The blame game over SVB’s collapse is a diversion. The media have rounded up the usual suspects: Trump, greed, bad law, blah, blah, blah. When Captain Renault did that in Casablanca, he knew who the real culprits were. The media is not that bright.
James Hickman is. He is the founder of Sovereign Research. He looked at the numbers and he found the culprit.
Biden. He made government bonds worth less which has banks dropping like cockroaches in a Raid commercial.
Using the pen name Simon Black, Hickman wrote, “Silicon Valley Bank was no Lehman Brothers. Whereas Lehman bet almost all of its balance sheet on risky mortgage bonds, SVB actually had a surprisingly conservative balance sheet.
“According to the bank’s annual financial statements from December 31 of last year, SVB had $173 billion in customer deposits, yet only $74 billion in loans.”
So where did the money go?
Hickman said, “SVB failed because they parked the majority of their depositors’ money ($99 billion) in U.S. government bonds.
“This is the really extraordinary part of this drama. U.S. government bonds are supposed to be the safest, most risk free asset in the world. But that’s totally untrue, because even government bonds can lose value. And that’s exactly what happened.”
SVB lost money on government bonds by the billion and that brought the bank down. That is like water catching fire.
Hickman said the bank noted in December that it had $15 billion in unrealized losses on government bonds. On Friday, those losses were realized. You see, to cure inflation, the Federal Reserve must raise interest rates, which pushes the value of the existing bonds down.
Well that is just one bank and . . .
Hickman reported, “The FDIC estimates unrealized losses among U.S. banks at roughly $650 billion.”
You can see why the Fed panicked on Sunday with its bailout that it refuses to admit is a bailout. They do not know what they are doing and have not for some time. America is headed toward a multi-trillion-dollar bailout of banks that will make Tim Geithner’s $700 billion TARP look like a taco truck.
Silicon Valley Bank was the first bailout — something akin to Ham the Chimp, who became America’s first astronaut when NASA put him in suborbital flight on January 31, 1961 — 11 days into JFK’s presidency. The banking bailouts will pass the moon by April and leave the solar system by the year’s end.
Citizens are helpless as the kleptocratic presidency begins to wildly spend money we don’t have. Millions, billions, what comes after trillions?
Every freaking banker in the world.
And why not? Uncle Sam is giving stuff away.
ABC reported, “Silicon Valley Bank UK purchased for £1 by HSBC with plan to protect deposits.”
They bought it for a one-pound note? Where’s my $2 bill autographed by President Ford’s treasurer? I need it to buy Bank of America in June.
Axios reported, “When a bank fails, depositors are made whole by the FDIC insurance fund. The insurance only covers deposits up to $250,000, although there are plenty of workarounds that allow depositors to effectively buy much more FDIC insurance than that.
“In the cases of SVB and Signature Bank, FDIC insurance will now cover all depositors, regardless of size. The FDIC insurance fund — which is funded by a levy on bank deposits [insurance premiums] — stands at roughly $125 billion.”
The bailouts are absolutely illegal. SVB paid premiums on only 3% of the money deposited there. Signature paid premiums on only 6%. The two banks could easily deplete all of the FDIC fund.
But SVB’s depositors — who will be paid despite not being insured — include Mark Cuban and other Democrat fat-cat billionaires, so Biden will take care of them unlike East Palestine, Ohio. The administration keeps saying we must make depositors whole.
As for Signature Bank, seven years after Barney Frank co-wrote the Dodd-Frank Act, which put a few restrictions on bankers, Signature added him to its board of directors. He then lobbied to roll back Dodd-Frank.
The Wall Street Journal reported, “Mr. Frank, who has earned more than $2.4 million in compensation from Signature Bank since 2015, rejected the idea that the regulatory change abetted to Signature’s collapse.”
Frank told WSJ, “Nobody has shown me any evidence of systemic or other kinds of fraud that would have been prevented” had they not changed the rules in 2018. I agree. If any fraud were committed it was by the government that issued the bad bonds.
But Paleface Pocahontas is on the warpath. Elizabeth Warren wasted no time in getting the New York Times to publish, “Silicon Valley Bank Is Gone. We Know Who Is Responsible,” even as the ink was drying on all those Benjamins the Federal Reserve printed to bail out the billion-dollar banks.
Who did she blame for the bailout?
She wrote, “Greg Becker, the chief executive of Silicon Valley Bank, was one of the many high-powered executives who lobbied Congress to weaken the law. In 2018, the big banks won. With support from both parties, President Donald Trump signed a law to roll back critical parts of Dodd-Frank. Regulators, including the Federal Reserve chair Jerome Powell, then made a bad situation worse, letting financial institutions load up on risk.”
