Of the many things to note in the fallout of the weekend bank(s) collapse is that SVB had been selling off its assets at a loss to cover deposits, and had been doing this for months.
Bloomberg notes “that all the containment measures taken so far won’t solve the core problem of some banks” — that rising interest rates are hurting their balance sheets.
You see, Powell in all his glory was so busy trying to knee-cap American Labor on behalf of plutocrats —who do not want to pay their workers what they deserve— and blaming Labor for the inflation that the plutocrats themselves caused by price gouging, raised interest rates such that long term bonds were underwater and no longer liquid. SVB was selling them at a loss. The regulators should have seen this.
So, yeah, we got banking problems, but the problems are at the Federal Reserve. That split mandate to control inflation and promote employment is not working for us.
UPDATE 1: Sen. Professor Warren in the NYTimes has some suggestions:
These threats never should have been allowed to materialize. We must act to prevent them from occurring again.
First, Congress, the White House and banking regulators should reverse the dangerous bank deregulation of the Trump era. Repealing the 2018 legislation that weakened the rules for banks like S.V.B. must be an immediate priority for Congress. Similarly, Mr. Powell’s disastrous “tailoring” of these rules has put our economy at risk, and it needs to end — now.
Bank regulators must also take a careful look under the hood at our financial institutions to see where other dangers may be lurking. Elected officials, including the Senate Republicans who, just days before S.V.B.’s collapse, pressed Mr. Powell to stave off higher capital standards, must now demand stronger — not weaker — oversight.
Second, regulators should reform deposit insurance so that both during this crisis and in the future, businesses that are trying to make payroll and otherwise conduct ordinary financial transactions are fully covered — while ensuring the cost of protecting outsized depositors is borne by those financial institutions that pose the greatest risk. Never again should large companies with billions in unsecured deposits expect, or receive, free support from the government.
Finally, if we are to deter this kind of risky behavior from happening again, it’s critical that those responsible not be rewarded. S.V.B. and Signature shareholders will be wiped out, but their executives must also be held accountable. Mr. Becker of S.V.B. took home $9.9 million in compensation last year, including a $1.5 million bonus for boosting bank profitability — and its riskiness. Joseph DePaolo of Signature got $8.6 million. We should claw all of that back, along with bonuses for other executives at these banks. Where needed, Congress should empower regulators to recover pay and bonuses. Prosecutors and regulators should investigate whether any executives engaged in insider trading or broke other civil or criminal laws.
These bank failures were entirely avoidable if Congress and the Fed had done their jobs and kept strong banking regulations in place since 2018. S.V.B. and Signature are gone, and now Washington must act quickly to prevent the next crisis.
Mrs BDR sent me aa link to this yeaterday which seems particularly appropriate
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Also David Dayen correctly lays blame where it belongs: https://prospect.org/economy/2023-03-13-silicon-valley-bank-bailout-deregulation/
and the incomparable Katie Porter (Next Senator
of my heartCalifornia, sorrynotsorry Barbara Lee!)
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I do love Rep. Lee, though, too. I felt I should say so.
Rep. Schiff is fine, but I’d like to see Porter or Lee in that Senate seat. I think they have more fire.
(I>And sorrynotsorry Adam $chiff.
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Gonna be really shallow here but as a possessor of facial foliage, my response to him is “Make up your mind, either grow one or shave!” Every time I’ve seen him lately he’s got a serious one-day “stereotypical noir bad guy” shadow.
Also he immediately hopped on the “omg gotta bail ’em all out” train here. We have enough BigBank lackeys in the senate…
Besides, imagine the kind of greedy ceo beat-downs Senator Professor Warren and Senator Katie “Don’t make me pull out ny whiteboard, mister!” Porter would apply while tag-teaming…
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Reblogged this on Politicians Are Poody Heads.