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The point being that people in positions of great responsibility must be hired on competence alone, utterly without regard to race, not only for the protection of the public, but because discrimination in employment based on race is illegal, and because hiring based on race makes everyone rightly suspicious of the competence of minorities in positions of power.
One of America’s leading audit firms, KPMG, is defending giving both Silicon Valley Bank (SVB) and Signature Bank a clean bill of health just days before they collapsed last weekend.
The banks imploded when customers rushed to withdraw their savings in panic-fueled bank runs.
The two banks collapsed shortly after their respective annual reports were certified by KPMG.
KPMG is one of the so-called “Big Four” accounting firms.
Why do those seven words matter so much?
The reason that depositors started pulling money from Silicon Valley Bank last Thursday wasn’t because they suddenly woke up and decided Silicon Valley had a weird-looking logo. It was because Silicon Valley had lost huge amounts of money buying low-yielding Treasury notes and mortgage-backed securities.
Bonds carry two kinds of risk, credit and interest rate risk. (Bearer bonds carry a third kind of risk, that they will be stolen, ala Die Hard. But bearer bonds don’t really exist anymore.)
Credit risk is obvious - if a company goes bankrupt and can’t pay back a bond, it’s worthless, give or take. Interest rate risk is more subtle. Bond prices rise as interest rates fall and fall as rates rise.
For a person who owns a bond and just plans to hold it until it matures, interest rate risk doesn’t matter much.
But for a bank, interest rate risk matters hugely.
A bank takes money from depositors and uses it to make loans or buy bonds (or other, more esoteric financial instruments). If the depositors want their money back, the bank has to give it to them. If it has to get that money by selling bonds when their value has dropped because interest rates have risen, it will lose money. A bond for which it paid $100 might only be worth $90.
But not to the Federal Reserve.
The Federal Reserve just told the world that it will pretend that a bond which is really only worth $90 is actually worth $100 - “par.” That’s what “these assets will be valued at par” means.
This program is similar to the way the Fed started to bail out banks in 2008, when it bought mortgage-backed securities that no one else would. That program, like this one, was supposed to be a temporary response to a crisis that threatened to destroy much of the banking system.
How’d that work out for us? Before the banking crisis of 2008, the Fed had under $1 trillion in assets. In bailing out banks that fall, it more than doubled the size of its balance sheet - to over $2 trillion.
Today the Federal Reserve has over $8 trillion in assets - loans and bonds that it has taken from banks (and since Covid, from companies directly). It is a larger and more crucial backstop to the banking system than it was 15 years ago.
For a long time, all that extra help didn’t seem to matter. Yes, interest rates were artificially low, mightily benefitting to the richest people in the world - on Wall Street and in Silicon Valley. But inflation was also low.
In 2021, though, the bill came due. Inflation suddenly spiked, and it has stayed high since.
To get inflation under control, the Federal Reserve has had no choice but to raise interest rates - and even more importantly, to reduce the size of its balance sheet and thus the amount of money in the banking system.
But the interest rate increases have caused a massive problem for banks. Over the last decade, they grew addicted to paying nothing - as in zero percent interest - on more deposits than they knew what to do with. They parked the money in Treasury notes and other low-risk bonds.
Low credit risk, that is. Those bonds had interest-rate risk like all the others. And when the Fed began to raise interest rates, they lost value. Some banks did a better job managing that risk than others, and - coming back to last week - Silicon Valley Bank did a particularly bad job.
As of last week, the bonds that Silicon Valley held were worth about $16 billion less than it had paid for them.
Coincidentally, Silicon Valley’s entire equity capital base - all the money it had to backstop depositors against all losses - was also about $16 billion. Thus Silicon Valley was effectively broke before the run on its deposits started.
The only question was who would get out whole and who wouldn’t. ...
What happens next? Where and how does all this end? I don't know. But it WILL end. Eventually these excesses will have to be unwound, gradually or suddenly. When they are, you can bet that all the people who have made fortunes from cheap cash for the last 15 years will be reaching into someone else’s pockets to save themselves - just as they did over the weekend.
And the only pockets left will be the federal government’s.
In other words, yours.
As if all the operations around finance in this land were not already unsound and degenerate enough, the alleged president just cancelled moral hazard altogether. It’s now official: from here forward there will be no consequences for banking fraud, poor decision-making, fiduciary recklessness, self-dealing, or any of the other risks attendant to the handling of other people’s money. Bailing out the Silicon Valley Bank and Barney Frank’s deluxe Signature Bank means that the government will now have to bail out every bank every time something goes wrong.
The trouble, of course, is that the government doesn’t have the means to bail out every bank. Its only resort is to ask the Federal Reserve to summon new money from a magic ether where the illusion of wealth is conjured to paper-over ever greater fissures in the splintering matrix of racketeering that America has become. That will quickly translate into US dollars losing value, that is, accelerating inflation, which is how nature punishes you when your government lies and pretends that it has a bad situation well-in-hand. ...
The disorder may go on for quite a while, but eventually the survivors will synergetically fix their circumstances themselves working in-step with the emergent mandates of reality. Having lived through a reality-optional period of history, it will come as an ecstatic shock to learn that the world requires us to pay attention to what is really happening and to act accordingly. We’ll find ways to get food, make some things work, and shine some lights in the darkness, if perhaps not by means we’re familiar with now.
In the meantime, expect more disordering tragi-comedy from the “Joe Biden” led psychotic regime ruling over us with its drag queen commissars, lawless Lawfare vandals, race hustlers, agents provocateurs, informers, censors, prosecutors, inquisitors, jailers, and propagandists — the worst collection of imbeciles, grifters, and villains ever assembled into political party.
SVB Went Woke, Then Broke, Then Got a Bailout
Americans can’t afford food, but leftist and Chinese companies get bailed out.
March 17, 2023 by Daniel Greenfield
Americans can’t afford food
Eating processed garbage does not count as food.
Sounds like UBS bailout is not happening, on to plan B, destroy the Euro!
UBS to buy CS for 2 billion, a fraction of its 8 billion close on Friday. UBS and CS shareholders will be shafted as no vote allowed. Probably all in all a positive development as some losses, bad spec money and debt will be flushed out.
The former chair of the Federal Deposit Insurance Corporation (FDIC), Sheila Bair, has criticized the Biden administration’s “bailout” of Silicon Valley Bank (SVB).
Bair denounced the Biden admin’s decision to guarantee all deposits at the failed SVB, labeling the move an “overreaction.”
Bair made the comments during a recent appearance on “The Washington Post Live” series.
She stated that insuring all deposits at SVB and at the failed Signature Bank was an unnecessary “bailout.”
Bair warned that the move would be paid for by extra fees on all banks, even well-run community and regional banks.
The former FDIC chief also threw cold water on proposals to waive the current $250,000 deposit insurance lid and for the FDIC to provide unlimited guarantees for all deposits across the entire $17.5 trillion U.S. banking sector.
“We need market discipline to complement the supervisory process,” Bair said.
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Oh yeah, and to once again blow away the bullshit about everyone being insured, read the article about how some depositors will have to pray dividend sales will someday return their deposits to them.
For some fun search bank run and see what some of the top images are.