Crisis In The Clouds

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Note #1: Behind the green door is a post about Kanye West, a post about the nuts and bolts of this bank crisis and the Sunday podcast. You can sign up for a green door account at SubscribeStar or Substack.

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One of the underappreciated properties of managerialism is how the managerial elite begin to look like the elite of a bureaucracy. The people at the top of the various pillars of power begin to think like the people in charge of the Post Office in that they care primarily for the power and privilege’s of their power center. We are getting a glimpse of this with the evolving financial crisis that was set in motion by the collapse of Silicon Valley Bank last week.

The bank started to run into trouble when the Federal Reserve started raising rates in order to combat inflation. Rates have been near zero for so long that it became the new normal, leading to  activity that otherwise would never get financed. When money is cheap, the appetite for risk-taking is high. When money has been cheap for a generation, risk-taking is no longer seen as risk-taking. It is simply how things are done, until money stops being cheap, which is what is happening now.

Despite the bizarre devotion to the cult of diversity by the people running SVB, the bank itself does not appear to have been poorly managed. To date no violations of the law have been suggested. Instead, the bank was the victim of changing conditions that suddenly made their model unworkable. In the world of banking, when your model becomes unworkable it means you are running out of money. A bank without money is an abandoned building.

SVB’s clients were mostly startups, tech companies and their corresponding venture capital firms. The bank helped facilitate funding for new companies and existing companies that are growing. Private investors kept their money at the bank and the firms they were bankrolling also kept their money at the bank. Because borrowing rates were near zero, the bank could lend to the customers of their preferred customers, the private investors, at attractive rates.

When the Federal Reserve started raising interest rates to combat inflation, everything based on cheap money was thrown into crisis. Those private investors suddenly had more attractive options than startups. Those startups suddenly found it hard to borrow money at tolerable rates. The startups then started to draw down on their cash reserves and the private investors began to move their money to more profitable places, thus creating a cash crisis for the bank.

That is the second problem, the very serious problem, that has broad implications for the entire system. To raise cash, Silicon Valley Bank first elected to sell assets like treasuries and mortgage backed securities. In the near zero interest rate world, these were as good as cash. In the time of rising rates, these very low yield instruments are not in demand, so they had to be heavily discounted. SVB had to take a two billion dollar write down when they sold these assets.

Since every bank in America, possibly the Western world, holds treasuries and long dated mortgage backed securities, it means every bank has the same problem as this bank in that they have assets with a book value above market value. Some estimates suggest there is a trillion dollar gap in the system due to this problem. In 2008 when the system came close to collapse, the problem was about a trillion and half, so you can see why the bankers are in a panic.

This is where we see the bureaucratic nature of the system. Pournelle’s Iron Law of Bureaucracy states that in any bureaucratic organization there will be two kinds of people: First, there will be those who are devoted to the goals of the organization. Secondly, there will be those dedicated to the organization itself. The Iron Law states that in every case the second group will gain and keep control of the organization. It will write the rules, and control promotions within the organization.

That is what we see with the bankers. The people running the system care only about the system, not the alleged goals of the system. No one ever asked if near zero interest rates was good for the economy. They do not care. What mattered is what is good for the financial system and the people running it. When inflation promised to become dangerous to their position in the system they raised rates, but now that raising rates is threatening the system, they will stop raising rates.

We are about to have another banking crisis because no one in the system bothers questioning what happens in the system, outside of those things that threaten the position of those atop the system. Cheap money underwriting you-go-girl capitalism makes them feel good, so they do it. If the polices warp the overall economy and puts the middle-class at risk, they do not care. All that matters is the internal dynamics of the system and how it impacts the people in it.

Replicate this silo mentality across the empire and you can easily see why the ruling class appears to be out of touch with reality. The reason is their reality is not our reality, but the artificial reality of the system. Right now, banking regulators are telling each other they are heroes for working the weekend to stem a bank run, while the rest of us see another trillion getting printed up and handed to the greed-heads who have been looting the economy for generations.

Of course, none of these silos of power are independent. The political silo will get in on the act when Joe Biden mumbles something about it this morning. Expect to hear lots of statements beginning with “we did…” from various political operatives, claiming that they are the real heroes of this crisis. The media will adopt their usual bunker mentality, defending the people who control their scripts. Here is an early example of what we will see this week from the content creators.

What all this means for the rest of us is the grocery bill will rocket up this year as the bankers are bathed in free money to save the system. We will get new narratives from the Cloud People about how the food bill is a conspiracy theory or maybe it is the work of the Chinese, who are the new bogeyman. The people at the top will sleep well knowing they have once against defended the system from the barbarians of reality who threatened to crash through the gates.

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175 thoughts on “Crisis In The Clouds”

  1. ” Imagine surviving an end of empire crisis with the productive portion of society seething with rage at the fanatics who brought about this disaster.”

    – The Great White-Out is coming. One week where all Whites will stay home from work. We’ll finally get to see if diversity is our strength – or not…

  2. Pingback: Crisis in the Clouds | American Freedom News

  3. One of the many obnoxious spots infesting my YouTube feed is one featuring close-ups of a bunch of you-go-xirls with purple hair, nose rings, and other modern xirl affectations at the wheel of high performance cars. As they bang aggressively through the gears they are saying various action movie cliches like “game on!”. I have no idea what the commercial is for but somehow it seems to me to sum up the whole mentality of the current ruling class.

    Because it doesn’t matter what these useless little sluts are doing with these cars, what game it is that’s now “on”, or how having them redlining the engines is supposed to achieve anything. What matters is that we all understand that when they wreck the cars we are all on the hook to buy them new ones so they can keep playing the game – whatever that game is.

    Regardless of what the SVB fallout is we can know for certain that the bottom will fall out of EVERYTHING if people actually start asking what the game is and why there were not better people than Suzy Purple-Hair and Jenny Nose-Ring to play it.

    • Speaking of xirls, one of my alumni mags just ran what may have been the ultimate Xirl Science story.

      I will try to find a link so I can share the pain with you guys.

    • Izurieta’s top two LinkedIn post likes include:

      “Valentines Day was extra special today joining Black Women on boards and the future generation of Spellman Students to ring the opening bell …”

      So posing as champions of black women replaces white men and gets you to the opening bell ceremony. Nice!

      Second one:

      “Advice I would give a young black man who is a recent college graduate that has no clue about Corporate America (aka – my younger …)”

      Can’t handle the responsibility of managing risk, so replace that duty with Negro worship. Order some more guillotines. We’re going to need them.

      • Olson is a retired Air Force colonel and neocon. Zero experience with risk management.

        • Lots of stupidity can be indulged as long as it is backstopped. If everything tanks next week, two-week vacations for African Divinity Week go bye-bye.

    • I think I have stated the following in previous posts. ( I stole it fair and square).

      “When a woman is placed in positions of importance in large corporations, the smart money has left the building.”

  5. Russ and Pam Martens had a pretty damning article on SVB today https://tinyurl.com/56dzjvm2 pointing out that $150 billion of its $175 billion in deposits were uninsured so it wasn’t strictly operating in the spirit of its charter as a
    federally insured bank. It’s worth a read.

    • You’re under the illusion that rules are applicable to places like that.

      The rules are for the chimps who live in the dirt.

      • Chimps was supposed to be chumps.

        We all know chimps don’t have to follow the rules.

  6. I know you guys are not going to like me for this. But I have to say it anyways.

    I noticed that our host is aware of Pournelle’s Iron Law of Bureaucracy. Add to that the fact that bureaucracy is inherently dysfunctional and that the larger the bureaucracy, the more dysfunctional it is. I will also state that all large scale human institutions are bureaucratic in nature. If you accept all of this as true, what does it say about all political philosophies that are based on the efficacy of large scale human institutions?

