Ingraham: Anyone believe we are done with runs on banks?
Before Collapse of Silicon Valley Bank, the Fed Spotted Big Problems
The bank was using an incorrect model as it assessed its own risks amid rising interest rates, and spent much of 2022 under a supervisory review.
5 MIN READ
WASHINGTON — Silicon Valley Bank’s risky practices were on the Federal Reserve’s radar for more than a year — an awareness that proved insufficient to stop the bank’s demise.
The Fed repeatedly warned the bank that it had problems, according to a person familiar with the matter.
In 2021, a Fed review of the growing bank found serious weaknesses in how it was handling key risks. Supervisors at the Federal Reserve Bank of San Francisco, which oversaw Silicon Valley Bank, issued six citations. Those warnings, known as “matters requiring attention” and “matters requiring immediate attention,” flagged that the firm was doing a bad job of ensuring that it would have enough easy-to-tap cash on hand in the event of trouble.
But the bank did not fix its vulnerabilities. By July 2022, Silicon Valley Bank was in a full supervisory review — getting a more careful look — and was ultimately rated deficient for governance and controls. It was placed under a set of restrictions that prevented it from growing through acquisitions. Last autumn, staff members from the San Francisco Fed met with senior leaders at the firm to talk about their ability to gain access to enough cash in a crisis and possible exposure to losses as interest rates rose.
It became clear to the Fed that the firm was using bad models to determine how its business would fare as the central bank raised rates: Its leaders were assuming that higher interest revenue would substantially help their financial situation as rates went up, but that was out of step with reality.
By early 2023, Silicon Valley Bank was in what the Fed calls a “horizontal review,” an assessment meant to gauge the strength of risk management. That checkup identified additional deficiencies — but at that point, the bank’s days were numbered. In early March, it faced a run and failed within a matter of days.
Major questions have been raised about why regulators failed to spot problems and take action early enough to prevent Silicon Valley Bank’s March 10 downfall. Many of the issues that contributed to its collapse seem obvious in hindsight: Measuring by value, about 97 percent of its deposits were uninsured by the federal government, which made customers more likely to run at the first sign of trouble. Many of the bank’s depositors were in the technology sector, which has recently hit tough times as higher interest rates have weighed on business.
And Silicon Valley Bank also held a lot of long-term debt that had declined in market value as the Fed raised interest rates to fight inflation. As a result, it faced huge losses when it had to sell those securities to raise cash to meet a wave of withdrawals from customers.
The Fed has initiated an investigation into what went wrong with the bank’s oversight, headed by Michael S. Barr, the Fed’s vice chair for supervision. The inquiry’s results are expected to be publicly released by May 1. Lawmakers are also digging into what went awry. The House Financial Services Committee has scheduled a hearing on recent bank collapses for March 29.
The picture that is emerging is one of a bank whose leaders failed to plan for a realistic future and neglected looming financial and operational problems, even as they were raised by Fed supervisors. For instance, according to a person familiar with the matter, executives at the firm were told of cybersecurity problems both by internal employees and by the Fed — but ignored the concerns.
The Federal Deposit Insurance Corporation, which has taken control of the firm, did not comment on its behalf.
Still, the extent of known issues at the bank raises questions about whether Fed bank examiners or the Fed’s Board of Governors in Washington could have done more to force the institution to address weaknesses. Whatever intervention was staged was too little to save the bank, but why remains to be seen.
“It’s a failure of supervision,” said Peter Conti-Brown, an expert in financial regulation and a Fed historian at the University of Pennsylvania. “The thing we don’t know is if it was a failure of supervisors.”
Mr. Barr’s review of the Silicon Valley Bank collapse will focus on a few key questions, including why the problems identified by the Fed did not stop after the central bank issued its first set of matters requiring attention. The existence of those initial warnings was reported earlier by Bloomberg. It will also look at whether supervisors believed they had authority to escalate the issue, and if they raised the problems to the level of the Federal Reserve Board.
