#Banking Crisis

[mysharona1987]

[newyorkthegoldenage]

Angry depositors gathered in front of the Clarke Brothers Bank, an 80-year old private institution at 154 Nassau St., which closed as bankrupt, ca. 1929. Unprecedented withdrawals caused the crisis, and the payment of 100 cents on the dollar was promised to the skeptical depositors.

Photo: Bettmann Archive/Getty Images/Fine Art America

[bitchesgetriches]

6 Lessons YOU Can Learn from the Silicon Valley Bank Crash

When news of the Silicon Valley Bank crash broke, I sighed deeply. Because sighing deeply is the age-appropriate version of a toddler pounding their fists on the floor screaming “I don’ wanna, I don’ wanna, I DON’ WANNA!” That’s always how I feel when I have to understand some complicated new brouhaha caused by oligarchs’ greed, when all I truly need in this life is more naptime.

Guys, don’t worry. Because I am a grown-up woman with finely tuned coping mechanisms, I worked through my tantrum and I did it! I understand what the hell happened to Silicon Valley Bank.

Paragon of intellectual generosity that I am, I’m going to explain it back to you. 

If you want an in-depth, technical breakdown, this ain’t gonna be it. I’m going to focus on what this means for us plebs. That means skipping all the boring parts, creatively employing childish metaphors, recklessly speculating about its impact on the future of the economy, and oversimplifying absolutely everything.

Complex, dense financial topics explained by babies, for babies. That’s the Bitches Get Riches brand promise!

Keep reading.

If you liked this article, join our Patreon!

[pharosproject]

Federal Reserve stuck between a rock and a hard place

[grits-galraisedinthesouth]

Silicon Valley Bank Bailout

SVB's Risk Management 🙄🙄🙄

[c0ry-c0nvoluted]

Gorrlax: The Merger 

"...and here, on the 1-year anniversary of the mass acquisition of the final thirty-two banks country wide, JPMorgan Chase has put the finishing touch on their newest building on Wall Street by resurrecting what appears to be a demon monument that they boast is purely artistic sensationalism, while others warn that it is much, much more. Is it a glimpse into the dark truth of this organization, or simply creatively aggressive marketing and gaudy tastelessness? In a recent interview, Jamie Dimon, the company's top shareholder, spoke fondly of this ostentatious eye-sore, promising it to be a symbol of modern 'badassery,' as he put it, explaining it was simply meant to be 'bold and edgy'. 'It scored great with the under-forty crowd and, I have to say, we've already sold-out of the miniatures in the first presale. Gorrlax is the new 'golden bull!!, he responded with practiced zest that I, for one, wasn't entirely convinced by. The interview has, of course, gone viral, and whether the perceived terror in his voice and eyes is in fact real, or a figment of all our imaginations, remains to be decided. Some say that 'he's just old' and the shakiness of his voice and demeanor reflect his struggle with those long years he's lived on Earth. While others point to several different recent interviews to clearly point out the falsehoods to those claims. Nevertheless, it seems 'Gorrlax' is here to stay, as is this new superpower in financial infrastructure that has many die-hard American patriots finally tucking tale and fleeing the country. But is there anywhere on this planet outside of the influence of an institution this powerful? After all, the company has already positioned themselves to have their logo adorning the first civilian structures set to be colonized on Mars. With a reach spanning the cosmos, I'm afraid these expats are simply only delaying the inevitable. I'm Olivia Gutiérrez..." moving her hand from her long coat pocket, the past-her-prime star reporter revealed the small .22 caliber revolver she'd been keeping warm in her palm, "...and I don't want to be here anymore. God speed."

No one on the street even bothered to flinch at the shot. Olivia's blood and skull-matter hardly made it past Gorrlax's ankles and was removed in minutes with a single wipe from a cloth. Although the camera angle wasn't able to confirm it, several unrelated onlookers claimed to have seen the golden demon smile in that instant at its first taste of blood. And in the months since, hardly a day goes by without another lost soul quieting their existential torment at the feet of the fifty-foot monument.   -cm

by AnomalousDesigns

[fuckyeahmarxismleninism]

By Gary Wilson

In the current crisis, the banks hold the government hostage. They demand anything and everything to "bail us  out, or we will take you down with us." As long as capitalism rules, the bankers are not lying when they say this. On March 12, the Federal Reserve, Treasury Department and the Federal Deposit Insurance Corporation unveiled a plan to rescue uninsured depositors, Semafor reports. Only customers with deposits $250,000 and below are insured by the FDIC. But by invoking a “systemic risk exception,” they’ll now be able to cover larger accounts, which make up a much higher percentage of SVB’s deposits than most banks.

[andysouldancer]

Banking Crisis

Media, don't worry there is no banking crisis.