    • Great question, Abelard and it reminds me of one of the best arguments for libertarianism: big organizations, like big government, always invite corruption, so to avoid corruption, make the government as small as possible.

      The problem is that, in practice, no one but a fraction of white men is at all persuaded by this small government argument. Everyone else on the planet is wired to tribe up and oppress the other tribes.

      And although big government invites corruption, it can still oppress you very effectively.

      Therefore, a big government composed of your tribe may become corrupt, but, if it is of your tribe, it will protect you from the other tribes that always want to oppress you.

      • Having lived through out Asia for 10 years, I am well aware of the tribal nature of humanity. In short, the entire Eurasian-African land masses are tribal in nature.

        Family-clan-tribe is how it works.

        Nevertheless, I remain libertarian for my own personal objectives in life. Kind of a variant of Harry Browne’s “How I Found Freedom in an Unfree World”.

  7. i have come to the disturbing conclusion that the old way of thinning out the bureaucracy with war every few generations is the only viable way to keep it under control.

  8. SVB had been gossiped about for a couple of months, when people realized a risky amount of liabilities were tied up in long term treasuries. Great for profits but bad for risk – something banks are supposed to be sensitive to. Technically SVB didn’t do anything “wrong” yet people were nervous. KPMG gave them a bill of good health just a couple of weeks ago.

    So the feds did act decisively to axe the less-than-bankerly free-spirits running the joint (even though this is a state bank), quickly box in the losses, and make the customers whole. Will they now be obligated, by precedent, to continue such bailouts in the future, even for state banks? And notice also that KPMG completely skates away unscathed as if their bogus reports were accurate.

    The upside is less pain (for the time being); the down side is more moral hazard. The ugly reality is that there is a cost to moving away from the free-money regime and Americans refuse to get stuck with the bill. Inflation is left as the only way to work off all the new Covid-stimulus liquidity.

    It seems like about half of recent startups revolve around making life more “manageable” in ways that normal people (adults) used to rely on themselves. The workplaces resemble daycare. When a billion dollar startup like BetterUp has a hand-holding mission to make employees feel better about themselves, it’s time to cut the funny-money cord.

    “Something for nothing and the chicks for free”

    • This chaos now is why you had COVID in 2020. The question is, what plan did they form up to handle this while everyone was locked down?

    • “KPMG gave them a bill of good health just a couple of weeks ago”.

      You mean to say a mega accounting firm was intentionally deceptive?!

      Say it ain’t so!

  9. Isn’t the Fed setting a terrible precedent by backing all deposits at SVB?

    Isn’t this just a stealthy way to initiate nationalization of the entire banking system?

    • If they did nationalize the banking system, how would we notice the difference?

      • They have nationalized the banking system or haven’t you noticed they use the term National Bank in their names

    • Now let’s go easy on Howard. Howard, the government has been doing this for many decades, under different guises. I don’t follow it closely any more, but the FED has several trillions of alleged “assets” it’s accumulated during the last few major financial crises. When they “buy” an asset, the money is created out of thin air, somebody is made whole, and the FED (which isn’t even techncially the US Government) now owns paper of dubious worth. That is only one way the well-connected are bailed out, but far from the only one.

    • “Too Big To Fail” now is “Too Connected To Fail.” A White-owned bank in West Texas with energy sector clients would not receive this treatment, needless to say, regardless of its size.

  10. The Z-man is wrong here. SVB was incompetently run. SVB failed because they did essentially the same things as WaMu where they paid out “on the come” while expecting to balance the books afterwards.

    https://market-ticker.org/akcs-www?post=248301

    What is more remarkable is that all of the senior managers, aside from the diversity “risk manager” lady, are alumni of the financial institutions that collapsed in 2008. You would expect they would have learned from their experiences. But they clearly did not as they made the same mistakes as before.

  11. ‘How did you go bankrupt? Two ways. Gradually, then suddenly.’

    keeps ping-ponging around my skull for some reason……….

  12. The collapse of SVB is an indicator of just how incompetent and clueless the woke elites really are about basic, fundamental, simple things. You would think that nobody would be stupid enough to tie up money in long-term securities at low interest rates and leave themselves in a situation where they’d get caught short on cash, but you’d be wrong.

    About ten years ago I had a conversation with a mulatto faculty colleague at a shithole college where I worked part-time. She was a tenured lecturer in economics. I made a comment that I was concerned that the Fed’s commitment to ZIRP would create an artificial inducement for the equities market, leading to a bubble in the market. Her face went from quizzical to beet red, then she put on a transparently fake smile and said “Oh, I’m not worried! I think everything will be fine!” and walked away.

    It was evident that she had No. Fucking. Clue. what I was talking about.

    These are the type of people in control now. They know absolutely nothing of substance, their real “job” is to announce to the world how queer, transgender, black, female, pansexual, and oppressed they are. They have no idea how to fly the airplane, wire the electricity, run the banking system, build an internal combustion engine, pave the roads, or where the shit goes when they flush the toilet.

    Worse, as the Fed’s bailout of SVB indicates (and the government’s bailout of GM back in 2009) they will pay no penalty for their stupidity, the government will come to the rescue, and they will double down on blaming the evil white man and the lack of “diversity” for the fuck-ups.

    This cannot end well.

    • There is a whole generation of investors who cannot imagine investing in anything other than “tech.” I have seen them with my own eyes. Their lack of historical perspective is breathtaking.

      They are pretty much all going to end up broke. Quite a few of them had accounts at SVB. Because it’s a shiny new thing, not a boring old thing. And it had a name that’s associated with slick and sexy. “Cutting edge.” Which kind of sums up their view of what makes for a good investment.

    • Agreed, but two things to add.

      1. This is a feature of the power flowing to a hereditary class of bureaucrats. Look at Fauci, guy was in power directing health policy and research since the early 1980s. That sort of centralized bureaucratic power makes a Palace not a Market economy, and like all Palace economies a very fragile one poised to create massive problems.

      2. Enemies of the bureaucrats outside (China particularl) will push on the open door of Woke Managerial craziness. So expect to see the answer to the bailout to be “ban more White men” or reparations on a massive scale. In the bureaucracy the feedback is more devotion to wokeness, not less, nor handing real problems since we have not had in the West a serious adversary since at least 1989 and possibly earlier. Meanwhile our real enemies now particularly China knows well how to push on ever more Woke craziness and how effective that is in destroying a society. [Note over the weekend we had a simulated nuclear attack on St. Petersburg (Russia not Florida, for now … ) and Kalingrad, with B-52s. Not the mark of sane individuals but crazed dueling bureaucrats in a Regency. I have no doubt Chinese influence is pushing ever more woke insanity to push collapse ever more rapidly]

      For doubters I point to the State of California now pushing Reparations at 500K per black person (and sure to go up in competition with SF’s $5 million per), no requirement for long-term residency, at more than three times the current annual budget in cost. There is no limit to craziness when the feedback is just other bureaucrats signaling to each other like fireflies in the dark. Stuff in California goes national now very quick.

      3. The “solution” is massive inflation pushed onto the people which is going to make collapse a lot quicker. The Fed can no longer raise rates, Dem Donors in Silicon Valley get hurt, which means inflation which means skilled labor either strikes and gets bigger pay raises or more likely goes Soviet and looks to private side gigs to make the daily food intake and energy bills. This includes all the defense contractors who have very powerful but very complex systems that require people with more skills than just some dude “floating over the Rio Grande” or bum-rushing at El Paso.

