Silicon Valley Bank Collapse

[Harry Bosch]

President Joe Biden issued the first veto of his presidency on Monday – stopping a Republican-led bill that would overturn his administration's rule letting retirement account planners take 'environmental, social and governance,' referred to ESG factors into account. Republicans in Congress who pushed to overturn the Labor Department's actions say ESG investments provide sizable funding to 'woke' political agendas, such as a drive against climate change, rather than on earning the best returns for savers. Biden, in a video released by the White House, said he vetoed the measure because it 'put at risk the retirement savings of individuals across the country.'

Daily Mail

Let's Go Brandon!!

What does this have to do with banking?

 

[Cheerful Charlie]

DeSantis and Forida define woke.

....
DurinThe governor's general counsel, Ryan Newman, said, in general, it means "the belief there are systemic injustices in American society and the need to address them." He added that DeSantis doesn't believe there are systemic injustices in the country, reports Florida Politics. ....g the testimony, Warren's attorney, Jean-Jacques Cabou asked those within DeSantis' administration what "woke" meant to them.

TALLAHASSEE, Fla. - It's a word that the Florida governor has used multiple times, even naming a piece of legislation after it and describing Sunshine State as the place where "woke goes to die." But what does that word mean?

What does 'woke' mean? Gov. DeSantis officials answer during Andrew Warren trial

During the trial between Andrew Warren and Gov. Ron DeSantis, those within the governor's administration answered what "woke" meant to them. According to DeSantis' general counsel, it's the "belief there are systemic injustices in American society and the need to address them."

www.fox13news.com

 

[RVonse]

Biden is acting swiftly to make sure depositors will not be hurt, while Fed chair Yellen vows no big bailouts as usual for these banks or those running them into the ground.

Making sure the depositors will not be hurt, including accounts over the FDIC guaranteed $250,000, is a big bailout as usual for these banks and those running them into the ground. It's like those making government decisions never took Econ 101. "People respond to incentives. That is the whole of economics. The rest is commentary."

No, it's not a bailout. A bailout is giving financial institutions to a failing business to save it from collapse. SVB has collapsed. It's shareholders and owners lost everything. The insurance fund is making the bank's customers whole. You can't blame the customers for not knowing the risks that SVB was taking. One of the top auditing firms in the country gave SVB a clean bill of health 2 weeks before the collapse! If Biden hadn't authorized this, SVB's customers, large tech companies, would not have been able to pay their vendors or pay their workers. It would have been chaos.

Chaos just isn't Biden's cheesmo man.

SVB is interesting because it is a Great Depression failure. SVB might have been on bad footing, but it was the bank run that closed the doors. A few people on YouTube start on about it and then over $40 billion was withdrawn. How many banks can handle that? Effectively, someone (Peter Thiel) yelled "FIRE!" and now SVB is dead.

I find it funny how some people are angry the bank customers aren't fucked over this. As you note, SVB is dead, FDIC is in charge now until it can find a foster bank to absorb its assets. So SVB wasn't bailed out, just the customers were protected. And some people just aren't happy unless others get burned.

The Biden Admin acted because fear is creeping back into banking and "fear" is one of the worst things in finance. Much much worse than inflation. Institutions and people make poorer decisions when fear is added to the calculus. The US also needs to look into whether banks with $300 billion in assets can be considered "small". I think it is real simple, if it is too complicated for a bank to prove solvency, then maybe, just maybe they are too big to fail.

All that needs done is to bring back and restore Glass Stegall (Clinton got rid of it) and then also to get rid of Dodd Frank. Restoring Glass Stegall will make sure banks are banks instead of casino's and we know the legislation worked for over 60 years. And then removing the horrible legislation of Dodd Frank will prevent bank runs by letting depositors know that their money can not be taken by the banks themselves (bail in's).

The people who know better would have made sure this happened if our government could function without bank lobbying.

 

[RVonse]

Now if there was a law against the bank using my $1 without my permission that's an improvement.

It was called Glass Stegal and it worked for about 65 years until Clinton fucked us over.

 

[RVonse]

Biden is acting swiftly to make sure depositors will not be hurt, while Fed chair Yellen vows no big bailouts as usual for these banks or those running them into the ground.

