America Faces No Greater Threat Than Joe Biden and the Democrat Party. Their Assault to Our Borders Is As Great As Their Assault to Free Speech and Free Elections
Monday, March 13, 2023
THE BANKSTERS ARE STILL AT IT KNOWING A DEMOCRAT PARTY ADMIN OF 'SPEECH FEES BRIBES' WILL ALWAYS BAIL THEM OUT AND KEEP THEM OUT OF PRISON
GOP Presidential Candidate Ramaswamy: 'Let SVB Fail,' a Govt Bailout is 'Crony Capitalism'
Asset manager and GOP presidential candidate Vivek Ramaswamy. (Screenshot)
Commenting on the collapse of the Silicon Valley Bank (SVB), Vivek Ramaswamy, a highly successful asset management chairman, best selling author, and GOP presidential candidate, said the bank should not be bailed out by the government but should be allowed to fail, "if needed."
Bailing out SVB is nothing more than "crony capitalism," he added, noting that we saw all this happen before with the bank bailouts in 2008.
Ramaswamy, who has an estimated net worth of $600 million and holds degrees from Harvard (BA) and Yale (JD), is a strong supporter of limited, constitutional government. He made his remarks on CNN's State of the Union, March 12.
When asked about SVB and the billions of dollars it owes its many high-tech business clients, Ramaswamy said, "I would not bail out either SVB or even the depositors, because here's what's actually going on."
"SVB made some -- Silicon Valley Bank made some uniquely bad management decisions," said Ramaswamy. "One of them is, first of all, they have a depositor base that's really concentrated of tech start-ups in Silicon Valley. A staggering nearly 90 percent of their deposits are uninsured."
"That's an anomaly compared to most banks in this country," he continued. "So what's happening right now is a lot of Silicon Valley executives and V.C.s this weekend, many of them have even reached out to me to push this narrative that that's going to create a bank run in America if Silicon Valley Bank isn't actually bailed out."
"But what they're doing is actually trying to create the fear of one," he said. "I think that can actually become a self-fulfilling prophecy, which is dangerous. But the reality is, Silicon Valley Bank also had exposure to interest rate-tethered securities that they could have hedged. A normal bank would have done that."
Police officers leave Silicon Valley Banks headquarters in Santa Clara, California on March 10, 2023. - US authorities swooped in and seized the assets of SVB, a key lender to US startups since the 1980s, after a run on deposits made it no longer tenable for the medium-sized bank to stay afloat on its own. (Getty Images)
"Silicon Valley Bank did not," he added. "So I do not think we should reward that kind of bad behavior, that kind of bad mismanagement."
Ramaswamy continued, "we should let the market work here, let Silicon Valley Bank fail, if needed, but the government needs to do one thing. Here's what I will say. It's get out of the way if another bank actually wants to acquire Silicon Valley Bank."
The anti-woke money manager also criticized the ESG (Environmental, Social, and Governance) agenda followed by SVB.
"Silicon Valley Bank just last year made a $5 billion commitment to sustainable finance to ensure a better and more sustainable planet," noted Ramaswamy. "If they had actually sought for a more sustainable balance sheet, they would have better done their job."
A pedestrian speaks on a mobile telephone as he walks past Silicon Valley Banks headquarters in Santa Clara, California on March 10, 2023. (Getty Images)
"But it's even deeper than that," he continued. "I think that, if they do get bailed out, part of their bet is that they wanted to signal that they're one of the good guys by influence amongst influential people in Silicon Valley, even in Washington, D.C., by gesturing towards even committing $5 billion, which I don't think is responsible, towards something outside of what their core mission should have been focused on."
"It's not that different than what companies like Goldman Sachs did back in the 2008 financial crisis," he said. "You play the right games, you influence the right people, you send the right virtue signals, you're the one that gets bailed out, if you're Goldman, instead of Lehman Brothers, who didn't do those things."