      The supply of skilled labor is inelastic. “Diverse” and girl-boss types can’t really do much other than preen for the cameras. The Soviets had their own version of this collapse and now it is our turn. Collapse is not coming, its already here.

      • And when it does, if one is prepared, they will survive. I’m not just talking about bags of rice and beans, I mean mentally.

        The FED is going to bail out banks in the current go round. But what if when, not if, it stops?

        People will be incapable of functioning.

        I’m troubled by the thought of my kids and grandkids dealing with the coming shit storm.

        I’m more troubled by the thought of them having to deal with society as it is today.

  13. Depositors will be made whole, SVB shareholders get two in the chest and one in the head. This can only mean one thing…

    Members of congress were blindsided by events and are not *Y*E*T* fully loaded up with far out of the money call options. Next time, they’ll be prepared and the real bailout party can commence.

    • You’re partly off script, I fear. If engineered, the purpose of such regional/medium small bank collapses is, to choose an ulterior motive which I should think would be obvious, is so that the big banks can buy up the assets of the insolvent juniors on the cheap. HSBC just bought the UK unit of SVB for one British Pound (source: ft.com)

      It works much the same here in the Colonies. Insured depositors get out whole, over the limit ones maybe, depending upon whom was in the good graces of the Palace Economy. Less favored are left to twist in the wind (e.g. Lehman). But the collapse doesn’t have to be engineered. To be sure there are always nefarious deeds being planned. Just the same, I’m pretty sure that not all untoward events are hatched by a diabolical group of billionaires in a bunker somewhere in the Swiss Alps. But yeah, congress critters or anyone else in the know often is well positioned just in time to pick up some easy money on the side.

    • Washington, D.C. is a charming city with much landscaping and architecture dating back to the 19th century. It is abundantly supplied with parks with tall, stout trees. Elsewhere, there are sturdy lamp posts.

  15. I imagine a scene many months from now where Jay Powell is giving a speech to the nation intended to show confidence in a financial system that by then is deeply shaken. As he talks the market ticks up and up…and then a single bead of sweat rolls down the side of his face, like that scene in Total Recall, and the market crashes to the floor. I think that’s how it’s going to go down.

    • And as the banks fail, anybody believe this bullshit?

      “The TreasuryDirect application will be temporarily unavailable from approximately 12:30 PM ET to approximately 4:00 PM ET on Monday, March 13th for light scheduled system maintenance. We apologize for any inconvenience this may cause.”

      https://www.treasurydirect.gov/log-in/

    • Oddball question – when did media voices change to what we hear today? They seem most distinct in the 40s and 50s. I remember that when I was a boy in the 80s. But now I listen to broadcasts from 30 years back and am shocked at the difference.

      • Not sure exactly what you’re asking, but that guy had a smoker’s voice, and there aren’t a whole lot of smokers left in the media class.

      • That’s interesting. I’m a fan of old time radio shows, and if you binge listen to an old radio series, you can notice a distinct change in the content, commercials and public service announcements after the onset of WWII.

        It’s quite distinct, you can hear the precursors to what we now call “woke” starting to creep into the public dialog somewhere around 1941. Probably a sufficiently diligent listener could pinpoint the exact day we headed down the road to perdition.

        • My thoughts too … for quite a long time.

          Centralization of economic control;

          Nationwide mandating of manufacturing and employment standards (defense industries the vehicle);

          “Do it for the cause …. Defeat evil”;

          How much of critical materials you could use; what and how much you could eat;

          Where you could go; when and if you could talk on your Ham radio; could you keep your own big pile of scrap metal.

          Hell; just look at what Roosevelt did to the Pres / CEO (?) of Montgomery Wards.

          …. to say nothing of Henry Kaiser

          I had a neighbor back in the 80s whose family owned a garage in NorCal through the 40s. He talked about how the govt agent came by to inspect fuel and tire inventories and sales. He said if you had excess tires, or were hoarding them, the agent would set them on a stump and cut the beads.

          I think our nascent ruling class got a good, clear look, and liked what they saw.

          • ….. and of course, the “progressive” attack was finally gaining a solid foothold, and they’d gotten their people ensconced in out institutions.

          • That’s likely a true story. I’ve read bits and pieces of WW II economic history. Yes there was rationing and other controls, in the name of the war effort. But please don’t be under any illusions that there were not black markets. I don’t know the extent. For example, tires were rationed because rubber was genuinely scarce. On the other hand, gasoline was plentiful but rationed. But there was quite a business in counterfeit ration books and so forth. And go figure how much more law-abiding America was back then. In fact, if the quote in one book was accurate, President Truman, upon ending the price controls and rationing, specfically said that there had been widespread flouting of those laws, and he feared that it might extend to other laws.

            Anyway, one more real world lesson: in our decadent 21st century world, that government agent is more likley to be black marketing stuff on the side, although it’s quite possible he will confiscate from one guy and deliver the goods to a favored client.

        • My wife and I used to listen to a Sunday evening old-time radio broadcast, and I really enjoyed both the broadcast and the history behind it all.

          Its difficult to articulate what I hear in the voices through various eras. Its not merely accent but how information is presented. To my ear it is authoritative, which would make sense. Certainly government experts were always presented as competent, there for your benefit.

          This seems to distinguish American propaganda from propaganda pushed by other countries. Surely it is more sophisticated. It is more subtle, it can be difficult to notice. It has been embedded into other forms of entertainment, making it almost omnipresent.

      • I read something about how those old announcers were chosen for an accent that was closest to a median American accent. I think those guys came from somewhere in the Midwest.

      • I have recently noticed that female commercial voice-over talent often has this high-pitched little girl voice. It’s not vocal fry like the Kardashians, but just high pitched and childlike and I’m not sure if it’s a thing or just me noticing but it’s really getting on my nerves.

      • Homogenization. Music has the same problem. Numerous studies have demonstrated how contemporary music varies little between genres now.

        I occasionally come across cable news broadcasts at places like hotels and airports. It’s almost comical how neutered and homogenized they are. The on air talent is disfigured through chemical and physical cosmetic alteration…Caesar Flickermans.

  17. Re: the “GirlBoss” thing

    On a side note, can we all please pray that the imminent collapse also takes with it all of the “influencers” who make their money doing eye shadow tutorials on YouTube? Pretty Please?

    And as mush as I like the guy on a personal level, PewDiePie should have never been a thing. Becoming a multimillionaire by videoing yourself playing MineCraft should not be a thing. It just shouldn’t.

    • “And as mush as I like the guy on a personal level, PewDiePie should have never been a thing. Becoming a multimillionaire by videoing yourself playing MineCraft should not be a thing. It just shouldn’t.”

      I assume you’re not in your teens. Do you remember the tech bubble in the 90’s? How is the current one any different? Yinz guys should know by now what kind of “activity” bubbles provide. You’ve lived thru enough. Nothing was corrected from 2008 except that every year we ignore it the bill gets bigger and bigger. 0% interest rates and the government picking winners and losers is how you get people making a living “doing” nothing on the internet.

      • Pets.com says “hi!” Yeah, this is just another fall down the flight of the same stairs.

      • Oh I’m in my 50s.

        Yes I remember the 90s tech bubble, and the subsequent early-2000s recession.

        The more things change, the more they remain the same.

    • The lists I’ve seen of SVB’s big depositors, I see nothing irreplaceable, unique, vital, or systemically important. Roku, Tiktok, DoorDash, AirBnb, Plaid, Snapchat…….