The Fed’s report is expected to disclose information about Silicon Valley Bank that is usually kept private as part of the confidential bank oversight process. It will also include any recommendations for regulatory and supervisory fixes.
The bank’s downfall and the chain reaction it set off is also likely to result in a broader push for stricter bank oversight. Mr. Barr was already performing a “holistic review” of Fed regulation, and the fact that a bank that was large but not enormous could create so many problems in the financial system is likely to inform the results.
Typically, banks with fewer than $250 billion in assets are excluded from the most onerous parts of bank oversight — and that has been even more true since a “tailoring” law that passed in 2018 during the Trump administration and was put in place by the Fed in 2019. Those changes left smaller banks with less stringent rules.
Silicon Valley Bank was still below that threshold, and its collapse underlined that even banks that are not large enough to be deemed globally systemic can cause sweeping problems in the American banking system.
As a result, Fed officials could consider tighter rules for those big, but not huge, banks. Among them: Officials could ask whether banks with $100 billion to $250 billion in assets should have to hold more capital when the market price of their bond holdings drops — an “unrealized loss.” Such a tweak would most likely require a phase-in period, since it would be a substantial change.
But as the Fed works to complete its review of what went wrong at Silicon Valley Bank and come up with next steps, it is facing intense political blowback for failing to arrest the problems.
Some of the concerns center on the fact that the bank’s chief executive, Greg Becker, sat on the Federal Reserve Bank of San Francisco’s board of directors until March 10. While board members do not play a role in bank supervision, the optics of the situation are bad.
“One of the most absurd aspects of the Silicon Valley bank failure is that its CEO was a director of the same body in charge of regulating it,” Senator Bernie Sanders, a Vermont independent, wrote on Twitter on Saturday, announcing that he would be “introducing a bill to end this conflict of interest by banning big bank CEOs from serving on Fed boards.”
Other worries center on whether Jerome H. Powell, the Fed chair, allowed too much deregulation during the Trump administration. Randal K. Quarles, who was the Fed’s vice chair for supervision from 2017 to 2021, carried out a 2018 regulatory rollback law in an expansive way that some onlookers at the time warned would weaken the banking system.
Mr. Powell typically defers to the Fed’s supervisory vice chair on regulatory matters, and he did not vote against those changes. Lael Brainard, then a Fed governor and now a top White House economic adviser, did vote against some of the tweaks — and flagged them as potentially dangerous in dissenting statements.
“The crisis demonstrated clearly that the distress of even noncomplex large banking organizations generally manifests first in liquidity stress and quickly transmits contagion through the financial system,” she warned.
Senator Elizabeth Warren, Democrat of Massachusetts, has asked for an independent review of what happened at Silicon Valley Bank and has urged that Mr. Powell not be involved in that effort. He “bears direct responsibility for — and has a long record of failure involving” bank regulation, she wrote in a letter on Sunday.
Maureen Farrell contributed reporting.
Jeanna Smialek writes about the Federal Reserve and the economy for The Times. She previously covered economics at Bloomberg News. @jeannasmialek
4th US Bank Is On The Brink Of Collapse: We Are In Far More Trouble Than Most People Realize
Summers: First Republic Bank Rescue Package Seems ‘Corporatist and Deal-Based Between the Government and Big Banks’
During an interview aired on Friday’s broadcast of Bloomberg’s “Wall Street Week,” Harvard Professor, economist, Director of the National Economic Council under President Barack Obama, and Treasury Secretary under President Bill Clinton Larry Summers stated that the rescue package for First Republic Bank “was not an objective private sector assessment to have confidence in First Republic.” And “seemed a little corporatist and deal-based between the government and big banks to me.”