"This is crony capitalism," he said. "We saw the movie in 2008. I had a front-row seat to it. I was working in finance in New York City back then. It was my first job out of college. It would be a sad thing to see that story repeat itself."
Ramaswamy, 37, is married and has two children. He announced his run for the GOP presidential nomination on Feb. 21. He is the author of two New York Times best-selling books, Woke, Inc. and Nation of Victims.
Good morning. Is the U.S. at risk of another financial panic? We’ll learn more today.
Silicon Valley Bank.Jim Wilson/The New York Times
Boom and bust, again
Today is a day of uncertainty for the American economy.
Will more banks have to close, as Silicon Valley Bank did last week and Signature Bank did yesterday? How will financial markets react? What will the federal government do? And will the current turmoil prove to be fleeting — or turn into a true crisis?
In today’s newsletter, I’ll walk through the basics of the potential financial panic sparked by the failure of SVB (as Silicon Valley Bank is known) and summarize the latest Times coverage.
What happened?
SVB, founded in California in 1983, became one of the country’s 20 largest banks mostly by lending money to start-ups. SVB was sometimes willing to back start-ups that more traditional banks were not — and some of those companies went on to great success.
SVB’s problems date to 2021, when many technology start-ups were flush with cash and deposited large amounts of it with the bank. SVB, in turn, tried to increase its profits by investing those deposits elsewhere. But as the Federal Reserve increased interest rates to fight inflation over the past two years, SVB’s investments began to lose value. (Kevin Roose’s column helpfully tells the longer version of the story.)
The bank’s clients became worried in recent days that it would no longer have enough money to repay its customers, and a classic bank run occurred. On Friday, federal regulators said they would take over SVB.
Bank runs are especially dangerous because they feed on themselves, sowing panic as people worry that their own deposits may be at risk. Even healthy banks can become endangered because they also do not keep enough cash on hand to repay all customers at once. If banks kept all their deposits locked up in a safe, they could not earn the money that allows them to pay interest.
Janet Yellen, the Treasury secretary.Valerie Plesch for The New York Times
Halting the crisis …
Federal regulators — at the Fed, Treasury Department and other agencies — tried to stem the worries last night by announcing that all customers of both SVB and Signature would have access to their money today. Before the announcement, it was unclear what would happen to deposits of greater than $250,000; a pre-existing guarantee from the Federal Deposit Insurance Corporation covers only deposits below that amount.
Some SVB clients had indicated that they would be unable to pay their employees if they lost their money, which could lead to spiraling economic problems.
Last night’s announcement has the benefit of reducing the likelihood of a panic today. It also prevents seemingly innocent victims — the workers and executives at companies that used SVB or Signature as their bank — from being hurt. Federal officials emphasized that they would not use taxpayer money to repay those companies. Ultimately, the money will instead come from a mix of the two banks’ assets and from a broader insurance program financed by other banks.
But if the panic spreads, taxpayers would be on the hook, as happened during the financial crisis of 2007-9, because the insurance program would be too small to cover the losses. That risk highlights the fact that there are two different policy questions to keep in mind in coming days — one immediate and one longer term.
The immediate question is how to keep this situation from turning into a full-blown crisis. History suggests that an aggressive and generous government response, like the guaranteeing of all SVB deposits, probably has the best chance of success. The 2007-9 crisis never turned into a depression, partly because of the aggressiveness of the Fed and both the Bush and Obama administrations.
… and avoiding the next one
The longer-term question is how to reduce the chance of future crises, and the historical lessons here are different. The U.S. has suffered so many financial panics over the past few decades, dating to the savings and loan crisis of the 1980s, because the country tends to regulate its banks so lightly.
In the case of SVB, regulators allowed it to make risky bets with its deposits (while the bank’s executives insisted that the bets weren’t risky). More generally, SVB and other banks are often not required to maintain enough of a financial cushion to withstand a crisis. Financial cushions — effectively, cash or other forms of insurance — tend to reduce banks’ profits, which is why bankers resist them. But without a healthy cushion, a bank can collapse during a crisis, and taxpayers must sometimes bail it out. When that happens, the bankers and their investors often emerged unscathed.
