And now for something really important...SVB failure.

[Why_Yes_I_Do]

Originally Posted by Tiny

Socialism and tyranny my ass. You end up with contagion and a breakdown in the system like 2008/2009 and we're going to be on the hook for a lot more than the temporary "increased costs of doing business" which would be born by bank customers and bank shareholders.

"Contagion" -- a fear inducing phrase that causes one to give up their Liberties for perceived Security, thus deserving neither. Some are known to don googles, face diapers, jab their asses with unproven toxins and shut themselves in to their own homes for months on end. In that and other cases, also suspend the rule of law and ignore the Bill of Rights all together. Imma say nope, but thanks just the same.


Tomorrow's secret word of the day is: Fear

[Texas Contrarian]

One of the most successful rates traders referenced a fintwit post from just about an hour ago saying that Orszag was on bubblevision this morning, urging Yellen and others to explicitly state that ALL deposits (not just those in accounts with under $250K) be backstopped by the FDIC, pending legislation codifying the full guarantee. (Which he also strongly urges.)

There's an increasing level of talk about this in a lot of quarters. In recent days, large deposits have been fleeing community and regional banks in favor of JPM, BofA, Citi, Wells, and a couple of other very large (and perceived to be TBTF) banks.

There's also growing discussion of the view that we ought to move to a banking/finance model closer to that of Australia, Canada, and a number of Western European counties. (Dominance by just a few tightly-controlled, tightly regulated megabanks and a near-absence of communities and regionals.)

My view is that moving toward such a model would be a painfully wrenching process, since smaller banks all across the countryside have been the lifeblood of America's farms and small businesses for many decades.

Nonetheless, I think that's where we may be headed. After all, it's the sort of regime preferred by the likes of Bernie Sanders and Elizabeth Warren.

And why not? If a handful of the TBTF's were allowed to fatten up to unprecedented proportions, imagine the potential for political bribes ... er, "campaign contributions!"

[Texas Contrarian]

The excellent Kim Strassel of the WSJ has an interesting take on the SVB debacle -- that is, it was writing "basically subprime business loans." (Yikes!)

Here's the piece:

Opinion | Did ESG Help Sink SVB?

Kimberley A. Strassel

March 16, 2023 6:20 pm ET

One entrepreneur says the bank was offering ‘basically subprime business loans.’

If government funds it, they will come. That’s an overlooked story line in the collapse of Silicon Valley Bank. If Washington wants to point fingers, it should aim the biggest digit at itself.

Let’s talk about what actually imploded over the past week. If the name wasn’t already a giveaway, SVB was the lender of choice for tech dreamers. It claims to have banked nearly half of all U.S. venture-backed tech and healthcare startups. Yet in recent years those clients have skewed ever more in one direction. “We serve those creating positive environmental change,” SVB’s website brags, noting that the bank worked with some 1,550 companies in the “climate technology and sustainability sector.”

Most of these companies weren’t filling some vital market need. Rather, as the Journal reported, SVB was beloved for its willingness to offer “banking services to startups that often weren’t profitable, in some cases didn’t have a product, and would otherwise have a hard time getting a line of credit or a loan from a larger bank.” One tech entrepreneur provided law.com a more scathing description of SVB’s products: “They’re basically subprime business loans. You’re talking about companies that have no credit profile, they’re burning cash and are unlikely to raise the same type of capital because of interest rates. . . . It was basically social credit.”

What inspires a bank to disregard risk and shower money on products or services that nobody is clamoring to buy? One answer is easy money and misguided regulation, which washed dollars into the economy even as it pushed banks like SVB to load up on sovereign debt, lulled by a Federal Reserve-fed belief that interest rates would stay near zero forever. The other? Washington handouts, via President Biden’s effort to engineer a climate industry that otherwise wouldn’t exist.

