Some people I discussed with said that my piece insinuated that bank runs won't happen but they did. That's not what I said, the hysteria part can hurt any bank no matter how sound the fundamentals. These recent cash lifelines to banks have only shown how far the contagion has stretched rather than the severity of the illiquidity/insolvency of banks. SVB itself had mostly sound financials except for the interest rate impacted HTM/AFS nonsense (e.g. it's loans were actually making good money). Signature bank had even better fundamentals and had even stopped the bleeding (see this article: https://www.cnbc.com/2023/03/13/signature-bank-third-biggest-bank-failure-in-us-history.html) and yet was completely purged.
A quote from a board member of Signature bank "‘I think part of what happened was that regulators wanted to send a very strong anti-crypto message,’ Frank said. ‘We became the poster boy because there was no insolvency based on the fundamentals.’” Was this a bailout? Hardly. It falls into the bank consolidation part of my post. Maybe they should have played the game and given Janet Yellen some speaking fees? (https://www.theguardian.com/business/2021/jan/01/janet-yellen-speaking-fees-us-treasury-secretary#). Why do you think she got those fees? Obviously because of her incredible elocution skills (https://twitter.com/SeidlerCorp/status/1636518949872451584?s=20).
As far as the bailout go, preferential treatment is only given to a specific subset of banks that stay in line. While woke politics in investing didn't take down this bank, it may have helped it get bailed out. When political "titans" like Gavin Newsom bank there and the entire VC market being politically skewed towards the current administration, it makes the bailouts more likely.
“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.” --Frederic Bastiat
When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you - When you see corruption being rewarded and honesty becoming a self-sacrifice - You may know that your society is doomed.” --Ayn Rand
Some people I discussed with said that my piece insinuated that bank runs won't happen but they did. That's not what I said, the hysteria part can hurt any bank no matter how sound the fundamentals. These recent cash lifelines to banks have only shown how far the contagion has stretched rather than the severity of the illiquidity/insolvency of banks. SVB itself had mostly sound financials except for the interest rate impacted HTM/AFS nonsense (e.g. it's loans were actually making good money). Signature bank had even better fundamentals and had even stopped the bleeding (see this article: https://www.cnbc.com/2023/03/13/signature-bank-third-biggest-bank-failure-in-us-history.html) and yet was completely purged.
More on the financial fundamentals here: https://www.netinterest.co/p/contagion?utm_source=%2Finbox&utm_medium=reader2
A quote from a board member of Signature bank "‘I think part of what happened was that regulators wanted to send a very strong anti-crypto message,’ Frank said. ‘We became the poster boy because there was no insolvency based on the fundamentals.’” Was this a bailout? Hardly. It falls into the bank consolidation part of my post. Maybe they should have played the game and given Janet Yellen some speaking fees? (https://www.theguardian.com/business/2021/jan/01/janet-yellen-speaking-fees-us-treasury-secretary#). Why do you think she got those fees? Obviously because of her incredible elocution skills (https://twitter.com/SeidlerCorp/status/1636518949872451584?s=20).
As far as the bailout go, preferential treatment is only given to a specific subset of banks that stay in line. While woke politics in investing didn't take down this bank, it may have helped it get bailed out. When political "titans" like Gavin Newsom bank there and the entire VC market being politically skewed towards the current administration, it makes the bailouts more likely.
“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.” --Frederic Bastiat
When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you - When you see corruption being rewarded and honesty becoming a self-sacrifice - You may know that your society is doomed.” --Ayn Rand
For more on corruption in banking and SVB.
https://www.nakedcapitalism.com/2023/03/michael-hudson-talks-to-ben-norton-about-svb-and-bank-failures.html