and that he can win again. I would be fine with Ron DeSantis too. You really can't get worse than a senile President who takes bribes from our enemies and rivals, and who has undertaken the destruction of our national sovereignty and well being as a matter of more or less conscious and planned policy.
America First should be a given. It should tell anyone with half a brain all they need to know that that slogan has somehow become controversial. We should be debating what is best for America, not that our leaders should prioritize our own well being over that of other nations.
I think your "compassion" would most effectively be exercised through silence. But those with nothing to say can't stop saying it. That's not what the internet was invented for, but seemingly one of the principle uses to which it is put. Nobody actually stuck in the room with you could but fail to excuse themselves and leave. Here, though, you can butt in anywhere and any time you like.
That's enough from me. I myself become progressively more foolish the more I interact with you. But telling people to shoot themselves would get you banned, if I were a moderator. That's beyond the line.
I sympathize with RT because imagine if we had tried your exact plan over and over and over for decades and it failed spectacularly.
You would be lashing out irrationally as well. There’s like a stages of grief thing happening.
You took all these drugs, met "God", and presumably even now think that your political views are enlightened, humane, and beneficial. Yet here you are, acting like a little turd, rejoicing every time you can get a rise out of someone. It's childish.
And I will say to the moderators that people like RT here can dramatically lower the quality of a forum, and do so quickly. The people who actually have interesting things to say look at people like him, and say goodbye to the whole mess.
If you want to protect this as a quality forum, give warnings to the people who seem to be here just to cause trouble, ban them for a week if they don't change, then ban them permanently if you need to ask a third time. That will ENCOURAGE thoughtful discourse, not discourage it. Asinine trollery is everywhere on the internet. RT is likely only here because he's either in the majority on leftwing sites--which reliably ban conservative opinions--or banned everywhere else with an active and alert moderation staff. It's not his opinions that are the problem: it's the patent desire to demean, bully, insult, and create chaos.
You would not talk like that in front of me. You are an internet hero, and I have no doubt that in any actual physical rooms you occasionally darken, you have nothing to say to anyone, because you are at heart a coward.
It's always interesting to me how the people who want the government to be "compassionate" are actual a-holes to everyone outside their cult. Small wonder that genuine horrors ensue every time the "compassion" and "justice" people get their claws into a society.
No. Not any more.
Trump will 100% definitely lose but DeSantis will also lose and I’m rooting for Biden to win anyways.
Obviously, it would be idiotic to set it up so DeSantis get blamed for the collapse that is going to occur as a result of 100 years of Democrat policy.
Yeah I also blame Eisenhower for the Great Society. Zeihan is CIA. Mexico is run by illiterate criminals.
One trick pony, "Trump, Trump, Trump". The song of the mentally deficient.
Can't you bring anything else to the table, like civil, logical, debate on any other topic besides Trump? There is a lot out there besides Trump. Put down your weed long enough to unscramble what is left of your brain and give it a shot.
I am skeptical of and curse both parties. You only, like comprof, curse one. The Clinton crime family sold presidential pardons and the Clinton Foundation was a slush fund for the Clintons.
I am no fan of Trump but I can't support socialism. We are trapped in a no win situation. We need term limits and a balanced budget amendment. That won't solve all of our problems but it might help.
Also, we need a neutral (If that is even possible.) investigatory legal branch that does nothing but investigate congress, the presidency and all senior government officials for corruption and start putting these thieves in prison and I don't mean Club Fed. I mean supermax prisons where they take long hot showers with a muscled up, tattooed person named Knuckles.
I do not understand blind loyalty to a corrupt political party. maybe you can explain that to me and while you are at it how members of congress and the President get rich while in office. Nancy Pelosi for example is estimated to be worth 150 million dollars. Biden has two mansions worth between 6 and 8 million dollars all on a senator's salary.
I am sure there are Reps equally as guilty of profiting off their office, Truman said, "Anyone who makes money while in office is a crook." and I believe that.