      If collectively they are systemically important, that really says something about the system doesn’t it

      • “If collectively they are systemically important, that really says something about the system doesn’t it”

        Individually they’re not, but collectively they make up the society, which is a lie, so failure is not an option. Everything we all hate here, “woke, fake diversity, politically correctness” is all driven by the people who refused to resign or be fired in 2008 attempting to hold on to power with 0% money and QE. Once that all stops, woke will too, mark my words. That saying “shit got real” will be the phrase of the decade.

    • “Becoming a multimillionaire by videoing yourself playing MineCraft should not be a thing. It just shouldn’t.”

      Yeah, every white young person these days wants to be in media. In other words, they’re interested in getting rich quick by being a dumb ass internet personality or porn star preying on other desperate dumb asses. And sadly, some will succeed. They are essentially drug dealers; getting money for giving out poison.

      There’s no choice but to bring in immigrants because they might be the only ones left who know how to fix a car or a sink.

      This is another strike in my book against so-called free markets. The people, the culture, have to be protected against itself at some points. Especially in the realm of mass communication which we understand very well today to have enormous power bordering on brainwashing. This is why it used to be understood that such things like porn are NOT “speech”, but rather obscenity. Today, the most hideous and hateful porn (and violent left wing speech) runs rampant like water, but a conservatard who mildly suggests a teensy bit of border enforcement or somesuch will get locked up for hate speech because *that* speech is violence!

      • I mean, he’s a likable guy with a sharp sense of humor. He’d probably be fun to hang out with if I were 20 years younger.

        But that’s about it. Nothing more.

    • I’m seeing on Twitter that it turns out “Girl Boss’s” husband, who she says “works in manufacturing”, is a senior executive in a steel company, (not a machinist or welder, duh!) and that she left a job making $230k/year to squander other people’s investment money (so that she could still feel like the woman who used to have a high status job before she started having kids), while driving around in her mini-van doing the soccer mom thing.

      Honestly dudes, boomers aren’t the problem.

    • My wife is a lovely normie con, who’s mostly apolitical if anything. She likes watching the makeup tutorial videos to look good for me, which I appreciate. It’s not all bad!

      • I’m not saying there is anything particularly “wrong” with makeup tutorial videos. Just like there is nothing wrong with “how to adjust the carburetor on your 68 VW Beetle” tutorials.

        I’m just not in favor of someone making 7 digit annual incomes from YT advertisements and Covergirl™️ sponsorships for uploading 15 minute videos once a week.

        Basically, I’m no commie, but I’m not an apologist for the failings of consumerism either. We could do better.

        I mean, what would be wrong with that same makeup “influencer” earning a $200k/yr salary? Do you think that (almost certainly) nobody who 5 years ago was working at a nail salon for 15/hour would have turned down a 200k/yr salary if that was the best she/or “he” could ever hope for?

        If I were king, I would figure out a way to reward people with talent and good ideas with incomes commensurate to the value of their talent and ideas.

        I used to be a libertarian and would have applauded people who were getting rich off of the internet. It’s just all gone too far. Too much. Nobody is pumping the brakes, and honest, hard working people who actually produce/build/fix things for a living are getting poorer.

    • The worst are the YouTube channels that are basically bad remakes of good YT content that are really meant to showcase some hot, tight young thing.

      A channel like, “Everyday Driver,” will put out a quality review video on say, a Subaru WRX, and get 500k views.

      A knockoff WRX review video with some hot young blonde going, “Lol, it’s blue!!!” will easily get 5 million views.

      • Now, my recent favorites have been the well-endowed females wearing very little, who are doing mechanical, yard, garden, (etc) work. Some of them really do seem like they know what they are doing. Ask me how I know…

  18. The Feds will fully guarantee depositors in failed Silicon Valley Bank & Signature Bank, and unveiled a new, bottomless facility to ensure all banks can access cash on favorable terms, should they see deposit runs of their own.
    To a more simple minded person such as myself – it all seems to be robbing Peter to pay Paul, or privatizing the profit and socializing the loss. Take your pick (or perhaps they’re opposite ends of the same stick).

    • The funding mechanism appears to be the Fed buying these banks depressed treasuries and mortgage backed securities at par, which transfers their losses over to the Fed..The Fed is already underwater on its purchases from the last 12 years, so apparently it can be insolvent indefinitely…

  19. We all know that the west is in long term, slow motion collapse, and has been since at least 1914. At the same time, I’m always mindful that seeing signs of sudden collapse, or predicting sudden collapse, can be a product of wishful thinking. Thus I remain open to the possibility that the fed printer backstopping everything can remain functional for decades. However, the confluence of this with the regime’s promotion and celebration of everything deviant, perverted, and wicked sure does make it look like the collapse is coming sooner. Wherein it’s not so much the finances that are failing, but the morality that is failing, and sometimes that just happens to manifest financially. When no one is allowed to lose, when weakness and fragility are rewarded, then people become weaker and more fragile.

  20. Some people are trying to pin this on Peter Thiel. They want him jailed for doing something “irresponsible.” I wasn’t aware that the market had these Emily Post-like rules of etiquette. The desperation is strong.

    • NBC News has a story up blaming it on a “Trump banking law” that was passed in 2018

      Didn’t take a real fortune teller to see that one coming

      • Yes, Bloomberg also. Meanwhile, no less than Barney Frank was on the Board of Signature Bank. Seriously.

  21. Privatize the profits and socialize the costs. Same old story. . .I have to believe there is some bottom where the system finally dies.

    • fakeemail – Having posted prior to reading newer comments, seems I just regurgitated your post. Mea culpa.

      • ‘sal good man! The principle is a key one. It explains how “free market” principles of open borders and off-shoring have brought total ruin and cannot uphold any standards of culture, education, aesthetics, safety, you name it.

  22. Each and every day, this world looks more and more like The Hunger Games. Orwell got a lot of things right, but the future AI historians will concede a lot to Suzanne Collins as well.

    • Memebro: “the future AI historians will concede a lot to Suzanne Collins as well”

      For any bachelor Giga-Chad playahz chez Z, here’s a before & after of Lindsey Michaelides:

      https://i.imgur.com/1oo8MQe.png

      Y’all married men need to be keeping dem hoz barefoot & pregnant in da kitchen.

      In the immortal words of Willie Nelson, “Daddies, don’t let your girls grow up to be Venture Crapitalists”.

      Mrs Michaelides is gonna be so much happier after her business goes bankrupt.

      She’ll be able to devote 110% of her time & energy to her children.

      [Although I’m sure she’ll be breathing down the necks of all the other Moms on the PTA board.]

  24. The latest bailout allows banks to use their “assets” as collateral with the Fed at 100% par value. This bailout will of course cost WAY more than $25 billion and they know it. Add a couple zeros to that. Also, this continues our long march, since the mid 80’s, of centralizing risk. Risk cannot be destroyed or extinguished unless the underlying debt is extinguished. It has to go somewhere, and it goes to the Fed. We can’t tolerate even a slight liquidation of bad assets. Now consider the government’s debt. What will down this country is not the implosion of trillions in debt, but the attempted rescue of all that debt. the attempt to make everyone whole. The eventual termination point of this risk, the end of the garden hose, is the Forex market. It will show up in the dollar, in its price and value.

    Hardly a week goes by without various handshake agreements between governments on the other side of the world. Last week it was Iran and Saudi Arabia. What if a big motivation for this is the fear of a teetering dollar system and the need for a unified front during a future dollar crisis? I think it is.

    • “Whole.”

      Heh.

      Who knew the collapsed dollar would bring about the lions with the lambs thing?

