03-15-2023 - The Silicon Valley Bank Failure, My Anti-Republican Rant, and Some local Election Information for my Community Neighbors

 

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 (Before I get into the following article about the Silicon Valley Bank failure, let me quickly remind readers how banks operate.  Banks take in money by using the funds sitting in people’s savings and checking accounts and charging for services such as credit cards.  Same goes for their business clients. They use this money to provide mortgages and other loans, profiting from the interest they charge.  They try to keep their money working all of the time to make more money.  They start off with money borrowed from the Treasury Department at what is called the prime rate, and continue to borrow from the government in that manner, the interest rate of which they juice up  and pass on to those to whom they make loans. Because most of their money is tied up in such loans, they do have to keep some on hand to carry on day-to-day business. Such money is supposedly invested in conservative instruments like Treasury bonds and other very conservative bonds.  They never have enough on hand to satisfy all those whose savings and checking accounts they have, at one time, so how they invest what they have is important, at least from a liquidity standpoint, should the need arise to sell their bonds to have the funds with which to operate. This is where regulations come in. You probably knew all of this but I felt obligated to mention it.  Please now proceed to read on.)

Why the Silicon Valley Bank Failed 

Many observers of Silicon Valley Bank’s failure note that the 2018 loosening of banking regulations that had been imposed after the 2008 crash paved the way for that bank’s troubles. One of the lobbyists for this loosening was Greg Becker, who until Friday was the person in charge of Silicon Valley Bank. The best article on this that I have seen appeared in Newsweek Magazine and is reproduced here from that magazine’s website. 

Republican apologists for the bank, including the otherwise respectable Wall Street Journal, have been saying that the inclusion of a few members of minority groups on Silicon Valley Bank’s Board, and the shifting of some investments to bonds issued by environmentally and socially concerned companies caused its failure.  That is pure bullshit, provided by the Journal to give cover to its FoxNews cousin (they share the same ownership) giving them something about which to bellow.

Very simply, Silicon Valley invested heavily in Treasury bonds right before the Federal Reserve started raising the interest rates on the bonds that banks purchase, reducing the value of those bonds already on the market that were paying less interest, including the ones held by Silicon Valley Bank. They found that when they needed the funds invested in those bonds to operate, they had lost their liquidity because of the lower interest rate they paid, and could not be easily sold, and as a result, they could no longer do day-to-day business.  The bank did not do anything malicious. All it did was invest stupidly, not paying attention to the risks the bond market always poses.  

Just as there are doctors and lawyers and financial advisors who aren't as bright as we (or they) think they are, there are dumb bankers too. Perhaps that is why they all wear conservative dark suits.  See the last sentence of the article.  I've colored it pink.  It tells the whole story. They just were not paying attention.  Here is the Newsweek article:

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Trump Era Roll Back of Bank Regulations Resurfaces Amid SVB Collapse (by Thomas Kika 3/11/23 -1:20 P.M. EST)

   “Amid the collapse of Silicon Valley Bank (SVB), some commentators have claimed a Trump-era rollback of financial regulations may have contributed to the situation.

   While largely unknown outside California's Silicon Valley tech corridor, SVB has for decades been a go-to financial institution for the country's technology and health start-ups. One of the 20 biggest banks in the United States, it had over $200 billion in assets by the end of last year, according to CNN.

   As of Friday, however, SVB was left in freefall as clients began a run on the institution, spurred on by higher interest rates and other factors, resulting in a spiraling chain reaction that has threatened to sink the institution and leave its customers in financial jeopardy.

   In the fallout of Friday's run on the bank, some reports noted that a rollback of banking regulations by former President Donald Trump might have weakened SVB's ability to manage risks associated with interest rates. In 2018, according to The New York Times, Trump signed a bill that axed regulatory requirements for regional banks with less than $250 billion in assets.

   Under the new rules, such institutions no longer had to submit to "stress testing" by the Federal Reserve and were no longer required to keep a certain amount of cash on hand to protect against the effects of financial shocks, the newspaper reported.

   The Times noted in its report that the bill was championed by SVB CEO Greg Becker. Becker had pressed lawmakers in Congress to lessen regulation that placed higher scrutiny on certain banks, claiming that SVB had a "low risk profile of our activities and business model." By 2018, his bank had spent roughly $500,000 to lobby for the changes that Trump ultimately signed into law, according to The Lever, an investigative news outlet.

   The rules rolled back by the bill were first introduced in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act, a sweeping reform law signed by former President Barack Obama to address issues in the financial sector in the wake of the 2007-2008 global financial crisis and the Great Recession. As noted in a tweet on Saturday from businessman and former Obama economic adviser Robert Wolf, the Dodd-Frank Act originally required banks with over $50 billion in assets to submit to stress testing.

   As of Saturday afternoon, Trump has not commented on SVB. Newsweek reached out to his communications team via email for comment.

   In the wake of the run, California regulators shut down SVB and turned over control of it to the Federal Deposit Insurance Corporation (FDIC). It has since been reported that the bank had not employed a chief risk officer in the months leading up to Friday's collapse and had not insured roughly 90 percent of its deposits.” 