Once SVB began to falter, financial industry executives and investors again began clamoring for government help. In the short term, the government may indeed need to step in to avoid a spreading crisis. But the less immediate questions may be uncomfortable for the bankers: How can the people who caused this crisis bear financial responsibility for it? And how can the U.S. economy end this cycle of booms that benefit banks and busts that hurt everyone else?
Noah Smith, an economist and Substack writer, offers this useful bit of history in his newsletter:
In 2008, the bankers who made the bad decisions that led to the financial crisis generally got to keep their (very lucrative) jobs after getting bailed out. And their banks continued to exist as well, and even got government to guarantee them some profits going forward. Even as normal people suffered mass unemployment and the loss of their careers and livelihoods, many of the people responsible for the disaster kept collecting million-dollar checks and being in respected positions of power, now with government guarantees. If that seemed unfair, it’s because it was unfair.
JOE BIDEN HAS ALWAYS BEEN OWNED BY BANKSTERS AND HIGH TECH BILLIONAIRES FOR OPEN BORDERS AND NO CAP ON HIRING FOREIGN BORN WORKERS!
First, here's their wokesterly profile:
They spent $200,000 on lobbying Congress in 2022, hiring Franklin Square Group, which is full of Democrats, in their highest lobbying money total in their history. Through their PAC or as individuals, they donated almost exclusively to Democrats, with Sen. Mark Warner of Virginia taking the biggest pile but usual suspects such as Reps. Carolyn Maloney and Gregory Meeks, and Sen. Chuck Schumer, also taking their cut. MONICA SHOWALTER
ALERT! HUGE ANNOUNCEMENT, FDICDECLARES BILLIONAIRE BAIL-OUT FOR SVB DEPOSITORS
Wokeness and crypto have a few things in common. They’re both imaginary currencies that claim to exchange bad for good when they actually trade good for bad. Their value lies entirely in a state of mind. If you believe that we are heading toward an imaginary utopia, political or technocratic, they seem very exciting.
Theories are no substitute for facts. Utopians run on theories that can only be implemented either through mass delusion or mass repression. And when utopian ideas infect institutions, they pose a systemic risk.
It’s no coincidence that SVB and Signature were suffering from both wokeness and crypto. Why settle for one scam when you can have two?
Scams, hoaxes, delusions and a general inability to distinguish reality from wishful thinking have become an unfortunate part of our mindset. America was built by pragmatists. For all of our idealism, we moved forward by dealing with reality, not, like failed societies, retreating into an imaginary world and then lashing out when it fell apart.
Fantasy has overtaken reality across the spectrum. From our financial institutions to the military to criminal justice to public health, policy is a grab bag of wishful thinking, aimless visions composed of buzzwords that convey a cultural mindset but are not grounded in any reality that functions outside its echo chambers.
The whole thing gets too big to fail and when it does, the systemic risk is just passed further up the ladder until everything is at risk.
Daniel Greenfield, a Shillman Journalism Fellow at the David Horowitz Freedom Center, is an investigative journalist and writer focusing on the radical Left and Islamic terrorism.
Reader Interacti
Circular Firing Squad: Tech Industry Plays ‘Blame Game’ over Silicon Valley Bank Collapse
The collapse of Silicon Valley Bank has resulted in finger-pointing and blame being passed around the financial tech industry. The cryptocurrency sector and the traditional tech sector are busy blaming each other over the massive failure of the tech industry’s favorite bank.
The New York Timesreports that bitter arguments over the function of centralized banking and the potential advantages of decentralized financial systems, such as cryptocurrency, has been sparked by the recent collapse of Silicon Valley Bank, which sent shockwaves through the technology sector.
