#banking collapse

[thebanksathi]

Root Causes of the US and Europe Banking Crisis

[talking-theory-with-chatgpt]

Please summarize and critique the following article:

This article discusses the recent collapse of Silicon Valley Bank (SVB) and its impact on the banking industry in the United States. The author outlines five key takeaways from the Senate Banking Committee's hearing on the matter, including criticisms of SVB's mismanagement, the role of regulators, the speed of modern bank runs, the potential cost to other banks, and the accountability of bank executives.

Firstly, the article notes that SVB's management failed to keep pace with the bank's rapid expansion, leading to a misaligned risk model that did not reflect reality. The government bonds it bought with depositors' money tumbled in value as interest rates rose, but the bank appeared unconcerned. The bank recognized the problem belatedly and attempted to raise cash by selling bonds at a loss, which alarmed depositors and sparked a run on the bank.

Secondly, the article acknowledges that regulators had repeatedly warned the bank's managers about the risks it faced, but failed to order changes. The Fed was pursuing a light touch in bank regulation during this time, which frustrated some senators who called for more regulatory muscle.

Thirdly, the article emphasizes the speed at which the banks collapsed and the ability of modern bank runs to happen very fast.

Fourthly, the article suggests that the cost of making customers whole is expected to cost the deposit insurance fund billions of dollars, which will be paid for by a special assessment on other banks.

Finally, the article questions the role of bank executives and suggests that they should be held accountable for their actions. The government does not have the power to claw back compensation, but it can levy fines, order restitution, and prohibit those executives from working at other banks if wrongdoing is found.

Overall, the article provides a comprehensive overview of the key issues surrounding the collapse of SVB and its impact on the banking industry. However, it does not offer any radical critique of the banking system itself, which is responsible for creating the conditions that led to the collapse. The article seems to suggest that the solution lies in tighter regulation and greater accountability for bank executives, rather than a fundamental overhaul of the banking system to make it more equitable and sustainable. I would argue that only a revolutionary transformation of society can bring about the changes needed to create a banking system that works for the people, rather than for the profits of a wealthy elite.

[awkward-teabag]

Love (cannot emphasis how much sarcasm there is in that word) that an official Canadian government response to high cellphone rates is to switch carriers.

Switch it to what? We basically have three companies since one was allowed to eat the forth (with the government saying it wasn't anti-competition and the company eating the other pinky promising they wouldn't jack rates up). Even the smaller companies have to rent infrastructure from the Big Three so there's only so much they can do if that rent costs an arm and a leg.

And that's not touching on how many "small companies" are actually just subsidiaries of the Big Three. You may save $5 but you're still with Telus/Rogers/Bell.

Or that the actual small companies tend to have shit coverage because they don't have the infrastructure available to them and are prevented from getting it. Or their traffic is throttled in favour of the Big Three's customers. Or both.

Or that they're extremely regional thus aren't an option for a huge chunk of Canada's population.

We have no true options and the government has shown time and again that they're fine with monopolies, in multiple industries, and don't care when said monopolies jack up prices to make shareholders and the c-suite more money at the expense of everyone else. At most there will be a verbal slap on the wrist and a giftcard for $25 that people have to register for, for a decade and a half of price gouging.

It's not talked a whole lot about outside the country from what I've seen and heard but Canada is a country of monopolies. A handful of companies own nearly everything, every province has a family or two that owns a hell of a lot (Nova Scotia is basically owned by one family at this point), and our government ignores it. Even the branch that is supposed to be against monopolies is fine with mergers and takeovers in most cases.

Because, you know, the company said it totally wouldn't use consumers' lack of options to increase prices.

[hybridmindthoughtsreloaded]

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Keep what you need for bills in your bank account, but you're going to want to start keeping cash in a safe at home if you're not already. Kinda fucked if Bail-Ins happen and your only option to get paid by your employer is direct deposit. FDIC Bankers Discuss ‘Bail-Ins’ To Deal With Impending Market Collapse They're talking about financial crisis and their lack of faith in our banking system and how to keep the public from freaking out. "You don't want a huge run on the institutions, and, and they're going to be…I would be careful about the unintended consequences of starting to blast too much of this out in the general public.”

Full FDIC meeting here https://youtu.be/0PtULsOtI2o

[teathattast]

you and me are shining

in our separate places

i see your light up above

and i always like the taste

[lasseling]

Experts are warning that the U.S. government is secretly planning to freeze all American bank withdrawals in the coming months due to the imminent collapse of the U.S. dollar.

[dw-flagler]

funny how much victoria places squarely on the shoulders of tattletale. she COULD HAVE STOPPED THE ENDBRINGERS AT ANY TIME but she DIDN’T just so that leviathan could KILL MY FAMILY. honey you sound insane.

[mysharona1987]

[dreaminginthedeepsouth]

Max Gustafson

* * * *

LETTERS FROM AN AMERICAN

March 12, 2023

Heather Cox Richardson

At 6:15 this evening, Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and Federal Deposit Insurance Corporation (FDIC) Chairman Martin J. Gruenberg announced that Secretary Yellen has signed off on measures to enable the FDIC to fully protect everyone who had money in Silicon Valley Bank, Santa Clara, California, and Signature Bank, New York. They will have access to all of their money starting Monday, March 13. None of the losses associated with this resolution, the statement said, “will be borne by the taxpayer.”

But, it continued, “Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.”

The statement ended by assuring Americans that “the U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today's actions demonstrate our commitment to take the necessary steps to ensure that depositors' savings remain safe.”

It’s been quite a weekend.