    • Interesting how the rules “change” to suit the needs of our current rulers. Anyone remember the Reagan era and the Savings and Loan collapse? The collapse was initiated (IIRC) when the administration insisted on “mark to market”. The S&L’s insisted that the loans be carried/valued at pre recession pricing—as they were sure to return to previous value as the recession lifted. The administration won (of course) and the S&L’s had a “fire sale” to dump these assets and increase their *required* reserves. Many S&L’s went belly up.

      I remember such because there were all sorts of bargains here to be had in land purchases—many parcels selling for 1/2 to 1/3 of their previous value. Of course, that was for the folk who had cash, and a lot of it. So the rich got richer as usual. I was happy to have employment at the University and make the mortgage.

      In short, exactly the opposite of what you’ve described above with “par value” valuation. The only question is who among the super rich will make out like the bandits they are.

      • There is some logic to it I suppose. The Fed loans money against the book value of the loans, and theoretically it’s insane as the underwater bank would just be getting more underwater and on paper the Fed (FDIC?) just ends up owning the bad paper. However, the economic crunch brought about by the bad paper should lead to lower interest rates and the bad paper becomes tradable again.

  25. Related: it was reported that HULU had demand deposits of $450++ MILLION at SVB.

    The HULU CFO is a Swiss native with a Harvard MBA and early experience with Boston Consulting, followed by some damn thing or other at Daimler, then to Disney/HULU.

    If the report ($450 MILLION) is true, this guy should be shot at dawn for First Degree Gross Stupidity with Potential Demolition of the Company as an additional charge.

    • All deposits are being covered…shockingly to no one. The $250k cap has been waived. Look at who the fortunate ones are. Mark Cuban caught my eye.

      • The rumor is that while the bank was insolvent they still had enough assets to make the uninsured deposits whole (but, my guess would be, not the FDIC at the same time).

        • I suggested that we have a new rule for banks. If the regulators have to take control of the bank, the bank executives are immediately executed. When the Feds arrive, they first take the officers to the roof and throw them off the roof. It would require just one failed bank to solve the problem.

          • Seconded

            Though i myself am fond of how North Korea tied bad people to flak cannons and then fired.

      • Is there any particular reason it wouldn’t be “better” to buy short term treasuries rather than keeping the money in a bank account? One assumes they don’t need 500 million Dollars for payroll and other expenses on an ongoing basis. If they aren’t going to need half the money for another 6 months, why not hold that money which won’t be needed for 6 months in a 6 month treasury?

  26. “Despite the bizarre devotion to the cult of diversity by the people running SVB, the bank itself does not appear to have been poorly managed. ”

    Hell, I saw this coming and posted about it here several times. If I, a complete ignoramus in the subject saw this coming, how could they not have saw this coming?

    Falling RE prices were always a risk as were rising interest rates. I didn’t know or believe that a run on the bank would be the cause that exposed the risk.

    I would assume the fed is now going to step in and buy the 30 year low yield treasuries from the banks at full value.

  27. Z,

    Thanks for the link to the Strongsuit lady’s Twitter thread. I searched it and found this: https://www.strongsuit.co/

    First rule of business: If you cannot explain to me clearly and concisely what your business model is, I will probably not do business with you. As near as I can suss out, this lady’s business may be an electronic planner/project map for people who have never heard of:

    – A calendar
    – A day planner
    – Paper and a pencil or pen

    Newsflash: I have multiple calendars on my phone, tablet, and laptop where I can set reminders to myself of future items to plan ahead. I also, get this, make notes for myself in a notebook My Lovely 🥰 Mrs. bought me for the princely sum of $1.99. My Lovely Lady has a paper day planner she uses to plan out meetings. Alas, we are not harried or stressed out Millennials or Z’ers so we’re not their target market.

    I do feel for this lady but welcome to entrepreneurship ma’am.

    • What a bizarre product. A “girl boss” puts a baby shower on her calendar and the program spams her with gift, game and other suggestions. Can’t she just Google that stuff or look on social media when it is convenient for her? Who would pay for this?

      • “A “girl boss” puts a baby shower on her calendar and the program spams her with gift, game and other suggestions.”

        If what you’re saying is true, that’s the icing AND the big pink frosted flower 🌹 atop the cake. Because EVERYONE wants more spam in their inbox, amiright?

        And there’s this concept in computing of cookies where if your girl boss searches anything remotely related to baby or wedding showers EVERY ad app on EVERY website she visits will throw out ads for baby and wedding related products.

        Believe you me sir, EVERY woman knows when her wedding day is going to be. SHE set it. 😏

      • The strongest marketing pitch to professional-class women is to frame a product as “curated,” taking decisions out of her hands (because she’s too busy to think right now!), expert-censored, etc.

        I’m sure Roissy explained it before he got curated off the internet.

      • The strongest marketing pitch to professional-class women is to frame a product as “curated,” taking decisions out of her hands (because she’s too busy to think right now!), expert-censored, etc.

        I’m sure Roissy explained it before he got curated off the internet.

    • Probably some sort of exercise which is a front to get access to data, which they can then monetize. That’s my default “This business is stupid and makes no sense” assumption anymore.

      • Valley Lurker: ‘Probably some sort of exercise which is a front to get access to data, which they can then monetize. That’s my default “This business is stupid and makes no sense” assumption anymore.’

        What I’m seeing everywhere is what I call, “Interceptionism”.

        Everyone is trying to intercept your searches [for products, advice, services, etc] so as to replace the true source you were trying to find with, instead, a fake source of their own making.

        As an example, when I search for taxi cab drivers [or tow truck companies] in my locality, the majority of the hits I get are from pajeet streetsh!tters halfway around the world, in the punjab, setting up FAKE taxi cab companies [ostensibly in the United States, but ackshually nonexistent], to intercept my call for a taxi, in order to skim off a cut of the action before they call the ackshual bricks-n-mortar taxi cab company [or tow truck company] to be their subcontractors on the gig.

        It’s endemic now: Fake websites on top of fake websites on top of fake websites, trying to keep you from getting to the true bricks & mortar source which you seek, and attempting to force you into surrendering a cut of the action to them.

        Effectively it’s cyber-extortion [especially for older folks, who can’t make heads or tails of the insanity].

        Pro-Tip: Even the old AAA American Automobile Association is in on the racket now; if your car breaks down, in the middle of nowhere, all you get from AAA is a phone bank of middlemen & middlewomen who MIGHT be able to find a tow truck to send to you, but there are no ackshual AAA contracts with bricks-n-mortar tow truck companies guaranteeing that a tow truck will make its way to you; AAA can only offer an attempt to find a tow truck company which might be able to send a tow truck to you.

        After one such experience, we walked away from AAA forever, and will never look back.

    • This “simple” Ohio housewife struggling to find her way through the scary unknown world of business has an MBA from Duke and was a McKinsey consultant for 10 years, give me a break.

  28. Powell has been under tremendous pressure now for almost 10 months but has remained firm. I don’t take it as a given at all he will not raise rates one or two more times. We’ll know next week. The clincher were the inflation numbers less than two weeks ago.

    As for the mortgage-backed securities, despite rate hikes people remain employed and able to pay. Once that dynamic changes, the domino effect will be swift and sharp. Underneath the Senate Banking Committee’s ignorant demagoguery last week was a palpable fear. This may become a crisis that has to go to waste.

    While you are correct about the balance book trillion deficit of today vs. the 1.5 trillion on 2008, even with inflation adjusted dollars the security now is jaw-droppingly overvalued compared to then given the ability to buy (vs. theoretical demand) is far less. Additionally, the investment houses are far more deeply into real estate today. The bang-on effects could be far worse this go-round.

    • Depends on what KIND of “mortgage” backs those securities. Those little (and not little) shopping centers which used to have retail tenants? How about the office buildings now at 50% or less occupancy due to ‘remote work’?

