Here We Go Again. Wall St. Billionaires Demanding Bailouts Of Big Banks

[beagle9]

The fact that Silicon Valley Bank (SVB) has been seized by federal regulators is a big deal and will have a huge impact on Silicon Valley’s startup scene. They are the financial institution for every new tech company in Northern California.

Something is really rotten at SVB. The bank has $209 billion in assets and $175.4 billion in deposits, yet it collapsed because it failed to raise a mere $1.75 billion in new financing. The consequences should ripple across a significant segment of the economy, particularly in the San Francisco-San Jose region.

But whatever, shit happens, right? Economic sectors are disrupted all the time, and this one, at least, should hit a more affluent crowd. We’re not talking the destruction of manufacturing in small towns all across America, and Silicon Valley is resilient enough to bounce back. It always does.

Except this isn’t small-town America. This is some of the wealthiest, most powerful interests in our country. And if there’s one thing wealthy financial interests love more than anything else, it’s privatizing profits but socializing the risks. So like clockwork …

Here we go again: Wall Street billionaires demanding public bailouts of failed banks

UPDATE: Friday, Mar 10, 2023 · 8:19:42 PM +00:00 · kos Just watch, all the usual suspects will make the same f’n arguments: They can f’ themselves. I am so livid, I am still throwing shit around my house. Sorry if you come into my house and see the...

www.dailykos.com

No. Hell no. Fuck no. Eat shit and fucking die no.

It's Putin's fault.. Russia, Russia, Russia..

 

[Esdraelon]

You were the one harping on the leftist run bank needing a bail-out. I oppose all bail-outs. Sink or swim on your own hook.

I agree, but I seem to recall that the mortgage crash came about as a result of the Feds demanding that home loans be made "more affordable" to those who otherwise would have been too poor a risk to get a mortgage. When the Feds interfere in the market, seems only fair that SOME reparation be made by them. Certainly not the entire amount of losses, but something.

 

[Orangecat]

You think everyone to the left of you is a leftist. Actual leftists, otherwise known as progressives in America, have no interest in protecting banks from the consequences of their recklessness.

Do they have any interest in protecting college loan borrowers from the consequences of their recklessness?
Would buying votes count as an interest?

 

[beagle9]

The system was designed top to bottom to serve the big investors and they got greedy. China's new investor class was pulling up with dump trucks full of money begging to invest in the up until then solid American mortgage market. Problem was there were not enough good mortgages to go around so they steadily eased financial requirements. The biggest recipient of this was not regular homeowners but the house flippers with their expensive five year mortgages. As a group these sharks walked away as soon as they went underwater.

The Chinese...hmmmmmm.....Figures their name would be in there with the corruption somewhere or wait were they also victim's ?? Where was Joe Biden in or before 2008 ? What role did he play or have in the blown out debacle ?

 

[beagle9]

I agree, but I seem to recall that the mortgage crash came about as a result of the Feds demanding that home loans be made "more affordable" to those who otherwise would have been too poor a risk to get a mortgage. When the Feds interfere in the market, seems only fair that SOME reparation be made by them. Certainly not the entire amount of losses, but something.

Which Fed's ???? The Democrat's ? Where was Joe Biden at the time ?

 

[DudleySmith]

I agree, but I seem to recall that the mortgage crash came about as a result of the Feds demanding that home loans be made "more affordable" to those who otherwise would have been too poor a risk to get a mortgage. When the Feds interfere in the market, seems only fair that SOME reparation be made by them. Certainly not the entire amount of losses, but something.

It came about because banks like Goldman Sachs could make more money if they packaged all that loan paper in bundles with good mortgages and sell them for more than they were worth, and/or borrow against the bundles and leverage them at 35 to 50 times their value as 'equity'. When the the market bubble popped, nobody knew how much or where the bad paper was, so liquidity dried up overnight, and then the 'mark to market' rule kicked in and the margin calls went out as the hyper-inflated 'equity' droped like a rock on nearly all the tranches of paper and CDOs.

The govt. didn't force anybody to misrepresent bad high risk paper and leverage it so high then resell it over and over, nor did they force mortgage loan companies like Countrywide to write up fraudulent loan applications. That is all on the banks and traders themselves. Nobody went to jail for it, and the govt. jump in to save the most well connected criminals with trillions in bailouts, which we're still paying for, by the way. One of the first companies to fail in the U.S. was Thornburg Mortgage, with nothing put premium high end loans in its portfolio, with default rates of around 0,2%. The equity values dropped like a rock and then the margin calls on its debts rolled in and crushed them practically overnight.

 

[DudleySmith]

Correct.

Now, tell us who offered and guaranteed all those bad loans?

Tell us who hid the risky loans among good paper until nobody could trace them?

 

[DudleySmith]

lol it;s hilarious how the right is suddenly complaining about deregulation and lack of govt. oversight when their beloved crooks take advantage of the easing of regs and proceed to steal the public blind. It's never the fault of the criminals, cuz they're 'capitalists n stuff, and know what they're doing'. No, they're thieves, and they know exactly what they're doing.

 

[DudleySmith]

Here is the exact same thing happening in the 1990's, only on a smaller scale.