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It is pretty clear to me that Republican distaste for regulation of businesses, including banking and the financial marketplace, is the cause of the failure of Silicon Valley Bank, and the other banks which have gone under during the past few days for the same reasons.  This is another reason that those who believe in democracy should never, ever, vote for a party like today’s Republican Party, that does not work in the interests of the people, but exists only to serve its major donors.

President Biden assures the nation that no one will suffer because of these bank failures.  Not so!  Between the Federal Reserve Bank and the Federal Deposit Insurance Corporation (FDIC), no customer of these banks will be hurt, it is claimed, even though there is no legal basis for bailing them out (above the FDIC's $250,000 limit).  Of course, that means that ultimately, it will be the taxpayer who pays to put Humpty-Dumpty together again, just as they did to resolve the 2008 financial crisis, caused by the callous packaging of the mortgage debt of those who couldn’t afford to make their mortgage payments, bundled together into a marketable instrument (they call that 'collaterizing') with a fancy name and a red ribbon.  

Irresponsible behavior, be it intentional or just stupid, will be encouraged when there is the expectation that the government will step in to bail them out in protecting the larger economy.  

Government Regulation is the only answer. and voting for Republicans is never the way to get there.

JL

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This Started Sanely and Turned into a Rant

Most newspapers, and liberals throughout the country, just don't get it. They see rights being trampled by State legislatures, of which Florida provides a prime example. 

But they forget that Florida voters overwhelmingly turned Republican last year. Rather than explaining away this by calling Florida voters ignorant, gullible, or even stupid for consistently voting for candidates whose positions are usually against their interests, WE SHOULD RECOGNIZE THAT FLORIDIANS MAY ACTUALLY LIKE IT THAT WAY!

They consistently prove at the ballot box that they are against the equality mentioned in the Declaration of Independence and are driven by the hatreds and fears of what equality would bring about, and are very comfortable with undemocratic forms of government, guns, political Christianity, and look forward to week-end football violence. That's why DeSantis will certainly get away with his book banning, his gay-bashing, his objections to American history’s truths, and his firing of the State Prosecutor in Tampa for political reasons, even if these matters go to the highest courts of Florida and the Nation. It's no coincidence that the defeated former president and the late Rush Limbaugh felt at home in Florida. Ugh.

Limbaugh and the 45th president

In Florida, voters support a Republican party whose policies are patterned after Hungary’s supposedly democratic, but actually authoritarian, Prime Minister, Viktor Orban.  Compare what Orban says with what DeSantis says. You won’t see much difference.  Floridians have legitimately elected a governor, large majorities in both houses of the State legislature, two senators and a disproportionately large majority of the State's representatives in Congress from the right wing of the Republican party.  They do that because either (1) they do not trust the equality which true democracy brings and fear it, or (2) they don't know the facts and support agendas that are not in their best interests. 

In my opinion, most Florida Republican voters are in the second category.  They just don’t know the facts.  Not many read daily newspapers any longer so they are dependent upon TV and to a lesser extent, the internet for news. Thus far the First Amendment protects these sources of misinformation, but perhaps the imminent downfall of Fox News in the Dominion litigation, and the disappearance of its liars from TV, will start the ball rolling in the other direction and lies will be recognized as lies. (See how Shakespeare approached this problem in this blog’s previous posting.  Note how he told the truth, just to set things straight, before he proceeded to lie.)  

As for those who honestly do not believe the Declaration of Independence’s words that “all men are created equal,” or even that all men should have the opportunity to achieve that equality, all we can do is hope that some day they will cease being mentally asleep and wake up to reality.  

That requires them to stop bashing Critical Race Theory and efforts toward Diversity, Equity and Inclusion, as if they were some subversive un-American conspiracy.  That is precisely why those on the right attack public education, devote great efforts to pulling books from the shelves, condemning ‘waking up,’ and thusly try to convert young people to the idea that becoming ‘woke’ is something evil.  Those right-wingers who send me 'news' articles from totally irresponsible sources are among the mentally asleep and need to be ‘woke.'  How to do this without violating their 'rights' is a challenge.  The Chinese do it with 're-education' camps but we are not into that kind of thing.

I hope that what appears to be going on in Florida is not happening in the rest of the United States.  That would be terrible.  And that's my rant!

JL                  

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If you don't live in the Cascade Lakes community in sunny Florida, you can skip the following piece.  Just forward the blog to someone. 

Thoughts After Candidates' Night

For those of the blog’s followers who reside in Cascade Lakes, here are this blogger’s thoughts on the upcoming election of three Directors for its Board.  I listened to all of them speak and answer questions at the community’s Candidates’ night, at which I was honored to serve as timekeeper for the speakers.

Three incumbent Board members are each running for two-year seats on the Board.  Their positions are based on what they claim to be the present Board’s accomplishments.  As with the case with anyone involved in any level of governance, if one looks closely enough at them, flaws can be found in any candidate.  Whether residents consider such flaws to be sufficient reason to not vote for a candidate is a decision they will have to personally make, balancing it with the Board’s supposed accomplishments and how the voter might view those accomplishments.    

There are five other candidates, one of whom has a strong record of experience serving on the community’s Committees, in its Clubs, and in the management of the community running back more than twenty years. The other four, despite their personal attributes and sincerity, have no prior experience whatsoever on Cascade Lakes’ Committees or in the management of the community. 

I have already filled out my ballot.  If any of you are interested in how I voted, you can ask me privately.

JL                  

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