We need Melania to pull a Will Smith on Warren for putting Donald Trump’s name in her mouth. (Just joking, Secret Service.)
But Warren’s anger at the banks is as phony as her claim to be an Indian because she does not oppose the bailout. She is willing to let the government give billions to depositors — whom she admits include “billion-dollar companies, crypto investors and the very venture capital firms that triggered the bank run on SVB in the first place.”
No, what bothers her are not the billions for billionaires but the million-dollar salaries of the CEOs and the bonuses earned by bank employees.
She wrote, “We should claw all of that back, along with bonuses for other executives at these banks. Where needed, Congress should empower regulators to recover pay and bonuses. Prosecutors and regulators should investigate whether any executives engaged in insider trading or broke other civil or criminal laws.”
That’s reserved for Nancy Pelosi and other members of Congress, not the hoi polloi who elect and re-elect these bums.
Politico reported, “The rift between Frank and Warren is just a preview of what’s to come as Democrats sort out positions on how to respond to the latest banking crisis, which led to a weekend bailout of depositors at Silicon Valley Bank and Signature. Some like Warren want Washington to restore the tougher regulations that were rolled back in 2018. Some Democrats, like Frank, say the 2018 law isn’t the problem. A number of moderate Democrats still in Congress helped write the 2018 legislation, including those facing re-election in 2024.”
The main Democrat talking point is that the bailout is not a bailout.
Christina Wilkie of CNBC toted that water in her piece, “Wall Street — not taxpayers — will pay for the SVB and Signature deposit relief plans.”
Sure it will because everyone knows the stock market is a charity organization.
Wilkie quoted an unnamed Treasury official, who said, “The firms are not being bailed out . . . depositors are being protected.”
We are protecting Mark Cuban because billionaires are people, too. Especially the ones who donate to Democrats and hate President Trump.
Bailing out SVB is not the end, rather it is the beginning.
The New York Times had to admit, “Investors Fear Bank Contagion, Despite a Sweeping Rescue Plan. Shares in regional lenders were under pressure, even after regulators unveiled a vast backstop for U.S. banks after Silicon Valley Bank’s collapse.”
There goes NYT saying despite again when it means “because of.” The panic at the Fed to create a new program to bail out banks — er, make billionaire depositors whole — was all we needed to know that once again, Biden led us to another economic catastrophe.
He briefed reporters on the problem at 9 AM on Monday.
Biden’s longtime spokeswoman, Jen Psaki, said on one of those cable shows, “The fact that he is doing this at 9 AM speaks to how vital the White House recognizes that it is to have his voice out there conveying to the American public.”
So much for calm leadership amidst the storm. Reassurance, this was not.
The Washington Examiner reported, “Pressed about bailing out SVB on Sunday, Treasury Secretary Janet Yellen said federal regulators were focused on making customers whole.”
Her exact quote was, “Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and we’re certainly not looking. And the reforms that have been put in place means that we’re not going to do that again.”
Of course, the reforms they put in place failed to prevent this.
And if we are going to make everyone play by the rules, the government’s duty is to limit this making people whole is limited to $250,000 per savings account.
But what Biden and the rest won’t admit is the collapse of SVB was on the federal government. SVB invested in the government — and thanks to Biden that was the dumbest bet since the 2017 Browns lost every game.
Hickman — a West Point grad — brought up an even bigger issue. Our sovereignty.
He wrote, “Foreign banks and institutions are also suffering losses on their US government bonds and that has negative implications on the U.S. dollar’s reserve status.
“Think about it: it’s bad enough that the U.S. national debt is outrageously high, that the federal government appears to be a bunch of fools incapable of solving any problem, and that inflation is terrible.
“Now on top of everything else, foreigners who bought US government bonds are suffering tough losses as well.
“Why would anyone want to continue with this insanity? Foreigners have already lost so much confidence in the U.S. and the dollar and financial losses from their bond holdings could accelerate that trend.”
No honorable leader would ally with the United States with Biden in charge. No smart fellow would buy U.S. bonds.
Now for today’s TOTALLY SCIENTIFIC POLL:
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Like a good soldier(including Trump), just say it: "Biden. He made government bonds worth less which has banks dropping like cockroaches in a Raid commercial."
Great summary overall, Don. I like to revert to history of successful people... The media has trashed Trump for seven years even though he presided over three of our most prosperous. This is why:
You write so even Warren or Schiff should be able to understand! Thanks again, Don. To quote Suzie, "Another great article. " The history you include helps a lot, too.