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Featuring the Fabulous Dadbots: Dave S., Mark M., Mark O., Dennis C., Paul C., and Geoff Carter
Hey Bots,
Same shit different day. Fortunately I really let ‘em have it. This should fix things once and for all.
–Dave S.
–Dave
Ah yes, the cry of the underserved taxpayer! I have utilized that to great effect at the DMV.
The most interesting issue re SVB is whether the regulators did well to unexpectedly guarantee ALL deposits. Bank deposits in amounts exceeding the $250k FDIC limit are not typically owned by widows and orphans. These are the property of actual businesses, which are supposed to be staffed by flesh & blood cash/risk management people. These depositors “should have” known better than to put all of their company’s cash eggs into that single basket.
SVB’s assets did exist, but were not in the proper type of asset that could be liquidated in time to satisfy all depositors. And Jimmy Stewart was unfortunately not available to jawbone the depositors into reducing their demands. Life is just not that wonderful . But, I am reading, in the absence of the quickie regulator guarantee, these depositors would ultimately have gotten back upwards of 90% of their deposits.
So, did the regulators properly forestall contagion and thus protect all other midsize banks from bank runs? Or did they simply add to moral hazard by backstopping these financial players, who should have known better?
2008 is calling and wants its bailout back!
It’s interesting that tech firms were getting very anxious about their banks prior to the government action: “The lobbying blitz <by Tech to save the banks> reflected a broader sea change in the normally libertarian tech industry — one that typically tries to ward off federal intervention. Now, many of those same voices were calling on the Biden administration to act and protect an ecosystem in which they had a large stake.” Now, thatsa nice-a paragraph!
–Mark M.
No atheists in foxholes man!
–Dave S.
From the department of If All You Have is a Hammer, Everything Looks Like a Nail:
“They WERE a woke bank! If you look at their director of risk management, she brags about their diversified ESG portfolio, and the problem is that a lot of this is fantasy land, like the Green New Deal. It doesn’t work. It doesn’t pencil out. And if you’re a bank being insured by the federal government, which is the FDIC, your first responsibility is to grant loans to people who can actually pay them back! Not just to people who check a box on some liberal wish list.”
Representative James Comer (R-KY), Chairman of the House Oversight Committee.
–Mark M.
Crying “Woke”. Damn. Masterful spin doctoring by conservatives. It’s a simple message that can stick in the folds of even the dimmest brain. Of course, it isn’t actually true, but who’s gonna check on that? Tucker Carlson? And it does have some “truth-i-ness” to it. SVB did actively promote diversity (gasp). And, by conservative logic, it follows that diversity equals bank failure. (Unlike that staff of white guys at Goldman Sachs in 2008). I’m hoping that “crying woke” will soon have the same result on conservatives as “crying wolf” had on that shepherd kid.
DC
If we just put all those woke terrorists in prison we could restore the America we all imagine it used to be. Let’s start with those 23 dirty hippies we rounded up last week outside the proposed Cop City development in Atlanta.
I just learned something about our old pal Barney Frank. Not the costumed dinosaur but the Massachusetts congressman who lent his name to the Dodd-Frank financial reform bill. Turns out he was on the board of Signature Bank, the other bank that recently failed and had it’s depositors bailed out. Crazy how these things keep happening. Ol’ Barney used to brag about the money the banking industry invested in his campaign war chest and how that money allowed him to understand the banking industry from the inside, all in service of being a better informed regulator. In his own defense, Barney pointed out that while reaping a windfall from the industry, he never accepted the level of donations that Dodd did. That should make us all feel better about the system of government and regulation we all enjoy. Cheers!
MarkO
Good ol’ Barney Ridin’ the gravy train. There is nothing more corrupt in our current version of corporate capitalism than the “board membership”. All of these CEOs and vice presidents and celebrities and politicians, collecting the big bucks as a board member, and rarely doing anything other than rubber stamping the decisions of management. (Dave mentions the 737 debacle at Boeing, and in my reading of the situation, the very august board members at Boeing were totally led around by the nose by Boeing’s management. Which is why they made the horrible decision to try to shoehorn the existing training protocols & fatal software into the 737.)
You didn’t mention it, Mark O, but Dodd-Frank was rolled back partially in 2018, removing the most onerous of regulation from banks the size of Signature Bank. Barney was in favor of that, naturally. He had become very concerned about the “paper chase” that bank regulators impose upon banks. Naturally.
Barney was interviewed by the New Yorker in the wake of the Signature collapse, and he makes very clear that there was nothing in the rollback of Dodd-Frank that affected the ability of the REGULATORS to regulate Signature bank more effectively. Ah, so at least we have identified our villain — those goddam woke regulators, checking off boxes on the liberal wish list, but asleep at the regulation switch.
(I have one other anecdote about Barney. In 2009, the Dems held 60 Senate seats and were on the cusp of approving Obamacare. But then Ted Kennedy inconveniently died, and the Dems in Massachusetts LOST the Senatorial replacement election to a Republican named Scott Brown. OMG, panic ensued. How we gonna pass Obamacare?? And nobody panicked more effusively than Barney Frank. I saw him on CNN, just BLUBBERING to the interviewer about how all was lost. That was pathetic! Fortunately, Nancy Pelosi had bigger balls than Barney, and she & Harry Reid cobbled together some kind of legislative answer to the conundrum. Anyway, suffice it to say that Barney Frank does not belong in the current edition of “Profiles in Courage”.)
–Mark M.
BLUBBERING. Yeah, that’s pretty much how I remember Barney Frank in general. Some of it was pretty funny. I think he could compile his greatest hits and deliver them as a huge, floppy, purple dinosaur and be a big hit on Broadway. Hell, people paid hundreds of dollars to watch Springsteen mumble on stage for a couple hours. They loved it!
Just as “wokeness” didn’t cause SVB to fail, it’s quite likely that regulation (and deregulation) also didn’t cause it to fail. It seems to have been an emotion driven bank run, which has been happening as long as there have been banks. The only thing new about it is that a Twitter thread may have touched off the panic amongst the wealthy Silicon Valley clientele. Not to worry tech moguls, the gubmit covered your potential losses, as we all knew they would.
The initial worry about SVB, the realized losses from bond investments, is pretty scary. Those losses were on the most conservative of investments, treasury bonds. Every bank is invested in those to some extent. Every bank is vulnerable. The problem is the Fed going from a long period of free zero-interest money to a regime of high(er) interest rates. The fallout for the banking industry is wholly predictable.
MarkO
Hey bots,
Sorry I’m so late on everything. I been swamped. I’ve read that—as MO said—that the Fed raising interest rates had a lot to do with the SVB debacle, but I also read that a lot of it was greed. In reference to that, I submit the following quote
“With regard to who’s to blame here, I think that the greed and avarice that has long been present in Silicon Valley has come home to roost,” Keith Fitz-Gerald, a trader and principal of the Fitz-Gerald Group, (Silicon Valley’s ‘greed and avarice’ have ‘finally come home to roost’ in SVB collapse, trader says, CNBC, 3/23/23) told CNBC’s Capital Connection on Monday (CNBC). Fitz-Gerald also bemoaned the negligence of regulators and auditors—in short, the entire system.
Trump’s deregulation and the Fed adjustments were factors, sure, but doesn’t this always come down to the same thing? The Savings and Loan Scandal of the 1980s? The DotCom bubble? The Housing Bubble? Isn’t this primarily government holding hands (and giving handjobs to) their corporate sponsors? Not one wall street executive went to jail for the 2008 debacle. I doubt if anyone will pay here either. This isn’t about perfect storms, it’s about greedy and greedier pigs at the trough.
-Geoff