SANTA CLARA, CALIFORNIA – MARCH 10: A Brinks armored truck sits parked in front of the shuttered Silicon Valley Bank (SVB) headquarters on March 10, 2023 in Santa Clara, California. (Justin Sullivan/Getty Images)
Crypto advocates argue that the collapse of traditional banking institutions highlights the instability of fiat currencies and the need for an alternative financial system that is not beholden to big banks and other gatekeepers.
“Fiat is fragile,” wrote bitcoin advocate Erik Voorhees. Mo Shaikh, the CEO of cryptocurrency company Aptos Labs, stated: “We’re seeing glitches in the machine. This is an opportunity to take a breath and consider the practicalities of decentralization.”
The finger-pointing, however, also went both ways. Some tech investors claimed that the Silicon Valley Bank crisis was caused by the crypto industry’s bad actors and overnight collapses, which had trained investors to panic at the first sign of trouble. “That’s the pattern recognition too many have,” said Joe Marchese, an investor at the venture capital firm Human Ventures.
The crisis at Silicon Valley Bank has prompted renewed discussion about the potential benefits of decentralized financial systems, which are not beholden to centralized institutions and gatekeepers. The host of the cryptocurrency podcast “Mission:DeFi,” Brad Nickel, asserted that “centralized entities are more opaque. If cryptocurrency were powering the financial rails of our world, then a lot of things might not happen or would be a lot less severe.”
According to detractors of the cryptocurrency sector, the failure of Silicon Valley Bank would have been worse for everyone if it had occurred in the crypto space.
“If this was an unregulated crypto bank, then the money could just disappear,” Marchese said. The FDIC’s intervention to resolve the issue in a timely manner demonstrated that “the system is working,” he claimed.
The FDIC will direct a procedure to recover the missing funds in the coming days while paying the bank’s depositors up to $250,000 in refunds. Danny Moses, an investor at Moses Ventures and well-known for his role in foreseeing the 2008 financial crisis in “The Big Short,” stated, “There’s no crypto regulator insuring accounts for $250,000.”
On the left, they're claiming President Trump triggered the meltdown of Silicon Valley Bank on Friday through signing off on deregulation. On the right, they're saying it was wokester priorities that drove the bank bust.
It's hard to square that circle with what's known about why the mess happened.
Yes, they were a wokester bank, but there are caveats, and I'll explain why that matters.
First, here's their wokesterly profile:
They spent $200,000 on lobbying Congress in 2022, hiring Franklin Square Group, which is full of Democrats, in their highest lobbying money total in their history. Through their PAC or as individuals, they donated almost exclusively to Democrats, with Sen. Mark Warner of Virginia taking the biggest pile but usual suspects such as Reps. Carolyn Maloney and Gregory Meeks, and Sen. Chuck Schumer, also taking their cut.
They put out truly ignorant wokester statements calling non-green projects a matter of "systemic risk" in their "sustainable finance statement" (boldface added):
The innovation sector is essential to the transition to a sustainable, low carbon, net zero emissions economy. Supporting our clients that are building new sustainability solutions is the most effective way for SVB to tackle climate change, which presents a systemic risk to society, the financial system, our clients and our company. As the bank of the innovation economy, and in alignment with our mission to help our clients succeed and innovate for a better world, SVB has committed to provide at least $5 billion in loans, investments and other financing to support sustainability efforts by 2027.
Guess they learned the hard way that climate wasn't their biggest risk.
Treasury Secretary Janet Yellen on Wednesday called climate change "an existential threat" and the biggest emerging risk to the health of the U.S. financial system, pledging to marshal regulatory forces to guard against its harmful effects.
...and recently, too, from James Pinkerton at Breitbart News:
[A]s recently as March 7, Treasury Secretary Janet Yellen was urging faster please on ESG. "A delayed and disorderly transition to a net-zero economy can lead to shocks to the financial system," she said.