Summers said, “It was JPMorgan and a number of other banks who were apparently corralled by the secretary and by JPMorgan. I don’t know what to make of it. The government has committed to put money in there at par above the market value of securities for a year. The fact that the banks made a commitment for 120 days so they can get out well ahead of the government at an interest rate that we don’t yet know what it is, with what the understandings in the agreement with the Treasury are. I suppose the fact that everybody’s acting will make people a little more confident. But it made me nervous. This was not an objective private sector assessment to have confidence in First Republic. So, I’m not sure what to make of it. It seemed a little corporatist and deal-based between the government and big banks to me. But we’ll have to see how it unfolds. And I hope there will be total transparency on all the understandings.”
Follow Ian Hanchett on Twitter @IanHanchett
Here Are the Tech Companies, Liberal Media Outlets, and Prominent Democrats Saved by Biden's Bank Bailout
Prominent tech companies, liberal news outlets, and a Democratic politician’s vineyards are among the thousands of businesses that breathed a sigh of relief on Sunday when the Biden administration moved to bail out Silicon Valley Bank.
Silicon Valley Bank maintained $209 billion in assets and $175.4 billion in total deposits, making it the 16th-largest bank in the country. It was the second-largest bank to fail in American history when the Federal Deposit Insurance Corporation took control of the institution on Friday.
President Joe Biden has insisted that the FDIC's move was not a bailout, and claimed his administration is working to protect "American workers and small businesses." But average Americans won't benefit the most from the bailout. Ninety-three percent of the bank’s depositors kept more than $250,000 in the bank.
While the California bank was famous for its rolodex of tech clients, it happily accepted deposits from all manner of people, including some of the individuals and institutions involved in pushing the Biden administration’s bailout.
Here are just a few.
Gavin Newson
California Gov. Gavin Newsom’s (D.) trio of wineries are clients of the failed financial institution, as is the governor himself. He has maintained personal accounts at the failed bank for years, the Intercept reported, citing a former Newsom aide. Newsom’s efforts to rescue Silicon Valley Bank’s clients could also put him on the wrong side of the law. California law prohibits elected officials from influencing official matters in which "the official has a financial interest," Insider reported.
Newsom was instrumental in convincing Biden over the weekend that a bailout of the failing bank was necessary. He was also one of the first politicians nationwide to hail the president’s swift move on Sunday to make all of Silicon Valley Bank’s clients whole. Newsom was one of many high-profile Democrats who received money from Silicon Valley Bank, whose employees have also given tens of thousands of dollars to Democratic candidates and causes.
The emotional toll Newsom may have faced had his wineries failed amid Silicon Valley Bank’s implosion would have likely been equally as devastating as the impact on his bottom line. He refused to sell his businesses when he first ran for governor in 2018, saying: "These are my babies, my life, my family. I can’t do that. I can’t sell them."
BuzzFeed
Liberal online media company BuzzFeed revealed to investors Monday that it held $56 million in cash and cash equivalents as of the end of 2022, the majority of which was held at Silicon Valley Bank. The news capped off a not-so-banner 2022 fiscal year for BuzzFeed, in which the company weathered a net loss of $201.3 million, laid off 40 percent of its newsroom, and saw its stock price plummet by 90 percent.
BuzzFeed has placed little focus on the bank’s collapse, having mentioned the story in its morning newsletter, a quiz published Wednesday, as well as a passing reference in a Tuesday story about a "viral alpha male finance podcast parody sketch." None of the stories mentioned BuzzFeed’s financial connection to the bank.
As part of its efforts to right its ship, BuzzFeed announced it would leverage artificial intelligence to spin up viral listicles and quizzes. BuzzFeed News editor in chief Karolina Waclawiak also told the company’s remaining editorial staffers at a recent meeting to shift away from long-form news reporting and prioritize click-bait celebrity news, the Wall Street Journal reported.
Vox Media
Vox Media, the parent company of dozens of liberal news companies including Vox, New York magazine, the Verge, and Polygon, disclosed in news stories that it banked with Silicon Valley Bank before its collapse.
