Here we go again, hello 2008. The Biden Administration has decided to bail out the depositors of Silicon Valley and Signature Banks, both run by reckless idiots, and ultimately any bank in the United States, on an unlimited basis. Current and future reckless incompetents included.
These banks paid higher than market rates on deposits, (in the 5% range apparently; the rest of us schmucks get 0.5%) that could be withdrawn at a moments notice. Then they invested those funds in bonds that had an average maturity of 5+ years. Any bank trainee in the history of the industry knows this is stupid. Particularly if your clients are venture capital backed firms, that lose a lot of money before they get purchased by Google for approximately a google $ trillion. So you are likely to have to give the money back, before the bonds mature. So you have to spend big to sell off the bonds, causing HUGE losses for the bank. Even knucklehead bankers know this. But the geniuses at SVG did it, anyway.
Then we find out that the executives sold stock two weeks before the bank collapsed like an IKEA book case. So, they are stupid and criminal. Add fat and drunk, and you are Flounder from Animal House, given the opportunity to run $680B banks like gambling addicts at a casino using house money.
All of this is perfectly predictable and has tons of precedence.
Now is time to reflect on the influence of the government playing bank boss, which guarantees bailouts. The Canadians do not provide deposit guarantees. No bailouts necessary. Go figure. Note that the most paperwork intensive and intrusive regulation in the history of banking (Dodd-Frank) did absolutely NOTHING to stop this from happening. Great job, Barney and Chris. So sorry you are retired to your board memberships of bankrupt banks. (See Barney Frank at Signature Bank).
I guess we should not be surprised that SVB has members of senior management who used to be senior management at Lehman Brothers, (another bailout that cost us billions.) Find out where the rest of the reckless bums that destroyed the financial system back in 2008 are now working, and bet on a big downturn in their stock prices Guaranteed investment strategy.
Those supposedly in the know blame the Fed. It is not the Fed’s job to actually manage the banks, its the BANKS’ job to do that. Don’t believe this canard.
So another prefect storm. Reckless, stupid bankers. Useless or paid for regulators. Bailouts for billionaires and the ChiCom government. All of the above will escape consequences, career or criminal. But you, fellow citizen, get the bill.
What a country!