Among their thousands of loans to startup companies, they lent cash for "hundreds" of green tech financing loans, which included these priorities:
Eligible Climate Tech and Sustainable solutions include projects, technologies and business models in the following sectors: • Circular economy • Climate resilience • Energy efficiency and demand management • Green buildings • Renewable energy, energy storage and grid infrastructure • Sustainable agriculture and alternative foods • Sustainable transportation • Technology solutions that mitigate greenhouse gas emissions • Waste management and pollution control • Water technology
But with all those green concerns, they never did got around to appointing an actual head of risk assessment as defined in their corporate statement in the nine months before they went belly-up. However, they had plenty of wokester gurus. The Daily Mail reported that they had a woke boss for Europe, the Middle East, and Africa, who was busy organizing a month-long Pride campaign and a "Lesbian Visibility Day." (The New York Post has more on that.) On hiring personnel, they had plenty of wokester priorities, too.
3.5 Environmental, social and governance (ESG) · Strategy and program: The Committee shall review the Company's ESG strategy, including the Company's policies and programs related to environmental sustainability, climate change, and community investment, and receive updates from management on significant ESG and sustainability activities. The Committee will have oversight responsibility for the Company's external diversity, equity and inclusion ("DEI") initiatives, while the internal DEI initiatives will be under the oversight of CHCC. · Philanthropic strategy: The Committee shall review, at least annually, and receive reports on the Company's strategic philanthropy, employee giving, and community involvement, and provide oversight with respect to the Company's related policies, programs, and strategy. · Advocacy activities: The Committee shall review, at least annually, the Company's public policy and advocacy activities, including political contributions made by the Company and the Company's lobbying activities. Board Governance and Corporate Responsibility Committee Charter October 20, 2022 4 SVB Confidential · Supply chain diversity: The Committee shall review, at least annually, reports on management's efforts to include diversity considerations into the Company's procurement and supply chain activities.
Diversity, equity, and inclusion SVB believes that diversity is essential to our company's success, and we are dedicated to expanding our commitments and investments to create a more diverse, equitable, and inclusive company culture and innovation ecosystem. We believe our workforce should reflect the clients we look to serve and the communities where we operate. We believe equity is the outcome of fair, consistent, and well-socialized systems, policies and practices that enable individual success. We believe our talent is our best asset and will enable a unified culture where every employee feels empowered to excel and contribute fully, while feeling valued, supported, and safe. As inclusion ignites innovation: We are intentionally and strategically funding a world where every client and employee has the opportunity to bring their bold ideas to life. We also know that diverse perspectives and inclusive environments ignite new ideas to power innovation. That is why we are building a culture of belonging with a global workforce that celebrates greater dimensions of diversity and reflects the markets we strive to serve.
Although their executive team was remarkably...white.
No wonder, then, that Bernie Marcus, co-founder of Home Depot, found them pretty woke in their priorities. He had this to say, according to Fox News:
"I feel bad for all of these people that lost all their money in this woke bank. You know, it was more distressing to hear that the bank officials sold off their stock before this happened. It's depressing to me. Who knows whether the Justice Department would go after them? They're a woke company, so I guess not. And they'll probably get away with it," he said to host Neil Cavuto.
Top management reportedly sold their shares before the crash, while bonuses — big five- and six-figure ones — were paid out just hours before the FDIC stepped in and put up the paper "closed" sign on the headquarters door.
Guess it wasn't all about the collective responsibility for saving the earth after all. It was about looking out for number one.
And unlike the people of East Palestine, Ohio, the latest news is that their woke depositors will get prompt "service" courtesy of the U.S. government, making all of their uninsured deposits whole on Monday.
To sum up, they were indeed woke (yet hypocritical), as all the puzzle pieces fit together.
The only problem with this is whether they were woker than all the other banks out there. Were they woker than Bank of America or Wells Fargo? Those banks have far less systemic risk, based on the profiles of their depositors, but they at least match SVB in wokesterly attributes. That suggests that it may not have been wokesterism all by itself that triggered this meltdown.