Congress’s $1.2 trillion 2021 “infrastructure” bill was a starting gun for a clean-tech frenzy. The bill made available hundreds of billions for new “technologies” for electrical grid modification, solar, carbon capture, battery storage, electric-vehicle charging infrastructure, geothermal, “smart community” widgets, microgrids, CO2 transport, hydro, wind, fuel cells, waste management and efficiency gains. Last year’s so-called Inflation Reduction Act threw yet more dollars at would-be green innovators, while also extending billions in household tax credits in an attempt to lure Americans to buy these government-fueled concoctions.

The Biden bills were a supercharged version of Barack Obama’s 2009 stimulus, which produced Solyndra’s federal loan guarantees and other green embarrassments. Yet Washington is adept at repeating mistakes. The feds did this time largely off-load responsibility to the state and local authorities or industrial players that apply for grants and pass the money on from there. But the message was still the same: A honey pot of hundreds of billions sits waiting to be taken. Cue the clean-tech scramble.

While the main reason SVB failed was its decision to buy bonds at the top of the market (it got hit when it had to sell), it had also in the past few years further stretched itself by sizably increasing its loans and lines of credit to subprime firms. How much of that would have happened if not for the Biden pot of gold at the end of the green-tech rainbow? A Washington Post story acknowledged that SVB’s weekend collapse initially meant that “many major clean tech companies faced insolvency.” It even accidentally admitted Washington’s role when it noted that many investors were nonetheless hopeful “the infusion of hundreds of billions of dollars in public money” from Washington legislation would “blunt the fallout from the bank collapse.”

The politics doesn’t end there. Even a junior banking regulator should have picked up on SVB’s distress, but that’s apparently a grade above San Francisco Federal Reserve President Mary Daly. She and her team have spent more time of late focused on hypothetical climate risk than the real risk of bank failures. What woke overseer wants to clamp down on the darling of clean-tech banking?

And as for that “infusion” of government dollars, it turns out investors don’t have to wait for grant bucks. SVB had relatively few depositors, but most exceeded the federal deposit-insurance limit of $250,000. Had this been a regional bank in Texas specializing in oil and natural-gas ventures, those depositors would surely be out of luck. But the Biden administration immediately swooped in with an SVB bailout, promising to make all those clean-tech companies whole. Subsidy money, a regulatory blind eye, and bailout bucks—talk about a favored industry. This, while most every other company in the country faces a bevy of hostile Biden regulators and lawsuits.

Some Republicans are blaming the SVB meltdown on distraction—claiming the bank was overly focused on turbofunding climate and social-engineering causes. That’s a bit too convenient. SVB and its clients were doing exactly what Washington invited them to do—chase the money. And one big lesson is that no good ever comes from D.C. attempts to micromanage markets.

Write to kim@wsj.com.

[royamcr]

Solyndra was unfortunate but it was the massively lower raw material costs for their competitors that did them in. Without that it could have been a win.

[bambino]

Originally Posted by royamcr

Solyndra was unfortunate but it was the massively lower raw material costs for their competitors that did them in. Without that it could have been a win.

If ifs and buts were candy and nuts……………

[Tsmokies]

Just another gop fuckup Biden has to fix. Trains planes and banks after bringing oil down to 66$ a barrel

[bambino]

Originally Posted by Texas Contrarian

The excellent Kim Strassel of the WSJ has an interesting take on the SVB debacle -- that is, it was writing "basically subprime business loans." (Yikes!)

Here's the piece:

Opinion | Did ESG Help Sink SVB?

Kimberley A. Strassel

March 16, 2023 6:20 pm ET

One entrepreneur says the bank was offering ‘basically subprime business loans.’

If government funds it, they will come. That’s an overlooked story line in the collapse of Silicon Valley Bank. If Washington wants to point fingers, it should aim the biggest digit at itself.

Let’s talk about what actually imploded over the past week. If the name wasn’t already a giveaway, SVB was the lender of choice for tech dreamers. It claims to have banked nearly half of all U.S. venture-backed tech and healthcare startups. Yet in recent years those clients have skewed ever more in one direction. “We serve those creating positive environmental change,” SVB’s website brags, noting that the bank worked with some 1,550 companies in the “climate technology and sustainability sector.”