The Tories last year. 'We need to deregulate the banks. Take some of the restrictions off.... just like they have in the States.'

Ohh look....

Four banks in trouble later!!!

And two of these directly related to the same deregulation the Tories plan.

[aci25]

South Park always nails it

When someone asks me to explain the Bank collapse in layman's terms.

[warningsine]

Government regulators seized and sold off First Republic Bank on Monday, making it the third bank to fail this year after Silicon Valley Bank and Signature Bank collapsed in March.

The three banks held a total of $532 billion in assets. That’s more than the $526 billion, when adjusted for inflation, held by the 25 banks that collapsed in 2008 at the height of the global financial crisis.

The implosion of Washington Mutual that year, as well as the investment banks Lehman Brothers and Bear Stearns, was followed by failures throughout the banking system. From 2008 to 2015, more than 500 federally insured banks failed.

Most were small or midsize regional banks and were absorbed into other institutions, a common outcome for banks that have been put under government control. Washington Mutual, which was heavily involved in risky mortgages and became the largest bank to fail in U.S. history, was sold to JPMorgan Chase.

In recent years, fewer banks have gone under, thanks in part to stricter regulations that were put in place in the wake of the financial crisis. Before Silicon Valley Bank, the last bank to fail was in late 2020, as the coronavirus was ravaging the country.

The collapse of Silicon Valley and Signature Bank in March led to fears of fallout for the broader industry. Higher interest rates have eroded the value of assets on banks’ balance sheets, stressing the financial system and making it harder for banks to pay back depositors if they decided to withdraw their money.

First Republic received a temporary $30 billion infusion from the nation’s biggest banks in March as a way to restore clients’ confidence. But customers pulled a staggering $102 billion in customer deposits over the first quarter of this year, according to the bank’s quarterly earnings report filed on Monday.

By the close of trading on Friday, the company’s stock price had dropped more than 75 percent this week.

Similar to Silicon Valley Bank, First Republic had many start-up industry clients, and many of its accounts held more than $250,000, the amount covered by federal insurance.

The regulations put in place for the nation’s biggest banks after the financial crisis include stringent capital requirements, which means they must have a certain amount of reserves for moments of crisis, as well as stipulations about how diversified their businesses must be.

But midsize banks like First Republic, Silicon Valley and Signature do not have the same regulatory oversight. In 2018, President Donald J. Trump signed a law that lessened scrutiny for many regional banks. Silicon Valley Bank’s chief executive, Greg Becker, was a strong supporter of the move. Among other things, the law changed requirements for the amount of cash that these banks had to keep on their balance sheets to protect against shocks.

In a review of the Fed’s oversight of Silicon Valley Bank released on Friday, Michael S. Barr, the central bank’s vice chair for supervision, said the Fed would “re-evaluate” its rules for banks that were similar in size to Silicon Valley Bank.

Mr. Barr called the bank’s failure a “textbook case of mismanagement.” But he faulted Fed supervisors, too, for not understanding the extent of the bank’s vulnerabilities, and for failing to take decisive action when they did identify problems.

He also noted the real threat of contagion from Silicon Valley Bank. “A firm’s distress may have systemic consequences through contagion — where concerns about one firm spread to other firms — even if the firm is not extremely large, highly connected to other financial counterparties, or involved in critical financial services,” he wrote.

[edwordsmyth]

"The underlying reason why the failure of a medium-sized bank in California created so much angst worldwide is that international capitalism has never been able to get back on its feet after 2008.

In more detail: Central banks (the FED, the ECB, etc.) have one basic tool – the interest rate. When they want to put a brake on economic activity to keep inflation in check, they raise the interest rate, and vice-versa. But, in addition to price stability, central banks have two other goals: the stability of the banking system, and the balancing of liquidity with investment. The interest rate chosen by the central bank is one. That same number (e.g. 3%) must achieve three objectives simultaneously: price stability, banking system stability, and balancing between liquidity and investment.

And herein lies the reason why I argue that, after 2008, capitalism cannot recover: There is no longer one interest rate that can achieve all three of these objectives simultaneously. This is the tragedy of central bankers: If they want to tame inflation (at a high enough interest rate), they trigger a banking crisis and, as a result, they are forced to bail out the oligarchs who, despite being bailed out, drive investments below liquidity. If, on the other hand, they impose a lower interest rate to avoid triggering a banking crisis, then inflation gets out of control – with the result that businesses expect interest rates to rise, which discourages them from investing. And so on and so forth.

Back to 2008, then?

No, for two reasons. First, the problem for US banks today is not that their assets are junk (e.g. structured derivatives based on red loans) as they were in 2008, but that they own government bonds which they are simply forced to sell at a discount. Second, the Fed bailout announced yesterday is different from the one in 2008 – today it is the banks and depositors who are being bailed out, but not the bank owners-shareholders. These two reasons explain why bank stocks are falling but there is no total collapse of stock markets.