Making sure the depositors will not be hurt, including accounts over the FDIC guaranteed $250,000, is a big bailout as usual for these banks and those running them into the ground. It's like those making government decisions never took Econ 101. "People respond to incentives. That is the whole of economics. The rest is commentary."

No, it's not a bailout. A bailout is giving financial institutions to a failing business to save it from collapse. SVB has collapsed. It's shareholders and owners lost everything.

Risk management is a chess game, and you aren't thinking several moves ahead about it. SVB took excessively risky bets, lost them, and the shareholders and owners lost what they'd gambled, but they didn't lose everything. They didn't lose their skill sets and they didn't lose their reputations, because...

The insurance fund is making the bank's customers whole.

So there's nothing -- no vocal and highly visible community of angry former customers who lost their shirts -- to stop the shareholders and bank directors from doing it all over again, setting up a new bank, taking excessively risky bets, and maybe next time making out like a bandit. Average returns go up with risk, so risky bets enable you to offer depositors higher returns. When that risk isn't passed on to the depositors -- the people who financed those risky bets -- the depositors have no incentive to accept the more moderate returns offered by more prudent banks. How are more prudent banks supposed to compete with risk-embracing banks like SVB?

It's like if you have a million dollar house and buy an insurance policy with a cut-rate company that doesn't charge actuarially sound premiums. If few houses burn down they get rich and you got a good deal. If a lot of houses burn down they go broke, but what happens to you? Do you get the quarter of a million the company has assets to pay you? Or does the government swoop in and make you whole? If the government is going to swoop in and makes you whole, what's your incentive to buy insurance from a prudent insurance company? What's to stop the people who went broke just setting up another cut-rate company and enticing all the customers away from prudent insurance companies? Next year there are few fires so they're rich again; meanwhile the other insurance companies are switching to the cut-rate model too in order to survive in the new environment where they have to compete with somebody who's getting a de facto government subsidy; and the year after that there are a lot of fires and all the companies fold.

You can't blame the customers for not knowing the risks that SVB was taking. One of the top auditing firms in the country gave SVB a clean bill of health 2 weeks before the collapse!

And derivatives made of junk bonds were rated Triple-A before the 2008 collapse. People don't understand the difference between correlated and uncorrelated risk. But customers should know not to expect a million dollars worth of insurance from paying the premiums on a $250,000 policy.

If Biden hadn't authorized this, SVB's customers, large tech companies, would not have been able to pay their vendors or pay their workers. It would have been chaos.

And the same argument was made for the 2008 bailout. And that's fine: we can weigh the merits of taking the pain now versus creating expectations and incentives that make future pain more likely; maybe this was the lesser evil. But deciding Biden made the right call doesn't change the fact that this is yet another bailout.

What they are doing is very bad on 2 levels:

1) Forces the government to shift into monetary easing (even though that's not what they are calling it) while at the same time attempting to slow the economy down using other methods (interest rates).

2) A huge moral hazard for the other small banks who are going to move their money into what's left of SVB because they know the government is back stopping deposits. These other private banks are having to compete with the safety of our federal government now.
Either the government should nationalize all the banks or let the chips fall where they do.

 

[Politesse]

DeSantis and Forida define woke.

....
DurinThe governor's general counsel, Ryan Newman, said, in general, it means "the belief there are systemic injustices in American society and the need to address them." He added that DeSantis doesn't believe there are systemic injustices in the country, reports Florida Politics. ....g the testimony, Warren's attorney, Jean-Jacques Cabou asked those within DeSantis' administration what "woke" meant to them.

TALLAHASSEE, Fla. - It's a word that the Florida governor has used multiple times, even naming a piece of legislation after it and describing Sunshine State as the place where "woke goes to die." But what does that word mean?

What does 'woke' mean? Gov. DeSantis officials answer during Andrew Warren trial

During the trial between Andrew Warren and Gov. Ron DeSantis, those within the governor's administration answered what "woke" meant to them. According to DeSantis' general counsel, it's the "belief there are systemic injustices in American society and the need to address them."

www.fox13news.com

Nothing says "we're past systemic injustices as a society" like a large contingent of people, almost all of them from a certain class and ethnic background, pushing to make it illegal to accuse the state of systemic injustices. Like, what a completely normal and not at all suspicious thing to do.