Most of these companies weren’t filling some vital market need. Rather, as the Journal reported, SVB was beloved for its willingness to offer “banking services to startups that often weren’t profitable, in some cases didn’t have a product, and would otherwise have a hard time getting a line of credit or a loan from a larger bank.” One tech entrepreneur provided law.com a more scathing description of SVB’s products: “They’re basically subprime business loans. You’re talking about companies that have no credit profile, they’re burning cash and are unlikely to raise the same type of capital because of interest rates. . . . It was basically social credit.”

What inspires a bank to disregard risk and shower money on products or services that nobody is clamoring to buy? One answer is easy money and misguided regulation, which washed dollars into the economy even as it pushed banks like SVB to load up on sovereign debt, lulled by a Federal Reserve-fed belief that interest rates would stay near zero forever. The other? Washington handouts, via President Biden’s effort to engineer a climate industry that otherwise wouldn’t exist.

Congress’s $1.2 trillion 2021 “infrastructure” bill was a starting gun for a clean-tech frenzy. The bill made available hundreds of billions for new “technologies” for electrical grid modification, solar, carbon capture, battery storage, electric-vehicle charging infrastructure, geothermal, “smart community” widgets, microgrids, CO2 transport, hydro, wind, fuel cells, waste management and efficiency gains. Last year’s so-called Inflation Reduction Act threw yet more dollars at would-be green innovators, while also extending billions in household tax credits in an attempt to lure Americans to buy these government-fueled concoctions.

The Biden bills were a supercharged version of Barack Obama’s 2009 stimulus, which produced Solyndra’s federal loan guarantees and other green embarrassments. Yet Washington is adept at repeating mistakes. The feds did this time largely off-load responsibility to the state and local authorities or industrial players that apply for grants and pass the money on from there. But the message was still the same: A honey pot of hundreds of billions sits waiting to be taken. Cue the clean-tech scramble.

While the main reason SVB failed was its decision to buy bonds at the top of the market (it got hit when it had to sell), it had also in the past few years further stretched itself by sizably increasing its loans and lines of credit to subprime firms. How much of that would have happened if not for the Biden pot of gold at the end of the green-tech rainbow? A Washington Post story acknowledged that SVB’s weekend collapse initially meant that “many major clean tech companies faced insolvency.” It even accidentally admitted Washington’s role when it noted that many investors were nonetheless hopeful “the infusion of hundreds of billions of dollars in public money” from Washington legislation would “blunt the fallout from the bank collapse.”

The politics doesn’t end there. Even a junior banking regulator should have picked up on SVB’s distress, but that’s apparently a grade above San Francisco Federal Reserve President Mary Daly. She and her team have spent more time of late focused on hypothetical climate risk than the real risk of bank failures. What woke overseer wants to clamp down on the darling of clean-tech banking?

And as for that “infusion” of government dollars, it turns out investors don’t have to wait for grant bucks. SVB had relatively few depositors, but most exceeded the federal deposit-insurance limit of $250,000. Had this been a regional bank in Texas specializing in oil and natural-gas ventures, those depositors would surely be out of luck. But the Biden administration immediately swooped in with an SVB bailout, promising to make all those clean-tech companies whole. Subsidy money, a regulatory blind eye, and bailout bucks—talk about a favored industry. This, while most every other company in the country faces a bevy of hostile Biden regulators and lawsuits.

Some Republicans are blaming the SVB meltdown on distraction—claiming the bank was overly focused on turbofunding climate and social-engineering causes. That’s a bit too convenient. SVB and its clients were doing exactly what Washington invited them to do—chase the money. And one big lesson is that no good ever comes from D.C. attempts to micromanage markets.

Write to kim@wsj.com.

Strassel is the only one worth a fuck on the WSJ’s editorial page.