      This ain’t over yet, albeit there will be a pause.

      • No doubt. Residential has offset commercial since ’20, which has kept REIT’s, for example, resilient as investments and lender ledgers blacker than warranted. That backstop is about to go. Even moving Juan and Peng into empty office parks won’t help much.

    • Three possible scenarios I see:

      1. Powell is in cahoots with the rest of them to bring it all down (with all depositors being made whole this one now looks less likely)

      2. Powell is now going to start cutting rates

      3. They will do whatever they have to do to make Powell, or whoever replaces him, start cutting rates

      • Powell’s target has been the Eurodollar and that doesn’t change; he’d be very happy to have it crash. That means keep increasing the rates.

        The idiots managing SVB are collateral damage.

      • Jeffrey Zoar: “They will do whatever they have to do to make Powell, or whoever replaces him, start cutting rates”

        That’s precisely what I’ve been sensing in Janet Yellen’s behavior: Under the Strong Money policy of Jerome Powell, the various financial scams of the Bronze Age Death Cultists are collapsing left & right, and the Bronze Age Death Cult is looking at billions upon billions [possibly even trillions] of dollars in losses if they can’t get Weak Money back in a hurry.

        As I’ve been telling y’all bros, PRAY for the physical health & safety of Jerome Powell.

        To the best of muh knowledge, Jerome Powell is the only man in government who is fighting for us now.

        And the Bronze Age Death Cult has a lengthy history of physically assassinating anyone who gets in their way [Abraham Lincoln, William McKinley, Huey Long, George Patton, James Forrestal, Joseph McCarthy, JFK, Lee Harvey Oswald, the entire Romanov family, etc etc etc].

        The outcome of this question of Strong Money versus Weak Money, and the squealing of the bronze age death cult lassoed-pig, as it gets dragged towards the barbeque, could very well be the historical “singularity” upon which the future of the entire world will pivot.

        Pray for the physical health & safety [and the moral courage] of Jerome Powell.

        • Whatever his motivations, those of us paying attention years ago pointed out that the Fed is effectively trapped. Raising rates risks collapsing the economy because free money has been a thing for too long. The current generation of borrowers don’t understand it.

          The residential housing market slowed dramatically in May because rates hit about 5%.

          5%.

          My first home mortgage in 1994 was a 6% ARM which was considered a good deal back then.

          Between the Feds having to make debt payments, the National Association of Realtors and the Homebuilders, car makers, and Student Loans, even these pittance raises in rates are a death trap.

          In the other direction is the spiraling energy-driven (supply side) inflation which higher rates can’t stop, and lower rates will compound.

          The Fed is out of bullets.

          Powell has been trying to spark a small recession for a year now without much success.

        • Are you and I watching the same “Powell”?

          The guy who let ZIRP fester into dangerous speculation territory for basically every asset class for years? (see real estate for an example!)

          The guy who could’ve responded well over a year ago to start QT? Don’t have any idea why you have any faith in this person.

    • “Additionally, the investment houses are far more deeply into real estate today.”

      Real estate is being used as un-defaultable banks… as in stores of wealth, rather than the lending banks where the usury happens. Once the pirates make their privatized profits at socialized risk, they need a hole to stick it in where it’ll be safe from their cronies. An RE market crash will only happen when the government stops socializing the pirates’ risks, because that’s when the pirates will need to dig up their buried chests of hard assets… although you’ll hear media-amplified screams of pain at every downtick in valuation.

      Not that those investment properties are actually worth what they’re listed at. I’ve spent this winter in Kommiefornia being amused at the plight of finance pirates who tried to live in their fancy investment homes. “Nobody told us we’re get snowed in if we moved next door to a ski resort! Why did I pay $5mil for this? Rescue me, my victims!”

  29. Oh man. I’ve got some long running benchmarking happening this morning. So, why not follow all the links in today’s article? That “you-go-girl” capitalism link is amazing. What a moan-fest. No wonder boys can’t become men, and men are increasingly hostile to this system. If that was your mom, how could you learn how to be a man from that? And do you think the man who married that is much of a man to provide an example to his womb traumatized spawn?

    I mean even the decision making of that women is ridiculous. We were struggling and frazzled with raising a family. So, I got pregnant and decided to do a tech startup to help people who are frazzled and struggling with time management while raising kids.

    Could you imagine the VCs dealing with this ditz? You would think they would connect the dots and at least force her to hire a product manager who exhibits good time management and decision making skills before writing a check. In a better time, with better men, she would make her pitch and nobody would have had to say a word to see the insanity and total lack of self awareness in that crazy b****. She would leave the room, some looks would be exchanged, and some guys would bust a hearty chuckle. Then they would give themselves the rest of the day off to have some beers and a bunch of laughs at her expense. Instead they cut her a check.

    You know, accepting less and having more time might make you a bit less frazzled honey. But, you know, that is probably too obvious. Technology baby!

    • Right off the bat if this is the site: https://www.strongsuit.co/

      The fact that they are using the phrase “We are your employee’s home life management partner freeing up their mind so they never feel like they have to sacrifice their best selves at work or at home.” should be a warning sign. 🚨

      “You know, accepting less and having more time might make you a bit less frazzled honey.”

      Why don’t you just throttle back and focus on your four kids? Nobody is going to remember your startup. Your children will remember mom being around for them growing up.

      • Ha! Ha! Ha! Anybody who uses the tropes like, “we allow you to be your best self”, “we empower you to show up as your authentic self” … …

        I mean. We used to call people trying to be important in this way what they were – useless eaters who could go effff themselves. They would go and work the sandwich shop. But, they decided to import Jose and Miguel to do the useful work they used to do instead of doing harm.

        The easy money enables them to write, “business plans”, that are nothing more than confessions of utter stupidity.

        I was in Charleston recently, and white people do all the jobs there – the occasional black person in a menial job doing useful and valuable work to the best of their ability. It was like a paradise. I am sure it will be ruined soon enough. In any case, a sane society would have her work the diner part time in her home town where she could be of service, make some spare coin and be nice to her neighbors while she spent most of her time raising healthy children.

        Nope. The US of Participation Trophies needs her to be a CEO now. So, put another leech on the patient and draw a little more life out of it.

        • “we empower you to show up as your authentic self”

          What if your authentic self is an @sshole? 🤣

          • Right. We all know what it really means though. In the once healthy-ish world we were told, “Son, you need to show up as a man.”

            What it really means is, “You need to accept hiring and working with and being ruled by feminized people who can claim your very presence is oppressive. So, you, white guy, be a shell of your real self and accept your role in this feminized world of vibrancy where you are last in line and degraded.”

        • I was in Charleston recently, and white people do all the jobs
          —
          I’ve attended a handful of conferences over the last few years all they’ve all been the same: an army of brown people tending to a group of White people. I’m not sure who thought that was a good idea…

        • This is just like all the diversity crap – “we need people of diverse backgrounds and colors and life experiences to bring their voices to the table”. No, dips***, we need people who show up for work on time and do their damn job and get things done right, the first time.

    • ‘What a moan-fest. No wonder boys can’t become men, and men are increasingly hostile to this system.’

      That’s the mammy gorrilly in the closet of New Amerika. Men are fleeing from feminist cultures that hate and criminalize them.

      The system has been 100 percent gynocentric since the Seventies. Long ago America handed over the reins to its daughters, and told its sons to fuck off and oh btw, man up and marry my slut when she’s 32.

      This banking problem cannot be fixed by financial instruments, because in displacing men and boys from the system, and plugging-in women and girls, disaster inevitably follows. Tweak the numbers all you want you cannot invert the order of God and of His created nature and expect success.