The fact that there is no total collapse of the stock markets does not, of course, mean that the crisis of capitalism – which has been developing continuously since 2008 – is not deepening. It simply does not have the characteristics of an instantaneous, heavy-handed fall.

What should have been done?

Since 2008, governments and central banks have been trying to prop up the banks through a combination of socialism for the banks, and austerity for everyone else. The result is what we see today: The metastasis of the crisis from one “organ” of capitalism to another, with the magnitude of the crisis increasing with each such metastasis.

What could be done as an alternative? The exact opposite: austerity for the banks, with nationalisation of those who cannot survive. And socialism for workers – a basic income for all, a return to collective bargaining and, further out, new forms of participatory ownership of high- and low-tech companies. In other words, nothing short of a political revolution.

To those who fear the idea of a political revolution, my message is simple: Prepare to pay the price of the escalating crisis of a capitalism determined to take us all to its grave."

[mysharona1987]

[news-of-the-day]

3/15/23

Banking Crisis (WSJ, Axios, USA Today, NYT)

Last week Silicon Valley Bank (SVC) went belly up in the second-largest bank failure in US history and started a roller coaster in the banking industry. SVC specializes in the tech industry, and during the pandemic, many tech companies were booming--amazon was sending more packages, zoom suddenly became a common name in the home--and were flush with cash. SVC like any other bank uses that money to invest, and much of that was in US treasury bonds, a normally sensible and usual place to put it. However last year tech companies started shedding workers, cutting expenses, and were withdrawing their money. SVC didn't have the liquidity on hand, so it had to sell those bonds, but because the Fed kept upping interest rates to combat inflation, SVC sold at a loss. When that news came out, there was a run on the bank and it eventually failed. The FDIC insures accounts up to $250K, but because SVC dealt a lot with companies, that's not going to cover it and a good portion of Silicon Valley would be in deep trouble. Biden announced on Monday that the government will help with deposits (with a bailout, but he didn't say the word), however shareholders can’t expect assistance. The Wall Street Journal has a good video summarizing what happened.

Unfortunately the problem is now spreading. Two days after SVC, Signature Bank, many of whose clients are crypto companies, announced the same issue. And today Credit Suisse's shares tumbled when its major shareholder said it could no longer invest, which means it is now beyond the US.

Some are arguing deregulation of the Dodd-Frank act under the Trump administration led to this. After the 2008 crisis, Dodd-Frank put more stringent rules on banks with assets of more than $50B with things like liquidity, stress tests, etc. In 2018 the threshold was later risen to banks with more than $250B, so SVC and Signature weren't subject to the same scrutiny. (Ironically Barney Frank, whose name is on the bill, was on the board for Signature.) The Justice Department also said it's opening up investigations into the banks.

Other news:

Police withdrew from trying to arrest former Pakistani PM, Imran Khan. Kahn is being investigated for illegally selling state gifts. (He was also charged for breaking anti-terrorism laws last year for threatening to sue a judge and police officers, but that was later dropped.) When police showed up to arrest him, there was a large fight from his supporters until the court ordered the arrest be delayed. Since Khan's ousting last April, he has been calling for early elections and been attending rallies, and he says the charges against him are politically based. I need to do more research into this because last October the Pakistani Election Commission declared Khan cannot hold public office for five years, so unless he’s campaigning for his party in general, he cannot serve as prime minister again anytime soon.

Argentina's inflation hit 100%, the first time since the 90s.

A Russian plane hit a US drone in the Black Sea, downing it. Russia is trying to recover it.

Cyclone Freddy is hitting Madagascar, Malawi, and Mozambique with over 200 reported dead. It more or less is bouncing between the countries in the Mozambique Channel.

Earlier this month, four Americans went down to Mexico for medical procedures but were kidnapped. Very shortly afterward two were found dead and the other two were recovered, and later five people were left tied up on the side of the road with a note saying they were responsible for the whole incident. Many are speculating the Americans were victims of mistaken identity, and once the cartel realized it had the US government bearing down on them, informed local law enforcement where to find the individuals and gave up some people as a means of smoothing the whole situation over. Mexico announced today it's indicting the five purported kidnappers.

1) Al Jazeera 2) Financial Times 3) BBC 4) AccuWeather 5) BBC

Sorry, had to finish those projects yesterday. Updates will continue as normal.

[mondaymustread]

Nearly half of Americans say they're worried about the safety of the money they have in the bank. Yet most have their money in FDIC protected bank accounts — where it's safe.

[grits-galraisedinthesouth]

Massachusetts residents wait in line to withdraw money from defunct Silicon Valley Bank