Unlike BuzzFeed, Vox has disclosed its financial connection to the failed bank in news stories this week. That hasn’t stopped the outlet, however, from carrying water for the Biden administration. On Tuesday, for example, it published a story mocking concerns that Silicon Valley Bank’s fixation on woke initiatives may have contributed to its demise.
Vox spokeswoman Lauren Starke told the Washington Post that the company doesn’t anticipate "any significant impact" due to the bank’s failure but added that it has suffered "logistical issues such as the temporary suspension of accounts and company credit cards."
In a Monday piece on Silicon Valley Bank’s collapse, Vox competitor the Dispatch parenthetically disclosed it had been a Silicon Valley Bank customer.
Black Lives Matter
While Black Lives Matter isn’t a known client of Silicon Valley Bank, the bank’s untimely failure marks the end of a significant gravy train for the movement.
Silicon Valley Bank and its employees contributed more than $73 million to the Black Lives Matter movement and related causes since 2020, according to a database maintained by the Claremont Institute.
The Green Energy Racket
Silicon Valley Bank’s failure could have delivered a seismic blow to the climate change industry and the more than 1,550 technology companies that specialize in solar, hydrogen, and battery storage solutions that held funds at the bank, had Biden not bailed the institution out.
Still, the bank’s failure will have lingering effects for the industry, with insiders warning that Silicon Valley Bank was often the only institution willing to lend funds for their projects.
"Silicon Valley Bank was in many ways a climate bank," Kiran Bhatraju, the chief executive of the nation’s largest community solar manager, Arcadia, told the New York Times. "When you have the majority of the market banking through one institution, there’s going to be a lot of collateral damage."
Wedbush Securities technology sector analyst David Ives added that the bank’s failure is a "major blow to early-stage and even late-stage tech startups."
Silicon Valley Bank "was the bank that would always pick up the phone when other large money center banks wouldn’t," Ives told Politico.
AT THE CENTER OF A NATION UNRAVELING'S PROBLEMS IS A PACK OF BRIBES SUCKING DEM-POLS, MOST OF WHOM ARE GAMER PARASITE LAWYERS!
Silicon Valley Bank Board Included Barack Obama, Hillary Clinton Donors
Several Silicon Valley Bank (SVB) board of directors have donated thousands of dollars or have direct ties to prominent Democrat politicians like Hillary Clinton, former President Barack Obama, and Rep. Nancy Pelosi (D-CA).
'CREDIT CARD JOE HAS NEVER RETURNED A BRIBE IN HIS SQUALID POLITICAL LIFE!
DNC, Joe Biden Will Return Campaign Donations Tied to SVB
The Democratic National Committee (DNC) and President Joe Biden’s presidential campaign stated they would return political donations tied to the collapsed Silicon Valley Bank on Friday, according to USA Today.
The DNC told the publication that the money would be returned following last week’s bank collapse. The announcement was made the same day the bank’s parent company, SVB Financial Group, filed for Chapter 11 protection in New York bankruptcy court.
A spokesperson from the DNC told USA Today that Biden’s 2020 presidential campaign and the DNC would donate the contributions from 2020 or later from SVB CEO Greg Becker and the bank’s managing director, Gerald Brady.
USA Today reported that Biden’s presidential campaign and aligned PACs received at least $11,900 from SVB executives, including Brady, and the former brand ambassador and head of startup banking, who took over one of Brady’s roles running a division of the bank, Claire Lee. Additionally, the DNC took at least $32,250 over the years from Brady, Lee, and other former SVB executives.
The report also noted that Becker donated $2,800 to Biden’s campaign, and Brady donated $5,500. Brady also gave $12,050 to the DNC. Reportedly, Biden’s presidential campaign will return $8,400, and the DNC will return $12,050.
Last week, Silicon Valley Bank collapsed when panicked customers suddenly withdrew tens of billions of dollars after it announced a loss of approximately $1.8 billion from selling its investments in U.S. treasuries and mortgage-backed securities. Ultimately, regulators shut Silicon Valley Bank down, and the Federal Deposit Insurance Corporation (FDIC) took control of the bank and said they would protect insured deposits.