[eccieuser9500]

[the_real_Barleycorn]

I wonder if VM is starting to rue the day he said "plain old bank run"?

[Why_Yes_I_Do]

Let's get RECKLESS!! <ding, ding, ding!>
Thought I'd swim upstream to the headwaters of the FDIC to check the source. Along the way, I swam by this Turd-Berg:

Silicon Valley Bank Pledged Nearly $74 Million To Black Lives Matter Causes

...Silicon Valley Bank might have been able to make good on $74 million promised to customers had it not pledged the money to leftist causes.

According to a new database by the conservative Claremont Institute, the collapsed bank donated or pledged to donate nearly $74 million to groups related to the Black Lives Matter movement.

Will Hild, the executive director of Consumers’ Research, told The Federalist that SVB’s failure on the heels of its left-wing activism “is yet another indication that SVB was focused on woke virtue signaling instead of protecting their customers’ deposits.”...

Upona arrival, I reviewed:

FDIC-Your Insured Deposits
Updated January 2020
-- On Page 5 --

WHAT THE FDIC DOES NOT COVER

• Stock investments
• Bond investments
• Mutual funds
• Life insurance policies
• Annuities
• Municipal securities
• Safe deposit boxes or their contents
• U.S. Treasury bills, bonds or notes*
* These investments are backed by the full faith and credit of the U.S. government.

The standard deposit insurance amount is
$250,000 per depositor, per insured bank,
for each account ownership category...

Without getting into the fineries of Unit Banking versus Branch Banking. It is pretty obvious that the $250,000 is per bank and they even have a handy-dandy calculator for that known loosely as EDIE Here. It allows one to calculate their insurance coverage by account per bank. So I thought to myself: Why is that some smacked-ass can say we should just recklessly ignore the $250,000 cap and insure the rich, bypassing Congress et al?

Deposit Insurance And Cheap Money - The Ultimate Financial Bad Guys
By David Stockman
David Stockman's Contra Corner
March 17, 2023

Why would you throw-in the towel now? We are referring to the Fed’s belated battle against inflation, which evidences few signs of having been successful.

Yet that’s what the entitled herd on Wall Street is loudly demanding. As usual, they want the stock indexes to start going back up after an extended drought and are using the purported “financial crisis” among smaller banks as the pretext.

Well, no, there isn’t any preventable crisis in the small banking sector. As we have demonstrated with respect to SVB and Signature Bank earlier this week, and these are only the tip of the iceberg, the reckless cowboys who were running these institutions put their uninsured depositors at risk, and both should now be getting their just deserts.

To wit, executive stock options in the sector have plunged or become worthless, and that’s exactly the way capitalism is supposed to work. Likewise, on an honest free market their negligent large depositors should be loosing their shirts, too.

After all, who ever told the latter that they were guaranteed 100 cents on the dollar by Uncle Sam? So it was their job, not the responsibility of the state, to look out for the safety of their money.

If the American people actually wanted the big boys bailed out, the Congress has had decades since at least the savings and loan crisis back in the 1980s to legislate a safety net for all depositors. But it didn’t for the good reason that 100% deposit guarantees would be a sure-fire recipe for reckless speculation by bankers on the asset-side of their balance sheets; and also because there was no consensus to put taxpayers in harms’ way in behalf of the working cash of Fortune 500 companies, smaller businesses, hedge funds, affluent depositors and an assortment of Silicon Valley VCs, founders, start-ups and billionaires, among countless others of the undeserving.

And for crying out loud, forget this baloney about the bailouts aren’t costing taxpayers a dime because they are being paid for by the banks via insurance premium payments to the FDIC fund. Well, yes, when the Congress wants to disguise a tax they call it an “insurance premium”, as if its victims had the choice to elect coverage or not. But when $18 trillion of deposits are being assessed in order to bailout careless large depositors who paid no attention to what was happening to their money, then that’s an onerous tax by any other name.

