LA Times’ Hot Take on Banking Crisis: It’s a ‘Blessing in Disguise’
As the stock market responds to the “fixes” that will be pursued by the current administrations, I hope the “blessings” don’t completely kill the once robust American economy.
Last week, I covered the collapse of several regional banking institutions in the wake of woke-priorities and Bidenflation.
I suspect the fallout from these developments will impact the stock market for some time to come, as well as consumer choices regarding investments and purchasing. It will be interesting to see how the American press plans to script the narrative to be favorable to the current administration and Democrats.
One intriguing data point on the upcoming narrative comes by way of The Los Angeles Times. One of its journalists, Doyle McManus (who is also a graduate of Stanford University) offered this hot take on the subject: Silicon Valley Bank’s collapse may be a blessing in disguise.
In it, McManus derides Republicans and Libertarians.
In the brief but spectacular collapse of Silicon Valley Bank, we may just have witnessed the best banking crisis ever.
It might even have been useful.
Nobody got seriously hurt, except bank executives who made bad decisions and shareholders who weren’t paying attention.
Those Silicon Valley libertarians who spent years demanding that government get out of the way earned their comeuppance when they begged the Federal Reserve to save them. “Where is [Federal Reserve Chair Jerome H.] Powell? Where is [Treasury Secretary Janet L.] Yellen? Stop this crisis NOW,” tweeted David Sacks, the tech investor who was a fan of creative destruction until it got too near his bank account.
Just as there are no atheists in foxholes, there are no libertarians in financial panics.
Republican politicians provided a dose of comedy, blaming SVB’s financial blunders on the imaginary menace of “woke banking.” There’s no evidence that the bankers’ political leanings, “woke” or otherwise, affected their balance sheet.
Big Government and progressive policies pushed onto the finance industry (e.g., Biden’s billions in covid relieve and Environmental-Social-Governance investment criteria) are leading contributors to the collapse. However, McManus pushes these as the solution.
The rest of us got a useful reminder of why free-market capitalism needs to be regulated: to protect the little guy (and sometimes not-so-little guys) from catastrophe.
Most important, the Fed and the Federal Deposit Insurance Corp. (FDIC) got a wake-up call that their oversight of middle-size banks has been dangerously lax.
The collapse of SVB, frightening though it was, could be a useful corrective to excessive bank deregulation, like a brief health crisis that prompts people to exercise more and eat better.
In the real world, it appears the current fixes are larger institutions procuring the ones in trouble. For example, The Federal Deposit Insurance Corp. (FDIC) is deciding on a potential sale of Silicon Valley Bank (SVB).
One financial institution that may be throwing its hat in the ring is First Citizens BancShares, according to Bloomberg.
The firm is reportedly evaluating making an offer for SVB.
The lender based in North Carolina is among the handful of potential buyers for the auction process for the failed bank, said a person familiar with the situation.
Bank of America may move to acquire New York’s Signature Bank.
Prominent hedge fund manager Bill Ackman said he had heard rumors that New York-based Signature Bank will be acquired by Bank of America, but did not provide any details.
“I am hearing that @BankofAmerica is going to buy Signature Bank on Monday,” he tweeted. “Unless and until we can protect uninsured deposits, the cost of capital is going to rise for smaller banks pushing them to merge or be acquired by the SIBs. I don’t think this is good for America.”
Another institution has made an offer for the Swiss bank, Credit Suisse, which was one of the institutions that saw its value plunge last week.
Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures, amid a divided market rally. UBS reportedly has made a lowball offer for ailing Credit Suisse, which could face a government takeover otherwise. Bank contagion fears are high in the U.S. and Europe. The Federal Reserve meeting looms with the rate hike outcome and outlook very much in flux.
A stock market rally attempt is underway, but there is a clear divergence. The Nasdaq, led by Microsoft (MSFT), Meta Platforms (META), Nvidia (NVDA) and Advanced Micro Devices (AMD), surged above its 50-day and 200-day lines, even with Friday’s pullback. Many chip stocks are near buy points.