On Sunday, the U.S. Treasury, the Federal Reserve, and the FDIC announced that they would be taking “decisive actions to protect the U.S. economy by strengthening public confidence in [the U.S.] banking system” by effectively making deposits above the FDIC’s $250,000 limit available this past Monday. The bank failed to be auctioned off last weekend after none of the largest U.S. banks bid, but there is supposed to be another attempt at auctioning the bank off on Friday, according to multiple reports.
Jacob Bliss is a reporter for Breitbart News. Write to him at jbliss@breitbart.com or follow him on Twitter @JacobMBliss.
Nolte: Janet Yellen Admits Government Choosing Bank Bailout Winners and Losers
Treasure Secretary Janet Yellen admitted to the U.S. Senate Thursday that the government is choosing winners and losers in the rigged bank bailout lottery. And wouldn’t you know it, the losers sure look like the smaller community banks the big banks (and Democrats) would love to see eliminated.
Oklahoma Republican Sen. James Lankford asked Yellen a very simple question:
Will the deposits in every community bank in Oklahoma, regardless of their size, be fully insured now? Are they fully covered, every bank, every community bank in Oklahoma, regardless of the size of the deposit? Will they get the same treatment that SVBP [Silicon Valley Bank] just got or Signature Bank just got?
Please look very closely at Yellen’s terrifying answer:
A bank only gets that treatment if a majority of the FDIC board, a super majority of the Fed board and I, in consultation with the president, determine that the failure to protect uninsured depositors, would create systemic risk and significant economic and financial consequences.
In other words, if the FDIC likes your bank, the depositors are insured. If not, the depositors are not insured over $250,000, which means what?
It means that people will withdraw their money from community banks and hand those deposits over to a handful of fascist giant banks that not only own almost all the banking but will refuse to do business with you if you hold certain political opinions they find offensive… Oh, and you can bet those political opinions they find offensive will always-always-always be conservative opinions.
Lankford understands what these corrupt crony capitalists are up to and follows up with this:
So what is your plan to keep large depositors from moving their funds out of community banks into the big banks?” Lankford asked. “We have seen the mergers of banks over the past decade, and I’m concerned you’re about to accelerate that by encouraging anyone who has a large deposit in a community bank to say, ‘We’re not gonna make you whole, but if you go to one of our preferred banks, we will make you whole at that point.’
Now that Yellen had been exposed and busted, she chose to answer this important question by playing stupid…
“Look, I mean, that’s certainly not something that we’re encouraging,” she said.
Lankford responded with the obvious: “That is happening right now!”
Yellen’s idiot act continued:
That is happening because depositors are concerned about the bank failures that have happened and whether or not other banks could also fail…
Lankford again tried to get her to answer the only question that mattered…
No, it’s happening because you’re fully insured no matter what the amount is if you’re in a big bank. You’re not fully insured if you’re in a community bank.
Watch the full testimony below. It’s only a few minutes…
I hope everyone understands what’s happening here…
By informing the public that their money is only safe in those big banks the Democrat party favors, everyone will deposit their money in the big banks and effectively bankrupt community banks or force them to give up the ghost to the big banks.
That’s just step one.
Step two is worse.
Once the big banks control all the money, they will also control everything else, including what kind of business you can run, what you can and cannot say on social media, and what opinions you can hold…
How would you like to live in a world where a gun store has no place to bank or run a credit card payment?
How would you like to live in a world where a mall owner cannot rent to a gun store?
How would you like to live in a world where your accounts are closed if you tweet a biological fact like, “Trans women are men?”
You might not want to live in that world, but that is the world the Democrat party seeks, so they are in the process of deliberately undermining faith in community banks.
It is always about control through centralized power.
Never let a crisis go to waste.
Follow John Nolte on Twitter @NolteNC. Follow his Facebook Page here.
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