      Women are not men no matter how much daughter and daughter-daddy want it to be so. No matter how much propaganda the puppet-masters saturate us with. But fear not! The implosion of Western civilization is, assuredly, not enough to budge the nations from their gynarchies of failure. At least we find stability in that.

      Want to succeed and prosper as a nation? Stop despising God the Father. Let men be men and don’t let women be them. Because they will try to any chance they get. See Genesis. No not the band.

      • You say: We should have picked our own cotton.

        I say: He never should have eaten the apple.

        We are not the same.

        • No, I say don’t listen to women, and hold them accountable for their transgressions. Instead of letting empowered princesses run everything and then expressing shock when it inevitably crumbles.

          Then nobody ever offers you the apple and the cuckfest never commences. Don’t know what you are going on about with cotton picking.

  30. “SVB’s clients were mostly startups, tech companies and their corresponding venture capital firms.”

    I wonder if it’s a coincidence Silicon Valley set it off or a reflection of high tech as the endpoint of capital accumulation. Post-human future at the fringe. Not just free money, but free value provided by autonomous, uncomplaining, ‘slave’ machines— maybe even immortality. It’s a madhouse!

    All borrowed against a human future, of course. Back from the insane edge, I’d like to think they don’t pull it off again, but the slavishness of the people in the face of their obvious destruction is well-established.

    At any rate, pain is weakness leaving the body. Individuals, society, and civ can clean up or die. We’ll see what happens.

  31. The Alchemists didn’t live to see the digital, fiat printing press. Rates were not and are not zero, they were and are negative thanks to inflation. The rates still haven’t been raised to the rate of inflation.

    That article you linked to is just sad. The partisan, schoolyard pissing contest approach to politics was tired and old even in the 80s. The pro-victim, anti-white narrative and the Trump Derangement Syndrome has been so pervasive for the past 13 years I forgot that used to be the level of infantalization and degeneracy prevalent in, “journalism.”

    My favorite part were the stories linked at the bottom. When MSN is pumping articles stating Nikki Haley is the, “Perfect Candidate”, you have to laugh. Then, you realize that the GOP is putting forward a candidate that is perfect for MSN and its primary audience. Then, you wonder if you should take the blue pill, and watch Badatts, badattts, badatts buh-buh-buh-buh-Ben ummkay Shapiro promote Chris Rock as the champion of anti-wokeism and join the comments section of 1.7 million civ nats groveling at the feet of an Israeli psy-op agent and worshipping Rock, then click on his link to sign your kids up for Dennis Prager’s anti-woke schooling option for your kids, then hop over and watch Jordan Peterson break down and cry after flying home from ass kissing the ring of the Prime Minister of his boss’ home country.

    Man. We can’t go out like this. We won’t. The center cannot hold when the rot and corruption is this deep. Non-organic eggs are $8 and organic $11. Organic egg chickens are laying $1 bills. History’s rhyme with Weimar has far out-Weimar’d Weimar on the cultural front. Will the post Weimar rhyme out Weimar the original Weimar?

  32. Yep, the entire financial system and those attached to it over the past fifteen odd years have become totally addicted to ultra low interest rates. It’s so embedded now that it looks like the terminal rate ceiling has been reached. The question is, will the funny money parties start up again? I kind of doubt it anytime soon, as a couple of bank failures (at least) are like turds in the punch bowl. On another note, will Jim crapper maintain his “guru” status (LOL) after shilling SVB a month ago?

    • Proving once again, that if one is a serious investor, do the EXACT opposite of what that carney barker says.

      It’s actually pretty amazing.

      • For the sake of convenience, there are now ETFs that allow one to go long with Cramer or short against him.

    • I didn’t realize Cramer shilled SVB. It is not surprising. They say a bubble is not over until the promoters are fully discredited. Cramer got caught on video admitting he was scamming the rubes. He cried some crocodile tears and went right back to his prime time grift.

      I doubt anything will happen to him. For all we know, he is being rewarded for providing a cover so his boys could make an exit while the public, pumped by Cramer, placed the bid on their exit.

      At some point, some intelligent person will put together video series that narrate the oligarch charlatans and brazen crooks like Cramer and the anger will boil. With any luck, someone in his security detail will be someone whose grand parents took his bait and lost it all – twice in the past 30 years.

    • This all goes back to Volcker. We’ve been in a falling interest rate environment almost my entire life. Almost everyone working in the financial system has spent their entire career in a mostly falling rates environment. How else can you possibly explain bankers buying 30 year US bonds at less than 1% interest? It’s not like they didn’t know that if rates went up, the value of those bonds if they needed to sell them would go way down. They either thought they would never need to sell them or that interest rates would never rise over the next 30 years.

      • Partly because “bank reform” forced the banks to buy USTs and/or US agency debt when they ran out of good loans to make.

  33. OK, so wake up and smell the coffee. The SVB failure is a harbinger of the coming collapse. And that is no trivial thing. The stalwarts of “muddle-through” and bury-your-head-in-the-sand mentality are soon going to get the proverbial 2×4 upside the head reality check. You can be in Stage 4 cancer, and the doc can prescribe some palliative pain meds that make it seem less worse for a while, but you gonna die nonetheless, and probably sooner than you think. And as bad as all this sounds, it’s actually what’s needed to get normie off the couch.

    The US government has been living on borrowed time for more than half a century and banking on being able to fleece Russia (and other countries) of its natural resources as a means of keeping the plates spinning a little longer. Well, Russia ain’t losing in Ukraine and Uncle Sam is not going to be getting the goodies that he’s been relying upon to save the day. Dementia Joe is the poster child of DC corruption and incompetence, and no miracles will be forthcoming to magically make it all better. We are now deeper into the toilet bowl vortex and the centrifugal forces are rising exponentially. Just sayin’.

    • Just like every municipal voter-initiative bond issue for the past 50 years for teachers unions, new sportsball stadiums for blacks and billionaires, billion dollar “bike lanes” that are just a painted white stripe….

      “It won’t raise your taxes one bit!”

      (Then property owners get their taxes raised year over year to service the bond. The majority who votes this crap in doesn’t own property, so they don’t GAF. Democracy in action.)

  35. I had the exact same thoughts on the Newsweek article comparing bank failures under Trump to those under Biden.

  36. I disagree with your characterization of SVB. SVB was not a well run bank. It failed to hedge its interest rate exposure at all. That is risk management 101. Interest rates have been rising and the Fed has been signaling that they will rise for some time. Probably, and hopefully, the other banks have hedged their risk.

    I agree with the rest of the post.

    • SVB had to take a two billion dollar write down when they sold these assets.
      —
      That shows that they were lying (i.e. engaging in fraud) as they held the assets they had to redeem at par instead of mark-to-market which, for treasuries, is something even a math midwit like myself could handle.

      • The Banks all file “call reports” which detail these mark-to-market losses quarterly. The didn’t lie, they were just incompetent and greedy. Sites like Seeking Alpha detailed SVB’s problems in this regard as early as last fall.

        • I have been out of this world a long time now, so I do not follow it closely, but I keep coming back to that write down because I thought they changed the rules in the aftermath of the mortgage meltdown. The press makes it sound like SVB simply got caught short, but it sounds like this may have been something else.

    • The problem is hedge with what? There is very little in the way of variable rate mortgages in the system. That used to be how a bank would hedge fixed rate bonds. The same is true of other bonds. The fact is, no one has been willing to bet that rates would rise, because rates have been low for a generation. Even with the fed hiking rates the consensus on Wall Street is the Fed would relent and accept a higher inflation target. The consensus is right.