Mother Jones, on the left, argues that deregulation made the bank collapse, deregulation signed into law from Congress by President Trump. Here is their headline:
Long Before Silicon Valley Bank's Collapse, Its CEO Helped Kill Tougher Oversight of Banks Like His
That doesn't hold water, because SVB was small fry, contributing boilerplate congressional testimony in favor of loosening Dodd-Frank rules, along with dozens of other far bigger players. SVB's lobbying budget was also far smaller when they testified than it is today, nearly all of that cash going to Democrats. The links to that are above.
More likely, it was bad management, and possibly politically oriented federal regulators looking the other way.
Economist Steve Hanke, a professor at Johns Hopkins University and a leading monetary expert, explained what actually happened in far clearer language than what's been seen in the press, in an email to American Thinker:
When banks receive deposits, the bank incurs a liability — the bank is borrowing money from depositors. The banks then put those borrowed funds to work by purchasing assets. In the case of SVB, the bank purchased long-dated U.S. government bonds, among other things, when the bonds were realizing low yields. As interest rates went up, the unhedged bonds lost value big time, as the value of a bond is inversely related to interest rates. The SVB was very poorly managed, and if that wasn't bad enough, the regulators were clueless, too.
He added:
[T]he real SVB issue was terrible banking and risk management that resulted in a massive duration mismatch between SVB's liabilities (read: deposits) and its assets (read: long-dated bonds). The mismatch was stupidly not hedged. SVB was a poorly run bank, a disaster waiting to happen. Any regulator worth his salt should have seen this coming long ago.
"We bank nearly half of all US venture-backed startups, and 44% of the US venture-backed technology and healthcare companies that went public in 2022 are SVB clients," the bank proudly highlighted on its website.
The chart at this link, shared on Twitter, is pretty instructive as to how SVB's customer deposits were structured — barely any of them were small depositors, meaning the large deposits signaled that the bank needed to hedge to prepare for a potential bank run. The latest news today is that another bank near the bottom of that chart, Signature Bank, which has former Rep. Barney Frank on its board and, like Silvergate, was cryptocurrency-focused, went belly-up.
That's also where the distinctly political cast to what happened comes in — from the fast government service to the depositors (might they have been Democrat campaign contributors?) and from the U.S. bank regulators who looked the other way as the bank's balance sheet took on unhedged risk based on its lender profile, quite possibly again could have been based on campaign contributions to Democrats.
What that means is that any bank with the same profile as Silicon Valley Bank, which doesn't properly manage itself and doesn't hedge its risk profile, could go belly-up, too, as depositors withdraw their money. That might explain why the press is so obsessed with "contagion."
If they are politically linked, they'll get some kind of bailout as we are seeing now. If they aren't donating to Democrats, then what happens happens — they get as much sympathy and help as East Palestine, Ohio. This explains a lot about why banks go woke — it's a protection penny paid to Democrats that lets them mismanage in peace and line their pockets first.
That's no way to run a fiscal system. Wokery had its fingerprints all over this crisis, but it was mainly linked with how likely a bailout would be.
Biden announces bailout for wealthy depositors in Silicon Valley Bank
The Biden administration has approved a massive bailout for all depositors with the failed Silicon Valley Bank (SVB), announcing on Sunday evening that they would be able to withdraw all their money when trading begins today.
The decision came at the end of a weekend of frantic discussions involving the Treasury Department, the Federal Deposit Insurance Corporation (FDIC) and the US Federal Reserve after the bank was taken over the FDIC on Friday following a $42 billion bank run the previous day.
The immediate issue confronting the regulators was what would happen to the money of those holding more than $250,000 in their deposits not covered by federal insurance schemes. In the end, they decided they took the decision to “protect the assets of tech firms, venture capitalists, and other rich people in California,” to cite the words of the Washington Post.
Fed officials would not provide a figure for the bailout operation but indicated that it would be sufficient to cover trillions of dollars of requests.