Accordingly, Washington’s panicked bailout of $9 trillion of uninsured deposits held by big and small companies, hedge funds and affluent customers over the weekend was therefore nothing less than a gift to the undeserving. And now we find out the two banks that have been explicitly funded 100% by Uncle Sam—SVB and Signature Bank—were deep into woke investing and conduct. That makes the bailout by Janet Yellen & Co. especially galling.

For crying out loud, this is how the poison of wokeness and ESG spread like wild-fire among American businesses in the first place. The latter should have ordinarily been a bulwark of conservative values and common sense, but years of ultra-easy money from the Fed and the precedent of bailout-after-bailout since the 1980s allowed top executives to take their noses off the grindstone of safe and sustainable profitability in favor of a purely political agenda.

In any event, inflation is still raging and wage workers are still taking it on the chin. During February real wages dropped for the 23rd consecutive month. So the Fed needs to stay on its anti-inflation playbook, come hell or high water. That means it needs to keep raising rates until their after-inflation level is meaningfully positive, which is not yet remotely the case.

Indeed, unlike Tall Paul Volcker back in the late 1970s, who inherited 10-year Treasury yields at -2.0% and raised them to +10% over the next several years, real interest rates are still deeply underwater as we show below. The cries to stop the rate increases, therefore, are just damn nonsense.

In fact, in any sane world these are not even “increases”. They are long overdue normalization of interest rates that have been absurdly pinned to the zero bound for upwards of a decade.

And the Fed most certainly should not throw in the rate increase towel owing to a Wall Street proclaimed “crisis” in the small banking sector. That’s the long-standing wolf cry of the entitled class of speculators decamped in the digital canyons of Wall Street.

Yes, regional banks were playing fast and loose with depositor money, but even the biggest of these did not amount to a hill of beans in the great scheme of the nation’s $25 trillion GDP. As we showed a few days ago, both the recently departed SVB and Signature Bank each accounted for barely one-half of one percent of the nation’s $30 trillion of banking system assets...

BTW: There is much more contained in the article, along with pretty graphs and charts and is a good read for those that can read good - IMHO.

[Tiny]

Originally Posted by Why_Yes_I_Do

"Contagion" -- a fear inducing phrase that causes one to give up their Liberties for perceived Security, thus deserving neither. Some are known to don googles, face diapers, jab their asses with unproven toxins and shut themselves in to their own homes for months on end. In that and other cases, also suspend the rule of law and ignore the Bill of Rights all together. Imma say nope, but thanks just the same.


Tomorrow's secret word of the day is: Fear

I’m not sure what goggles, face diapers, unproven toxins and the Bill of Rights have to do with confidence in regional and community banks. But yeah, if you say so.

[Levianon17]

Originally Posted by VitaMan

You should. You have something to insure ?

Too bad the rabid right wingers want to turn this bank failure into something it is not.

Is this Bank failure Trump's fault? That's usually what it boils down too, lol.

[VitaMan]

Originally Posted by the_real_Barleycorn

I wonder if VM is starting to rue the day he said "plain old bank run"?

That is what it was at SVB.

A more interesting thought: how many posters here have more than $ 250,000 in bank deposits

[VitaMan]

Originally Posted by Levianon17

Is this Bank failure Trump's fault? That's usually what it boils down too, lol.

Go ahead and give a discussion of how politics and banking are intertwined, and what makes it a political issue.

This is the political forum.

[Why_Yes_I_Do]

Originally Posted by Tiny

I’m not sure what goggles, face diapers, unproven toxins and the Bill of Rights have to do with confidence in regional and community banks. But yeah, if you say so.

All of your above is true and accurate, yet "contagion" and "fear" apply to both when one decides to "panic" into "reckless" change for perceived "security" by giving up their "Liberty" by abandoning common sense, because of Fear-Porn.


Maybe read the extended track version above: Deposit Insurance And Cheap Money - The Ultimate Financial Bad Guys Plus the graphs are both informative and pretty compelling.