Team Biden slings bank BS — but you can’t spin this debacle

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It’s a strange but sad spectacle that Joe Biden and company are trying to turn a mess at a Silicon Valley bank — and a crisis in the banking system — into a political victory.

Strange as BS getting worked up about the transitory nature of inflation, or how well they handled the dangerously chaotic pullout from Afghanistan.

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Sad because it underlines the utter stupidity of our political class as they face very serious issues regarding the banking system and economy that cannot be brushed aside.

Of course, the last word has yet to be written on the collapse of SVB, Signature Bank, the near-collapse of First Republic Bank, and whatever else lies in the paper until this column.


But one thing I do know for sure is that the banking crisis demands leadership from Washington – stuff that is so clearly lacking when it is so desperately needed.

In 2008 we had Treasury Secretary Hank Paulson working day and night doing many fires and leveling with Congress and the American people about the seriousness of the situation. Today we have Sleepy Joe Biden, his equally Sleepy Treasury Secretary Janet Yellen declaring that bank bailouts are not really bailouts because taxpayers are not involved.

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In fact?

Treasury Secretary Janet Yellen reportedly said that bank bailouts aren’t really bailouts because they don’t involve taxpayers.
AFP via Getty Images

The government handed SVB a blank check to cover all of its depositors, mainly lefty Bay Area venture capitalists. This means that all accounts are covered by FDIC insurance, even those above the $250,000 limit.

The money, he says, is coming directly from the big banks that contribute to the FDIC insurance pool. OK, but if the banks are financing the fund, they will pass those costs on to depositors. That means everyone with a bank account, which means almost every American taxpayer, will be making all those wealthy VC friends.


not too ‘stressful’

Biden and Yellen say that undermining the banking law known as Dodd-Frank meant that mid-sized banks like SVB were spared so-called stress tests that would have exposed its vulnerabilities. They ignore (or most likely have no clue) the dirty little secret that such exams are known in banking circles as “feather tests” because even large risk-management-challenged basket cases like Citigroup Seem to pass them.

Another Whopper: Biden and Yellen want us to believe that the San Francisco Fed had no idea what was happening in its backyard with a bank that boomed in the three years before it sank.

Again, don’t believe me. SVB’s CEO was on the board of his local Fed Bank. Everyone who did should have known what SVB was about to do. And by many accounts they were too busy making sure the banks they regulate met ESG standards and adopting so-called social-justice measures to take care of SVB’s apparent risk-taking. One of my sources worked at SVB until about a year ago, and here’s how he described the bank’s business model: “Lending to VC-backed companies, asset-backed credit lines to PE funds, and a few more.” . It should never have been given FDIC insurance. This was not some place that gave loans to construction companies and took money from your aunt.”

Biden said the dilution of Dodd-Frank means the SVB is spared so-called stress tests that would reveal its vulnerabilities.
Bloomberg via Getty Images

Yes, FDIC insurance was supposed to protect small depositors like your aunt, not dice-rolling tech millionaires who banked at SVB and knew it was a risky business. Those tech millionaires (like the SF Fed) either knew or should have known that a hiccup in the economy like rising rates could doom this bank and probably others.

As I first reported last week, the big banks are now worried about another medium-sized bank in San Francisco named First Republic about to succumb to market forces. (See a pattern here?) He pumped in $30 billion to stabilize the bank, at least for a while.

This is because I have also heard that the bank may be sold to one of the bailout participants in the coming days. The reason they’re doing this isn’t necessarily because they think First Republic is a great business – rather they’re deeply concerned about an economic crisis that policy makers have no clue how to handle.

Remember 2008?

The bill comes on the heels of the dire economic policies of the past two-plus years: wildly unprecedented spending by the Biden administration to turn America into a quasi-socialist European welfare state and money printing by the Fed to do so.

Every top bank official I talk to says the current crisis in the financial system could be something on the scale of what went down in 2008. for job.

Or as one told me: “Where’s Hank Paulson when you need him?”

Team Biden slings bank BS — but you can’t spin this debacle

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