You assume a lot. Why are Democrat-party Sorcerer Apprentices now now frantically beside themselves trying to figure out how they're going to find and put up a candidate who'll rid them of the double problem of a Biden who's too frail, stupid and dangerous to allow a second run and his idiot-vice-president---whose place is owed to her being an electoral "insurance-policy" of catastrophic proportions--- think, Nixon's Spiro Agnew, or, in case you've forgotten, Obama's Joe Biden--- a vice-president who's just too stupid even for California, home of SVB stupidity? It's a question. That's right: Obama chose--or assented to--Biden on the ticket because he'd reasoned that no public would be so monumentally stupid as to want to see him (Obama) succeeded by such a completely corrupt and moronic figure. And that was openly joked about. Obama joked about Biden's being a dim-wit.
..."a known con man and grifter "...
A reference to Biden?
..."all indications are that Biden will not only run but if against Trump,"...
You just wrote telling us that, "The two party system is an illusion."
In that case, the term "winning", as applied to an election, has no meaning and the election of Biden (once more) no legitimacy.
Who writes the script playing in your head? Do you see them as well as "hear" them? Do "they" know you're watching them as they watch you?
Do you have a secret "sign" with which to safely signal those who are not "with 'Them' "?
https://news.grabien.com/story-supercut-joe-biden-the-wanderer
I can see why you are enamored with this disastrous, corrupt, clown. Do you have a laminated picture of the idiot in your wallet so you can take it out a few times a day and kiss it?
Let's hope the Socialists run another socialist beside Biden, at least someone who knows what planet he is on. However, unlike you I can never bring myself to vote for a socialist.
As odious as Trump is, he is no socialist. History shows socialist countries are run by mass murdering dictators. History bears out that socialist regimes are far bloodier than Hitler's NAZIs.
I find them disgusting. You on the other hand will vote for them.
I will say it again. We do not elect the best and the brightest to high office.
It doesn't matter who it is. The Dems are already orchestrating the necessary ballots. Two more years of the "Vote Blue No Matter Who" idiots, I mean babies + illegals + convicts = victory. That is why you keep seeing so many polls - gotta know what numbers they need.
Great initials, tankie.
"I’m grateful that the Treasury and Fed guaranteed deposits on Sunday afternoon (this is very different from “bailing out” Silicon Valley Bank, by the way—it simply means that depositors won’t lose their money). I only wonder what may have happened if this were announced earlier, without the 48-hour panic before the statement. " Then tell me what is the value of an FDIC statement that deposits are guaranteed up to $250K. You are suggesting guarantee should be stated as unlimited. That absolves the institution of any responsibility for managing investment risk. When does the gambling stop? Depositors should understand the bank balance sheet and risks if they want to deposit more than the $250K guaranteed. I think $250K is all they should get from the Fed.
This insanity won't stop until people are investigated, prosecuted and stripped of their ill-gotten gains. There is credible information about stock sales by execs and massive bonuses paid just days before the bank failed. That's not misfeasance, it's malfeasance.
The guarantee is just a minimum. When someone comes over to my house for a dinner party, I guarantee them at least a meal. They may get seconds or thirds, or they may not, but they will at least be fed.
The $250K guarantee is adequate for the average individual, but makes no sense for larger companies that have multi-million dollar payrolls. Imagine the bureaucracy if, say, Microsoft had to keep its money in 50,000 different banks so it would be insured and could always make payroll.
The ONLY part of this that really bothers me, though, is how quickly the Feds jump when the interests of the wealthy are at stake but, for everyone else, it takes years to get any kind of meaningful action.
People coming over to your house are your guests, not your customers. And whether you give them seconds or thirds is your decision based on what you have available in your fridge, pantry and bar. So your analogy does not fly. I
I doubt that this government would help a heavily O & G bank in Texas or Oklahoma. When the government decides who it will and who it will not help it is picking winners and losers. Which is not the job of the government. I do agree that the $250,000 may need to be revisited but largely based on the fact that the same government has so devalued the dollar. They are like hamsters on a wheel and I want out of the cage they are running.
Yes, the "too big to fail" is bullshit but Nancy Pelosi, Mitch McConnell, etc. are ALWAYS going to protect their multimillions.