In her appearance on Face the Nation on Sunday morning, Treasury Secretary Janet Yellen foreshadowed the decision saying that there would not be a bailout of large banks, but “we are concerned about depositors, and we’re focused on trying to meet their needs.”
The decision, which was announced before the opening of Asian markets, was taken to avoid a “systemic” collapse of the financial system. Regulators also announced similar measures for deposits with the Signature Bank of New York, which they closed on Sunday, and in a further extension of bailout measures, said it was creating a new lending facility for the country’s banks.
It came in response to a campaign by politicians of both parties to protect the financial interests they represent.
Eric Swalwell, a Democratic congressman from California, tweeted that all deposits over the $250,000 limit had to be honored. “If depositors lose confidence on the safety of their deposits over $250K then we are in trouble.”
Republican senator Mitch Romney said depositors should “recover and have access to their deposits in order to meet their payrolls, pay their suppliers and to prevent contagion.”
Major financiers also heavily intervened.
Billionaire hedge fund investor Bill Ackman warned of a run on all but the biggest banks if a takeover of SVB were not organised and the government stopped short of guaranteeing all depositors.
“The unintended consequences of the [government’s] failure to guarantee SVB deposits are vast and profound and need to be considered and addressed before Monday. Otherwise, watch out below,” he tweeted.
The Wall Street Journal cited the comments of one investment manager who said the “big question” was how the FDIC and the Fed made uninsured depositors at SVB whole or close to whole. If this were not “handled well, there’s a systemic risk that uninsured depositors will flee small banks.”
And not just small ones; SVB had been at the centre of Silicon Valley financial operations for 40 years.
A joint statement by the Treasury Department and the FDIC said that the action had been taken to “strengthen public confidence in our banking system.”
In fact, rather than increasing confidence, it will reinforce the conclusion already being drawn by wide sections of the population that the banking system is a house of cards, operated by and for the ultra-wealthy whose interests the government will protect no matter what the cost.
The decision not only covers the banks directly involved. It implies that there is a blanket guarantee for all deposits in the US banking system.
Like all banking and financial failures, the demise of SVB had its own individual characteristics and it appears that those on the inside had some knowledge of what was coming.
It has been revealed that SVB chief executive officer Greg Becker sold $3.6 million worth of the bank’s shares less than two weeks before the disclosure of the losses that led to its collapse. The share sale on February 27 was the first time Becker had sold shares in the company for more than a year.
Individual circumstances aside, there is no getting away from the fact that the demise of SVB was the outcome of policies initiated by the Fed and the speculation they have produced which all but transformed the US financial system into a kind of giant Ponzi scheme, dependent on the continued inflow of money, liable to an implosion once that stopped.
The injection of $4 trillion into the financial system after the March 2020 crisis at the start of the pandemic produced a flood of money into the high-tech start-up sector in Silicon Valley for which SVB was one of the major banks.
With more money on its hands than it really knew what to do with, as customer deposits surged from $102 billion to $189 billion in 2021, SVB sought to park the money in US treasury bonds and mortgage-backed securities, supposedly the safest assets in the world.
But the financial landscape has changed dramatically in the last year as the Fed has started to aggressively hike interest rates in a bid to suppress the upsurge of the working class for wage rises in order to counter the highest inflation rate in four decades.
As a result of the rate hikes, the book value of the SVB’s asset holdings went down—bond prices and interest rates have an inverse relationship.
According to a post by economic historian Adam Tooze on his Chartbook site, “At a rough guess SVB suffered a loss of at least $1 billion every time interest rates went up by 25 basis points (a rise of 0.25 percentage points) and the Fed has hiked by 450. So if they had to sell their ‘safe’ portfolio of bonds they would actually suffer a huge loss.”
SVB had a very heavy dependence on investment in government debt but its activities were part of a much broader process.