      • Do you think this line of reasoning is what the gay, female POC risk manager took?

      • SVB could have used derivatives to manage their interest rate risk just like lots of other banks have. SVB was a poorly run bank.

        SVB should have known that because their customer base was businesses with accounts way beyond FDIC limits, they were more vulnerable to bank runs than a bank where deposits are from retail customers who are protected by the FDIC.

        SVB had a huge amount of their assets in MBS with no hedges and deposit base that will move their cash out far more quickly than other types of customers. That’s stupid.

        Your general assertion is correct, however. Rising rates are causing problems throughout the system, particularly the banking system and even more particularly, for smaller banks. The Fed and Treasury will bail out the banking system by buying the old, low-yield treasuries and MBS at par. The Fed might even lower rates much more quickly.

        When the government has to choose between inflation and the bond market, it will always – always – choose the bond market, because the Fed’s real mandate is making sure the govt is funded and that requires the bond market.

        • The write down was not what killed the bank. SVB could have been manned by the finest minds in banking and it would have failed for the simple reason the business model of the bank stopped making sense when the fed aggressively raised rates. This is a systemic failure, not a crooked banker failure or an incompetent banker failure.

          The bottom line here is the bank operated within the rules, then the rules changed and there was simply no way for them to operate under the new rules. The question is, who else is facing the same problem?

          • Quite a few, I’d suspect. But the new treasury dept program will solve that – at least for the big banks and at taxpayer expense.

            Totally screwing over the smaller, regional banks.

      • “The problem is hedge with what?”

        There are interest rate derivatives that you can use to hedge against the risk of interest rate fluctuations but then the issue becomes one of “counterparty risk.” But this is all a house of cards, a hall of mirrors. What stops it from being completely like the board game “Monopoly” is that is has an impact on real people making, buying, selling and consuming real things.

        • That is the thing. Finding a partner for a rate swap is not easy when rates are going up. This is why the fed is the partner now. They will take those bonds as collateral for a loan, then return the bonds when the market is improved for the original bond holder. That is my read on this. There is no market for swaps so the Fed is creating one. They are also setting the market for treasuries, conveniently enough.

          • I’m in the swap market every month. You can always and easily find a partner. You just may not like the high price of the swap. The increase in swap prices over the last 12-18 months has been breathtaking.

          • You can always find a swap partner. I’m in this market regularly. You just may not like the price. The CEO got greedy, gambled and lost.

          • Yes, the higher prices in the swap market reflect the interest rate environment and interest rate expectations. That’s the thing about finance — you can always find someone to do a deal with, but the price will reflect the risk.

          • And the only thing happening is spreading the loss or delaying the inevitable write down.

    • What Mike said. Asset-Liability management is Banking 101. The CEO got greedy and extended maturities instead of staying liquid at shorter duration and just accepting lower margins/profits.

  37. The expected reading of the prepared statement from dementia joe already has me wincing. Sadly, my bingo card would have some D.I.E. along with some climate change, perhaps some Ukraine or racisms. It will probably be even worse than that, I don’t think my Monday deserves this. Perhaps the China will be blamed, I dunno but I do know there are certain groups that are actually responsible that will never be mentioned.

  38. “In the time of rising rates, these very low yield instruments are not in demand, so they had to be heavily discounted. SVB had to take a two billion dollar write down when they sold these assets.”

    It’s not that demand dries up. It’s that there’s an inverse relationship between interest rates and bond prices. Say you have a 30-year Treasury yielding. say, 2% that you bought for $100. Now suppose a couple of years down the line, the interest rate on the newly issued 30-year is 4%. But on that Treasury you bought you are only earning a $2 yield annually, while a $50 Treasury issued today will be yielding the same ($2) at 4%. So the price you can sell your $100 Treasury will be $50 as it is the cash flows that dictate the price of these long-term T-bills.

    Incidentally, I may be wrong but I think SVB took a $15bn hit on their Treasuries.

    The situation is probably as Bill Holter explains: The Fed can save the dollar (by high interest rates) or the financial system (by maintaining low interest rates) but not both.

    • You’d think the whole financial system takes precedence.

      “Date the dollar, but marry the financial system” as the saying goes.

    • The Fed dare not increase them for fear of cascading financial failures (there are other banks in almost the same situation as SVB). At the same time not increasing them will cause a run on the dollar (which has already started happening though I don’t know how far it will go).

    • Rate hikes are on hold, for sure. They will not lower rates, at least not yet and not officially. Instead, they went in and backed the deposits of SVB and Signature Bank. Most likely, there are plenty of liquid assets in these banks to do this, so the Fed is basically creating a bridge loan to facilitate the orderly disposal of the assets.

      In addition to the banks in question, they are offering to the broader system of smaller banks a new lending facility to prevent a repeat of last week. Instead of a bank selling assets, thus signaling trouble, that bank goes to the Fed for a loan, which then brings the Fed and Treasury in to head off trouble. Expect to see big banks buying small banks in the near future.

      My guess is the new plan is to give the banks time to off-load some of the bonds, absorb the losses and prepare for a new round of rate hikes in the future.

      • Right on que, the new Bank Term Funding Program will “offer loans of up to one year to lenders that pledge collateral including US Treasuries and other “qualifying assets” (probably MBS), which will be valued at par.”

        No surprise, but here’s the rub. Most small and regional banks don’t hold that many treasuries and MBS. That’s more the big banks, which do a lot more than make loans so they need the collateral. The small and regional banks do what banks are supposed to do, namely make loans to small, regional businesses and individuals.

        Those are the banks in trouble. They made lots of medium to long-term loans in the low-interest rate environment, and now they’re stuck with them. But with the new higher rates, they have to pay their depositors a higher rate than they’re earning on those old loans. And, of course, those old loans can’t be sold without a big haircut.

        So, yes, the big banks with their funding from this new program and profits from their other divisions will swoop in and buy the troubled small banks.

        Banking will get even more concentrated, making it even more difficult for small and medium-sized businesses to get financing, making big corporations even more invincible, making the economy slow even more and, finally, increasing the wealth gap even more.

    • As always dumb about this stuff, but will interest rates matter if banks are hesitant to loan? I mean, the assumption is banks are always willing to loan because that’s their business, but my limited understanding is that this happened because the bank didn’t have reserves, not because its loans were going bust.

      • It had reserves. The problem is that rising interest rates caused the value of the reserves to fall. That’s the systemic part of the problem. SVB was a poorly run bank, but every bank is dealing with holding assets (treasuries, mortgage back securities or just old loans) that are low-yielding and thus worth a lot less.

        • I wonder what the effect of unlimited fed-guaranteed deposits would be. Suddenly, no need for reserves, at least potentially, right? Just a different kind of money printer— the kind normal people might be convinced benefits them. But if I’m understanding you, it amounts to bad assets instead of bad loans.

          All I know is the magician has to be running out of rabbits in his hat. Can’t extract value that doesn’t exist. It’s going to be a big war or a fire sale, I’d guess.

    • Just to note that the Fed follows the 3-month treasury, they do not lead. To do otherwise would cause a disruption if there was a big mismatch between the Fed rate and what institutions could get “for free” from government debt. A look at the chart this morning shows it down, but not by a lot, basically back to mid-February which would seem to indicate a flat rate for now (though the Fed has been known to panic-chase the rate down if things get ugly).

      • I buy short term treasuries through E-trade. Last week I got a 3 month at almost 5%, this morning the highest one they have listed is 4.704%. That seems like a big dip over a few days to me. I think we need to watch it a few more days to see if it holds up.

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