In my town, people run for office because they care about the town. They may have differing views on what's best but they're not going into it to become multimillionaires.
Going into Congress for a $174K a year job then becoming a multimillionaire within a few years just isn't possible without corruption. The problem is, our corruption is LEGALIZED.
I posted this in another thread, but again THIS should have been one of the central points to the article. Hypocrisy. For a group who supposedly cares so much about the “average Joe”, would they have given 💩💩 if this was a small local or regional bank? How many of those depositors were donors? Supporters? Friends? These are all just questions swirling because I’m not going to assume or claim my conclusions as fact without any actual hard evidence.
Me too. If you read anything I post with the words "I think" it is my opinion.
As a quick last thought, I still don't think that these bailouts are healthy for capitalism. The herd needs to be thinned of bad actors over time.
To your analogy, I want my dinner guests to go home and not continually bellying up to the bar for a free meal!!
wealthy allies , you think if it was exxon they wouldn't let them get a haircut?
Like then maybe those companies should take the risk-i.e. Lose their money- if they don't check out the bank's fundamentals?
I would like to be invited for dinner and I will have seconds! But, insurance is paying for a level of risk. The level is set at $250K. Are the fees assessed large companies for FDIC insurance based on $250K or something more? If my deposit is $1M and yours is $10K, do I pay 100x more fees than you do for the $250K insurance? If big companies are to be insured to higher levels of deposits, the rules need to state that.
Maybe they should form banks that only hold money for payroll.
My daughter works for a big tech company and was telling me pretty much the same thing you just said. She and her colleagues were all fearful of not getting paid as well as the possibility of losing their jobs.
I feel for your daughter.
"The guarantee is just a minimum."
What?!?! No, it isn't. The F.D.I.C.'s 250k is the _maximum_ insured value of your deposits in any _single_ account--the only way to hedge that is to divide greater wealth into multiple accounts, which many very rich people _do_ for just that reason. Anyone who thinks otherwise is not mentally competent to hold a bank account. There's a reason those little signs read "Up to..."
Honestly, I cannot believe the level of naïveté here.
My understanding is that what happened Sunday is that they guaranteed above the $250k threshold. The Dems say they want to stick it to the rich, but they change the rules afterwards and do the exact opposite!!
Now Chris, there go your lying eyes. Put your blinders back on before you sow discontent amongst the herd.
👍🤠Don’t hear this a lot in the discussion of this SVB situation. “Moral Hazard”.
Ticker symbol SVB
http://mail.openinsider.com/screener?s=Svb+&o=&pl=&ph=&ll=&lh=&fd=730&fdr=&td=0&tdr=&fdlyl=&fdlyh=&daysago=&xp=1&xs=1&vl=&vh=&ocl=&och=&sic1=-1&sicl=100&sich=9999&grp=0&nfl=&nfh=&nil=&nih=&nol=&noh=&v2l=&v2h=&oc2l=&oc2h=&sortcol=0&cnt=100&page=1
FDIC insured up to $250,000. Unless your depositors include Oprah. The CEO cashed out stock before it crashed. How is this not insider trading? And employees responsible for decision making got their bonuses just before the hammer fell. Amazing timing.
What all this says to me is that banking regulations and the regulators enforcing them are a joke.
What about Biden's traveling freak show of an administration isn't a joke?
Remember 2019 when we had stable borders, low inflation, abundant energy at low cost, and were at peace?
The CEO's stock sale was properly and legally announced well before it transacted. It may or may not have been a coincidence. It will certainly be clawed back if it wasn't.
This is absolutely a bail out. SVB's collateral (treasuries) were repurchased at par (full value) by government when they were worth $0.60 on the dollar. Who is paying for that $0.40 on the dollar difference? Taxpayers.
The Fed will hold them on their balance sheet to maturity and there will not be a loss.
The taxpayers do not fund the money that the Fed uses to purchase assets. It is fake printed money.
Not doing this would have resulted in the elimination of every regional bank which would have expedited Democrat tyranny which is why I’m surprised they didn’t let it happen.
