More: You thought US Person was just mouthing off, as usual! ITYS! A consortium of eleven big banks announced it would provide $30 billion in emergency liquidity to Republic Bank to avoid "contagion" to the banking system. Wealthy depositors at Republic withdrew $40 billion in a matter of hours on Monday. Its stock price fell 60% despite reassurances the bank had obtained more liquidity from JPMorgan and the Fed. Republic catered to the 'carriage trade', offering favorable terms to their wealthy clientele; Mark Zuckerberg obtained a mortgage from Republic Bank. The consortium said its backstop of Republic showed their confidence in the country's banking system. Nevertheless, a nervous public forced the federal government to guarantee large uninsured deposits at SVB and Signature banks. Shares of midsized banks were broadly dumped by investors. So much for confidence.
Credit Suisse, a fixture of international finance, is under attack from its depositors. The bank asked for a statement of support from the Swiss government. The bank will borrow 50 billion CHF from the central bank to fund its operations. Credit Suisse has lost 70% of its share value over the last year. As long as taxpayers' money is not used to bail out the struggling capitalists faced with massive spreads in interest rates, US Person is fine with that.
{14.03.2023}You thought bank failures were a thing of the past--shades of FDR and the Great Depression. Take a look at this chart:
There have been an incredible 563 bank failures in the last two decades! Eclipsed only by the WaMu failure caused by junk mortgage backed securities, the collapse of SVB was caused by the inability of the bank to stay solvent as the its tech start-up debtors drew down more funds to cover expenses when their revenue dried up in the TechnoBust. The bank was unable to sell assets, including long-term Treasury bonds, at a profit to cover the withdrawals. Another failure is Silvergate Capital, which was closed by its owners who returned depositors their money. That bank was highly exposed to the sketchy crypto sector.
When WaMu shut its doors, a flood of bank failures followed.
Will "contagion" happen again despite so-called reforms of the financial sector in the wake of the 2008-09 Great Recession? There were no buyers for SVB at the weekend auction. Several large banks expressed interest, but after due diligence stepped back. Another auction is being scheduled. Regulators took the precautionary step of allowing large, uninsured SVB depositors to access their money on Monday. A bailout is a bailout by any other means. As economist Michael Hudson points out, this time around it is not fraud, but inflation of asset prices caused by the era of "free money", aka Quantitative Easing, that ended in 2022.
Forget the Repugnant's latest 'woke' meme--merely more propaganda! Commentators whose opinions
US Person respects see a systemic problem within the US banking system. SVB was overseen by the Federal Home Loan Bank, which is notorious for regulatory capture. Individual One
decided to stop scrutinizing mid-size banks under Dodd-Frankfor bank assets between $50 and $250 billion dollars with the help of moderate Democrats including Jon Tester of Montana. Progressives
Elizabeth Warren and Sherrod Brown fought against this regulatory roll-back. Silicon Valley is a core Democratic constituency that contributes mightily to Democratic Party coffers. Highly unlikely that the administration would allow wealthy contributors to
sink or swim on their own. Remember when President Obama told Wall Street bankers visiting the White House, “I’m the only one between you and the mob with the pitchforks."
The
real problem in the US financial sector is interest-bearing debt deflation which grows exponentially, whereas the economy does not. The magnitude of financial claims soon exceeds the ability to pay. To remove this problem a financial crash is in the offing so valuations and interest rates can return to historic norms. Subsidizing wealthy investors like those at SVB only delays the reckoning. Incidentally, have you paid your student loan today?