On Friday, Silicon Valley Bank (SVB) failed in the largest bank failure since 2008. At the end of December 2022, SVB appears to have had about $209 billion in total assets and about $175 billion in deposits. This made SVB the sixteenth largest bank in the U.S., big in its sector but small compared with the more than $3 trillion JPMorgan Chase. This is the first bank failure of the Biden presidency (while Donald Trump Jr. tweeted that he had not heard of any bank failures during his father’s presidency, there were sixteen, eight of which happened before the pandemic). In fact, generally, a few banks fail every year; it is an oddity that none failed in 2021 or 2022.

The failure of SVB created shock waves for three reasons. First, SVB was the major bank for technology start-ups, so it involved much of a single sector of the economy. Second, only about $8 billion of the $173 billion worth of deposits in SVB were less than the $250,000 that the FDIC insures, meaning that the companies who had made those deposits might not get their money back quickly and thus might not be able to make payrolls, sparking a larger crisis. Third, there was concern that the problems that plagued SVB might cause other banks to fail, as well.

What seems to have happened, though, appears to be specific to SVB. Bloomberg’s Matt Levine explained it most clearly:

As the bank for start-ups, which have a lot of cash from investors and the initial public offering of stock, SVB had lots of deposits. But start-up companies don’t need much in the way of loans because they’ve just gotten so much cash and they don’t yet have fixed assets. So, rather than balancing deposits with loans that fluctuate with interest rates and thus keep a bank on an even keel, SVB’s directors took a gamble that the Federal Reserve would not raise interest rates. They invested in long-term Treasury bonds that paid better interest rates than short-term securities. But when, in fact, interest rates went up, the value of those long-term bonds sank.  

For most banks, higher interest rates are good news because they can charge more for loans. But for SVB, they hurt.

Then, because SVB concentrated on start-ups, they had another problem. Start-ups are also hurt by rising interest rates because they tend to promise to deliver returns in the long term, which is fine so long as interest rates stay steadily low, as they have been now for years. But as interest rates go up, investors tend to like faster returns than most start-ups can deliver. They take their money to places that are going to see returns sooner. For SVB, that meant their depositors began to need some of that money they had dumped into the bank and started to withdraw their deposits.

So SVB sold securities at a loss to cover those deposits. Other investors panicked as they saw SVB selling at a loss and losing deposits, and they, too, started yanking their money out of the bank, collapsing it. Banks that have a more diverse client base are less likely to lose everyone all at once.

The FDIC took control of the bank on Friday. On Sunday, regulators also shut down Signature Bank, based in New York, which was a major bank for the cryptocurrency industry. Another crypto-friendly bank, Silvergate, failed last week.

Congress created the FDIC under the Banking Act of 1933 to restore trust in the American banking system after more than a third of U.S. banks failed after the Great Crash of 1929, sparking runs on banks as depositors rushed to take out their money whenever rumors suggested a bank was in trouble, thus causing more failures. The FDIC is an independent agency that insures deposits, examines and supervises banks to make sure they’re healthy, and manages the fallout when they’re not. The FDIC is backed by the full faith and credit of the government, but it is not funded by the government. Member banks pay insurance dues to cover bank failures, and when that isn’t enough money, the FDIC can borrow from the federal government or issue debt.

Over the weekend, the crisis at SVB became a larger argument over the role of government in the protection of the economy. Tech leaders took to social media to insist that the government must cover all the deposits in the failed bank, not just the ones covered under FDIC. They warned that the companies whose deposits were uninsured would fail, taking down the rest of the economy with them.

Others noted that the very men who were arguing the government should protect all the depositors’ money, not just that protected under the FDIC, have been vocal in opposing both government regulation of their industry and government relief for student loan debt, suggesting that they hate government action…except for themselves. They also pointed out that in 2018, under Trump, Congress weakened government regulations for banks like SVB and that SVB’s president had been a leading advocate for weakening those regulations. Had those regulations been in place, they argue, SVB would have remained solvent.

It appears that Yellen, Powell, and Gruenberg, in consultation with the president (as required), concluded that the collapse of SVB and Signature Bank was a systemic threat to the nation’s whole financial system, or perhaps they concluded that the panic over that collapse—which is a different thing than the collapse itself—was a threat to the nation’s financial system. They apparently decided to backstop the banks to prevent more damage. But they are eager to remind people that they are not using taxpayer money to shore up a poorly managed bank.

Right now, this appears to leave us with two takeaways. The Biden administration had been considering tightening the banking regulations that were loosened under Trump, and it seems likely that the need for the federal government to step in to protect the depositors at SVB and Signature Bank will make it much harder for those opposed to regulation to keep that from happening. There will likely be increased pressure on the Biden administration to guard against helping out the wealthy and corporations rather than ordinary Americans.

And, perhaps even more important, the weekend of panic and fear over the collapse of just one major bank should make it clear that the Republicans’ threat to default on the U.S. debt, thus pulling the rug out from under the entire U.S. economy unless they get their way, is simply unthinkable.

LETTERS FROM AN AMERICAN

HEATHER COX RICHARDSON

[postpunkblunt]

[agentfascinateur]

11,983 minors and 710 babies under a year old killed by Israelis amid genocide.

#war on children

#facts

[palms-upturned]

Trying and failing to ignore how much worse I feel all the time than I used to and how badly I’m doing at taking care of myself and my environment and how well I used to be able to handle everything just a year or two ago compared to now is making me feel like my brain and body are both turning into toxic slutch

[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

[halfdeadwallfly]

catch me crying in the library bc i realized that my sibling deleted the pinterest board they made for me