"fake printed money" is where the rub is. Real labor or goods enter somewhere, increasing M2 still has downstream effects seen in velocity and/or inflation
As long as the money you are printing isn’t given to people who will use it to buy chicken then you won’t have inflation.
We didn’t have inflation after the money printing in 2009 because Goldman Sachs didn’t use the money to buy chicken.
For the most part, that's true, but we still had inflation when the money was printed and started chasing stonks. Just because the prices of chicken aren't rising doesn't mean there isn't inflation. It's just somewhere else in the economy.
Oh yeah I know but a rise in the price of Snowflake and fancy watches does not destabilize society the way $15 bread does.
Exactly.
Here are some rational solutions that don’t infringe on our rights:
1. Bankers that don’t hedge for interest rate risk should not be bankers
2. Diversify. AKA don’t put all your eggs in one basket, if you do put all your eggs in one basket, watch that basket damn closely
3. Always have enough liquidity
Mimetic desire, very fancy useless words
SVB was too focused on ESG, DEI and climate change.
Although I do not favor those areas the real problem was a lack of a hedge for interest rate risk. Sadly banking 101
I agree.
I agree with you.
Multiple things are true at the same time here. You are correct on the lack of a hedge for interest rate risk. It’s also true that SVB used their increased assets to make higher risk loans to further their ESG and DEI objectives. Both are contributing to the problem.
Apparently, SVB didn't even have a chief risk officer between April 2022 and January 2023.
Classic asset-liability mismatch. Might have been avoided had the Trump Administration not neutered Dodd-Frank. I mean, at least they would have been required to do stress tests.
Exactly. The psychology of bank panics is less important than not creating them in the first place by doing the things that SVB was doing. And it looks like their "hedge" was, like the crypto fraud dude, to curry favor with the people supposedly watching over them. Democrats always talk like there was Magic Regulation that existed in a golden year before Bad Republicans removed it to help the rich. News: there are still (reams of) bank regulations and an entire structure of regulators.
To borrow from someone else:
"Either SVB was incompetent or this is a case of moral hazard, taking excessive risk and expecting political favors and bailouts. It turns out SVB’s real “hedge” was to curry favor with the Biden administration. In 2022 SVB publicly committed $5 billion in “sustainable finance and carbon neutral operations to support a healthier planet.” SVB’s 2022 ESG report lists a litany of “cross-function working groups,” including a “Sustainable Finance Group” that monitors progress against SVB’s Climate Commitment and an “Operational Climate Group” that “monitors implementation of operational greenhouse gas reduction initiatives.” Rather than apply basic risk-management practices, SVB resorted to lobbying for looser risk limits."
Yes.
Although I also think had Dodd-Frank not been undermined, the situation _might_ have been mitigated—the key word there being "might." Interestingly enough, SVB CEO Becker apparently lobbied hard for that relaxation of Dodd-Frank. Be careful what you wish for, eh? 😀
Anyway, the loan program the Federal Reserve has opened to help keep money flowing through the banking system will be backed by taxpayer money. But, hey! It's NOT a bailout.
I think Biden has just lost all chance of winning the 2024 election.
Never forget that it is now about ballots not voters. If the Republicans are smart they will realize there are lots of Alzheimer’s patients in red areas that should not be “denied” the vote.
You're on a roll today, Madjack! 😀 That made me laugh out loud.
And, of course, those among us with progressive leanings are already combing the 2020 census findings for unexploited pockets of dementia-addled perps in blue states! 😀
Absolutely not a bailout under any possible definition 😅😅
Per 2024 hard to say. On the one hand people’s memories are short, and there will be endless shiny news cycles to distract us between now and then. On the other, I was just reading somewhere that there are many banks not quite as reckless as SVB but nevertheless holding piles of treasury bonds and mortgage backed securities whose value has plummeted and without having hedged against rate hikes. So we could be looking at a wild ride.
All eyes are on Credit Suisse! 😀
"...material weaknesses in its financial reporting over the past two years..." Hmmmmm. What's that pig-Latin for? 😀
..."The psychology of bank panics is less important than not creating them in the first place by doing the things that SVB was doing. And it looks like their "hedge" was, like the crypto fraud dude, to curry favor with the people supposedly watching over them. " ...