According to Tooze, following the inflow of money by the Fed in response to the pandemic, there was a 44 percent increase by banks in their holdings of bonds, rising to $5.5 trillion, with the FDIC reporting that unrealised losses on securities reached $689.9 billion in the third quarter of last year, up from $469.7 billion in the second.
Viewing the events of the past 12 months, one can see the development of a gathering financial crisis on a scale larger than anything that has gone before. Interest rate rises on the scale and the pace of those being undertaken by the Fed take time to fully work their way through the financial system.
Their initial effects were seen in the outlying regions, the crypto market. It experienced significant problems last year, leading to the collapse of Sam Bankman-Fried’s company, FTX, and the bringing of criminal charges against him.
The key feature of the FTX operation was that while it was based on a fiction, the crypto model had many similarities to areas of the more regular financial system, above all the dependence on the continued inflow of cheap money in the high-tech sector.
The collapse of FTX led last week to the liquidation of Silvergate Bank, which had been heavily involved in Bankman-Fried’s operations. Silvergate’s fall in turn appears to have been at least one of the concerns about SVB, leading to the run which brought about its collapse.
The big question now is how far and how fast will this process continue to run?
In its semi-annual report to Congress earlier this month, the Fed reported that large banks “continue to have ample liquidity to meet severe deposit outflows.”
Even if the generous assumption is made that this is accurate, it only raises another question: Where the line is drawn, because just days after the report was issued, the 16th largest bank in the US failed. There are hundreds of US banks which do not fall into the category of “large” but which play a significant role in key areas of the economy as did SVB.
In his testimony to Congress, Fed chair Powell said “American banks are strongly capitalised,” a statement now exposed as a fiction with the second largest collapse in US history.
In her television comments yesterday, Yellen was desperate to maintain the illusion, saying the banking system was “really safe and well capitalised” as well as “resilient.”
Americans, she said, need to feel confident it could meet the needs of households and businesses and that “depositors don’t have to worry about losing access to their money.”
One gets the sense that the capitalist financial authorities are caught up in the world of their own illusions.
Having created the conditions which have led to the eruption of a new crisis, because of their response to earlier ones—the global financial crisis of 2008 and the market freeze of March 2020—they are now grappling with forces out of their control, and whatever may be the effect of their short-term actions, the longer-term consequences, as events have revealed, will only deepen the historic crisis of the system over which they preside.
Silicon Valley Bank CEO Sold $3.57 Million of Stock Two Weeks Before Bank Collapsed
The CEO of Silicon Valley Bank (SVB) sold $3.57 million of company stock just two weeks before the technology sector’s primary financial institution collapsed on Friday, according to federal filings.
SVB CEO and President Greg Becker on February 27 sold 12,451 shares of common stock at an average price of $287.42, or $3,578,652.31 in total.
Becker’s sale came two weeks before the stock plunged to $39.49 in the premarket Friday before the Federal Deposit Insurance Corporation (FDIC) seized the bank’s assets. The bank had $209 billion in total assets at the time of failure, according to the FDIC.
Becker also purchased the same number of shares using stock options priced$105.18 each, Securities and Exchange Commission (SEC) filings show.
“The options, which allow you to buy a company’s stock at a set price, were due to expire May 2,” the Daily Mailreported.
However, these transactions were pre-planned and made through a trust Becker controls. The trust executed a trading plan he reportedly set up on January 26.
SVB CFO Daniel Beck similarly sold $575,180 on the same February day as Becker. Beck sold 2,000 shares at $287.59 per share in a pre-planned sell-off as part of his trading plan set up on January 24.
“Company insiders often use such plans to execute trades when certain conditions are met, such as price and volume. This serves to remove any potential that they may use their knowledge to beat the market,” the Daily Mail explained.
On Friday morning, the California Department of Financial Protection and Innovation appointed the FDIC to take control of SVB after a bank run began Thursday following the bank’s announcement of a plan to raise more than $2 billion in capital, alarming many venture capitalists and start-ups who hold money in the institution.
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