Meanwhile the other indexes are being weighed down by bank and commodity stocks. The S&P 500 rose modestly, but couldn’t hold key support Friday. The Dow Jones edged lower while the Russell 2000 tumbled.
Banks remain in focus with industry giants and regulators scrambling to contain the crisis.
Here is an image of one of the “women” in its board of directors.
Credit Suisse gets a €54 BILLION bailout printed by Swiss Central Bank!
Head of Global Markets Philip Bunce said to be delighted.
Also known as Pippa as it is a 'trans woman' and is a key player in LGBTQ policy and sits as a woman on the board. pic.twitter.com/gxqTAMIvEy
— Warren Davis (@wdavis_OpRP) March 16, 2023
As the stock market responds to the “fixes” that will be pursued by the current administrations, I hope the “blessings” don’t completely kill the once robust American economy.
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The democrat media has become a parody of itself. A malignant parody, but a parody nonetheless.
They just make it up as they go. They’d die before they’d print any truth inconvenient to their fascist cause. And a fascist cause it is.
Richard Epstein said that people not hired for competence are too moronic to run a bank regardless of what regulations you steer them with.
https://www.hoover.org/research/libertarian-podcast-too-big-fail-dont-bank-it-richard-epstein-hoover-institution
14:20 into the podcast
One thing I don’t understand: how do the LA Times folks manage to write at the keyboard while simultaneously saluting their huge Mao portrait with both hands!!
They are not efficient. I only need one finger to salute the Great Helmsman.
“Big Government and progressive policies pushed onto the finance industry … are leading contributors to the collapse”
No. Wrong. Basic incompetence is the primary contributor. In the 80s, 90s, and 00s banks failed for the same reason: failure to hedge risk properly. Meet the new distraction, same as the old one.
Of course, progressives push big government policies because they insist that the government can be everywhere all the time all at once to solve incompetence. Also no. Banks are going to fail because they are run by complacent rich executives who spend too much time on their golf game, surfing, or whatever other narcissistic hobbies they have. When a bank fails (it will) its like an explosion in an ammo storage facility. Only thing you can really do is isolate everything to contain the damage.
Nope. In the ’80s, ’90s, and ’00s it was also the “woke” of the time, political and regulatory pressure to make bad loans in order to achieve “social justice”. Every time bank execs testified to Congress the politicians demanded that they lend more to black people and damn the risk.
Or as Barney Frank basically put it, why is it your problem if the borrower can’t pay? Make the loan and then sell it to an aggregator, and then it won’t matter if it defaults. And we’ll force the aggregators to buy all your loans, no matter how bad, by letting Fannie and Freddie buy them too.
Thomas Sowell’s book “The Housing Boom and Bust” about the 2008 crash covers this nicely.
Everyone, at every level of government, should be required to read every book Thomas Sowell has written. High school students, too.
And then have the Feds prop up Freddie and Fannie directly with cash infusion and indirectly by purchasing the MBS created from the liar / subprime loans.
Indeed, it was all in response to “red-lining” also known as common sense banking – don’t lend to people who can’t pay back the loan.
Frank is the last man to regulate anything. A man who didn’t notice that his small one bedroom D.C. apartment was being run as a very active male brothel by his boyfriend is not to be trusted.
Um, no, the apartment was not being used as a brothel. His boyfriend was running a call-boy business from it, which is a very different thing. I don’t necessarily believe his claims not to have known, but if the boyfriend was hiding it there’s no reason he would have noticed, and the apartment’s size is completely irrelevant.
No. In the 80s for example, banks got caught first in the great inflation of the 70s, then the great disinflation. It had nothing to do with social justice. In the late 70s and early 80s a lot of Ak lent to oil/energy projects that subsequently went bust when oil prices crashed. Although house prices declined in the 91 recession, mortgage delinquencies did not spike like they did during the financial crisis (in 2007-08 a lot of banks were making subprime loans on basically non existent or fraudulent documentation).
You would be well served to get some finance skills and economic history under your belt.