How is "not creating them in the first place by doing the things that SVB was doing" even possible, let alone more important, without first understanding "the psychology of bank panics"?
Corruption and fraud in dealings between bank management and elected officials does not constitute--or deserve the name of-- a financial "hedge".
Or this:
"SVB misread its customers’ cash needs. Risk management seemed to be an afterthought. The bank didn’t even have a chief risk officer for eight months last year. CEO Greg Becker sat on the risk committee.
As customers asked for their money, SVB had to sell $21 billion in underwater longer-term assets, with an average interest rate around 1.8%. The bank lost $1.8 billion on the sale and tried to raise more than $2 billion to fill the hole.
The loss flagged that something was wrong."
Obviously my use of "hedge" was sarcastic. The point is, as many other commenters have noted, it's a little odd to focus on the psychology of bank panics rather than not letting your bank get into such a position in the first place. SVB got themselves into a non-tenable situation, as this concise summary from WSJ describes:
"Management screwed up interest rates, underestimated customer withdrawals, hired the wrong people, and failed to sell equity. You’re really only allowed one mistake; more proved fatal. Was management hubristic, delusional or incompetent? Sometimes there’s no difference."
You don't create this specific bank panic in the first place by not doing all the things in that list above. Like this from the same article:
"Everyone, except SVB management it seems, knew interest rates were heading up. Federal Reserve Chairman Jerome Powell has been shouting this from the mountain tops. Yet SVB froze and kept business as usual, borrowing short-term from depositors and lending long-term, without any interest-rate hedging. The bear market started in January 2022, 14 months ago..."
Bingo.
Yes, yes, yes, yes, YES.
Thank you. SVB's risk management department must have been moonlighting from the Primate House of the San Francisco Zoo. 🍌
Their risk management department was underemployed and focused on promoting lesbianism for DEI events.
https://www.zerohedge.com/markets/fatal-distraction-senior-svb-risk-manager-oversaw-woke-lgbt-programs
It would not at all surprise me to find out that the San Francisco Fed (supposedly the regulators watching over SVB) were also laser focused on ESG and diversity initiatives. They probably have detailed charts of the LGBTQ and race metrics for all the banks they regulate which they pore over daily. Actual banking practices? Yawn.
That’s an insult to primates at the zoo.
We use the call it the lemming reaction.
An argument to restrict speech in order for something passed off as “it’s for the good of everyone”...no thank you.
Is it possible that this piece is trying to blame analysis and journalism for this run on SVB? HUH!!!? They were criminally STUPID in their management of their portfolio in leaving their interest rate risk unhedged and having cash locked up long term and it’s the INTERNET’s fault that there’s a run on the bank? 🤦🏻♀️ Make it make sense.
I agree. The author is misplacing blame on social media and suggesting the solution is some sort of ‘control’ scheme that must be imposed on social media. Newsflash, bank runs have been around since way before social media.
But, but, but bank runs are so much easier now!!!!! So-o-o-ooomething should be do-o-o-one!!! This is how we get digital currency.
And if you think it's bad now...
"There are people who woke up on Thursday or Friday morning with deposits in SVB who withdrew their money in a panic—but the thought of doing that would never have crossed their minds had it not been first suggested to them"
I have read your book and thoroughly enjoyed it. I disagree with this statement in that the animals on the side of the herd that cannot see the lion only know there is a threat. When the animals next to them begin to run, they instinctively know there is a threat even though they cannot directly see it. This is one of the "benefits" of mimetic behavior. If it turns out there is no carnivore and just a meerkat trying to get some sunshine, then the herd recovers and moves back to a "watchful state". Even if I don't like the outcome of this specific crisis, this worked exactly like it was supposed to.
Nope to state control of speech.
Not even for the sake of money.
"SVB was the victim of an old-fashioned bank run. "
Uh—NO. That was the rocks further down on the avalanche. NOT the pebbles that actually started it.
The pebbles that actually started the SVB avalanche were 15 years of near-zero interest rates, a hike in those interest rates by 1,700% in a single year, and a short-sighted risk manager who wasn't smart enough to diversify SVB's investment portfolio between short-term and long-term securities.
