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.
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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