“lot of Ak lent” => a lot of *banks* lent
Get ready for a diet of bank consolidation. This will suit the govt regulators and Congress just fine. Easier to hand out crony capitalism goodies to the favored when there are fewer contenders. It also increases the odds of max political donations as banks and their execs scramble to gain the clout the depositors at SVB and Signature Bank held in being granted extraordinary relief.
The consolidation will obviously be acceptable to the ultimate five or ten surviving banks. The winnowing process will take some time, not as much as most may believe but it won’t happen overnight. In the meantime a consortium of regional banks has asked the FDIC to backstop their deposits for two years. The money flows out of smaller banks to the top ten is creating havoc as depositors are creating the conditions to spur more panicked withdrawals which adds to the problem. Borrow short and lend long works until depositors withdraw their funds, then it stops working all at once, just like SVB.
The elimination of community banking is how they will ultimately destroy suburbia and chase us all into their urban utopia existence of living in 400 s.f, pods and limited to moving around within a 15-20 mile radius. Seventy-one percent of mortgages are held by community banks, banks that understand the needs of the local communities. The “Big Reset” marches on.
Several things the LA times bubble writer got wrong:
-The sign of woke banking is that the LGBTABDSXCV risk manager was literally doing DIE instead of ze’s job.
-Many libertarians were actually calling for the govt not to step in and to let the bank fail.
Talk about selective reporting…journalism is pretty dead if this fool has any kind of future in it.
This is the legacy media at work again deceiving us as to the severity of the issue
Here we go again. “Imaginary menace of ‘woke banking’….” Yep it’s just a right-wing fever dream that spending money on preposterous, illogical nonsense isn’t prudent management. “There’s no evidence” etc.
Gaslighting, anyone?
I’d expect nothing less from Pravda West…
Silicon Valley has been completely captured by the Left — they haven’t been “libertarian” in years.
They certainly aren’t “libertarian” today. Libertarians pleading for Fed bail outs? Funny how easy it is to “lean libertarian” or be a staunch “conservative” (whatever that is) when all you have to do is say it. But once life happens, too few are willing to suffer the consequences of our choices.
That’s why I reject being labeled anything. My values and beliefs are clear in my mind and I don’t want to spend the rest of my life living within vaguely defined labels that keep morphing into the opposite of what they purport to be.
Life used to be so much simpler before we had to declare whether we are Republican or Democrat, liberal or conservative, and so on. God, family, friends, community? A lot easier to navigate and stay on course. When we are distracted from our shared interests, life gets unnecessarily complicated. Our priorities get scrambled and nothing seems worth fighting for. So out of frustration, we just get angry and scream at each other as we all go down the shit hole together.
I have quite a bit of money in First Citizens Bank and are making it clear to them I will move all my money out of they buy SVB. I am sure other people that have money in First Citizens Bank feel the same way.
The “solution” of making the “too big to fail” big banks even bigger will be the final step in centralizing banking to facilitate the deployment of digital currency AI to place all of our “money” under government control. The loss of individual freedom forever.
There is one opportunity in this and it is only available briefly. I took note that UBS plans to lay off it’s investment banking employees and it made me wonder whether this is not already happening.
Once the big banks (5 or 6 of them) are consolidated, they could then be broken up in a relatively orderly process. They could be forced to split up to separate commercial banking from investment banking from insurance. In other words, re-instate the Glass-Steagall Act,
It’s basically about the banks. Make them two separate and economic entities again. Liberate Main Street from Wall Street and beyond. Strong communitees are best served by local banks.
This would be efficient since it doesn’t take a gigantic bureaucracy to keep these separate functions apart. This also assumes that local communitees are desirable in the grand scheme of American life. The “Big Reset” assumes the opposite. The plan is to force us all live in big cities, confined to 400 s.f. cubicles within a 15-20 minute radius of allowed travel distance. A rat’s existence.
We should be motivated by now to take steps to break this all up and breaking up the banking system is doable. The opportunity is developing. It’s one of the big vulnerabilities of being “too big to fail”. Big means fragile. Fragile things break. We can break them into something safer and more productive.
Yhat article used a lot of words to say: “Never let a crisis go to waste.”