I’ve been in markets for 42 years and love the myriad psychological aspects of them, including the ones you detail.
A crucial detail missing here is that SVB conditioned loan to startups on them then depositing their money with SVB. Stunning. Legal? Massive regulatory failure/capture by SF Fed (SVB Exec on SF Fed Board).
Depositors would have gotten 90-95% of their money back. SVB assets pretty transparent and liquid. (Mostly MBS BTW, not long dated treasuries)
Two “solutions”: Outlaw the quid pro quo, if it’s not already illegal. Make anyone who deposits more than $250K sign a statement acknowledging they know they are not insured.
Lot more to this, but I’ll stop here.
No doubt there is plenty of language detailing that fact about the $250,000. And these people are billionaires and millionaires and somehow they didn’t know that?
They knew (I was referring to other depositors in the future; tho I'm quite sure anyone w >$250K to deposit knows this any way).
What I'd love to know is how SVB successfully pulled this off: conditioning loans on re-depositing. Did the startups get a lower interest rate on the loans they took out? Did their VC backers also have stock in SVB bank and wanted to see it grow so told the startups to do this? Lotta unanswered questions here.
Did we really need more evidence that our Democrat friends, who populate these precincts and venues, have the mentality of panicked and dull herd animals?
We saw it on full display during the pandemic. Their subservience, their smug superioriry, their totemic obedience to the creed du jour, their reflexive condemnation of apostasy and fealty to the tenets prescribed by their tribal elders (Cuomo, Whtmer, Murphy, Fauci and most laughably, the senile imbecile they installed in the White House). I am now fully of the view that if a progressive liberal says "good morning," the sun has set and it's time to retire.
The question now is, "are we going to follow these nitwits over the cliff's edge, or retake control of society and stop their madness?"
Most of the Silicon Valley VC's and startup founders lean libertarian rather than R or D.
Funny you should say that. Probably the best summary is from the Kim Iverson show:
https://www.youtube.com/watch?v=DUBKdzG5vcY
Make no mistake about it - there is a plan underway to get complete control of the People. Their pesky and unexpected pushing back on the China Virus Lockdown, the Green New Deal, the "trans" agenda, "Black Lives Matter," the Climate Hoax, the Eat Bugs, Own Nothing and be Happy scam, et al, is inconveniencing the globalists a bit, but the most direct method of control is to control the money. - and That's The Plan: chaos, until complete seizure of the system and central control becomes possible. The 2008 meltdown was just the beginning.
Mencken:
"The urge to save humanity is almost always only a false-face for the urge to rule it."
Superb. Let me give you another one that might apply:
"Upon this battle depends the survival of Christian civilization. Upon it depends our own British life, and the long continuity of our institutions and our Empire. The whole fury and might of the enemy must very soon be turned on us. Hitler knows that he will have to break us in this Island or lose the war. If we can stand up to him, all Europe may be free and the life of the world may move forward into broad, sunlit uplands. But if we fail, then the whole world, including the United States, including all that we have known and cared for, will sink into the abyss of a new Dark Age made more sinister, and perhaps more protracted, by the lights of perverted science." ~ Churchill June 18, 1940
Substitute globalists for Hitler, planet earth for Britain, and it could have been written yesterday. Lights of perverted science, indeed.
"the most direct method of control is to control the money"
Bingo! If anyone has doubts, just look what Prime Minister Trudeau did to the truckers in Canada last year. The end game is digital currency, which will be controlled by the government. The days of cash are numbered.
Re: "SVB was the victim of an old-fashioned bank run."
NO - SVB and it's depositors were victims of BAD SVB management that paid far too little attention to risk management and prudent investing practices. The bank run was simply many people finally realizing this when the facts could no longer be hidden.
The fact that the CEO was actually on the board of directors of the San Francisco Fed befuddles me. How in the world did he not believe the Fed's rate increases would not have consequences on his own bank's portfolio?
Perhaps it is a clue about how clueless some at the Fed actually are?
Or how they "know" bailouts will save them from any mgmt screw-ups?