Long-Term Capital Management - Wikipedia

en.wikipedia.org

"Long-Term Capital Management L.P. (LTCM) was a highly leveraged hedge fund. In 1998, it received a $3.6 billion bailout from a group of 14 banks, in a deal brokered and put together by the Federal Reserve Bank of New York.[1]

LTCM was founded in 1994 by John Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers. Members of LTCM's board of directors included Myron Scholes and Robert C. Merton, who three years later in 1997 shared the Nobel Prize in Economics for having developed the Black–Scholes model of financial dynamics.[2][3]

LTCM was initially successful, with annualized returns (after fees) of around 21% in its first year, 43% in its second year and 41% in its third year. However, in 1998 it lost $4.6 billion in less than four months due to a combination of high leverage and exposure to the 1997 Asian financial crisis and 1998 Russian financial crisis.[4] The master hedge fund, Long-Term Capital Portfolio L.P., collapsed soon thereafter, leading to an agreement on September 23, 1998, among 14 financial institutions for a $3.65 billion recapitalization under the supervision of the Federal Reserve.[1] The fund was liquidated and dissolved in early 2000.[5]

LTCM can also be described as using an absolute return strategy in combination with high leverage."

Had zilch to do with Frank or anybody else but typical financial idiocy, people chasing something for nothing.

25 People to Blame for the Financial Crisis - TIME

As chairman of the Senate Banking Committee from 1995 through 2000, Gramm was Washington's most prominent and outspoken champion of financial deregulation. He played a leading role in writing and...

content.time.com

He also inserted a key provision into the 2000 Commodity Futures Modernization Act that exempted over-the-counter derivatives like credit-default swaps from regulation by the Commodity Futures Trading Commission. Credit-default swaps took down AIG,

 

[Dekster]

Somebody will buy the bank. The federal government is pretty good at strong arming other banks into eating the loss for them under threat of investigations into some practice or the other.

In this case, however, they had to take a couple billion in losses by selling off low interest bonds to try to increase cash on hand which signaled they were out of cash which caused a run on the bank, particularly by people who had deposits over the FDIC insured limits.

This liquidity problem is going to be more common over the next few years with the Fed addicted to interest rate hikes.

 

[beagle9]

It came about because banks like Goldman Sachs could make more money if they packaged all that loan paper in bundles with good mortgages and sell them for more than they were worth, and/or borrow against the bundles and leverage them at 35 to 50 times their value as 'equity'. When the the market bubble popped, nobody knew how much or where the bad paper was, so liquidity dried up overnight, and then the 'mark to market' rule kicked in and the margin calls went out as the hyper-inflated 'equity' droped like a rock on nearly all the tranches of paper and CDOs.

The govt. didn't force anybody to misrepresent bad high risk paper and leverage it so high then resell it over and over, nor did they force mortgage loan companies like Countrywide to write up fraudulent loan applications. That is all on the banks and traders themselves. Nobody went to jail for it, and the govt. jump in to save the most well connected criminals with trillions in bailouts, which we're still paying for, by the way. One of the first companies to fail in the U.S. was Thornburg Mortgage, with nothing put premium high end loans in its portfolio, with default rates of around 0,2%. The equity values dropped like a rock and then the margin calls on its debts rolled in and crushed them practically overnight.

Uhhhh, the government allowed it all to take place due to it's ease of regulations, and if you don't think that the government knew about it all, and if you don't think that it didn't have it's hand in it, then you are either a government snoop here or you are a government apologists, so which is it ??? Remember now - Fannie Mae and Freddie Mac were also a huge part of it too.

 

[DudleySmith]

Uhhhh, the government allowed it all to take place due to it's ease of regulations, and if you don't think that the government knew about it all, and if you don't think that it didn't have it's hand in it, then you are either a government snoop here or you are a government apologists, so which is it ??? Remember now - Fannie Mae and Freddie Mac were also a huge part of it too.

So you think that just because the govt. did what right wingers are always sniveling it should do means that business people are supposed to ignore sound practices and are actually obligated to steal and make stupid gambles with other peoples' money???

As always, the right snivels whenever they get caught being dumbasses, and their corporate heroes regulate themselves. lol nobody forced anybody to hide so much bad paper inside bundles of good paper; businesses did that all by themselves.

It's also legal to murder babies in many states; according to your 'logic' that means we HAVE to kill babies, right? It's legal! All babies now have to be aborted now ...

 

[multivita-man]

This quickly turned into a dumb thread that has nothing to do with the original topic. SVB wasn't doomed by bad mortgages or credit default swaps, so let's stop talking about 2008.

This is a mostly corporate big account bank that got so much in deposits during the pandemic that it didn't couldn't lend it all, so it had to put it into treasuries. That worked when interest rates were near zero, but in a rapidly changing higher rate environment? Not so much. The bonds weren't appreciating fast enough. The account holders wanted better yields on the amount they had in the bank. They weren't getting it, so Thiel and some of the bigger plays began withdrawing - a lot. All at once. They may actually have the assets to repay a lot of their account holders and investors, but not now. They have a liquidity problem.

 

[westwall]

The fact that Silicon Valley Bank (SVB) has been seized by federal regulators is a big deal and will have a huge impact on Silicon Valley’s startup scene. They are the financial institution for every new tech company in Northern California.

Something is really rotten at SVB. The bank has $209 billion in assets and $175.4 billion in deposits, yet it collapsed because it failed to raise a mere $1.75 billion in new financing. The consequences should ripple across a significant segment of the economy, particularly in the San Francisco-San Jose region.

But whatever, shit happens, right? Economic sectors are disrupted all the time, and this one, at least, should hit a more affluent crowd. We’re not talking the destruction of manufacturing in small towns all across America, and Silicon Valley is resilient enough to bounce back. It always does.

Except this isn’t small-town America. This is some of the wealthiest, most powerful interests in our country. And if there’s one thing wealthy financial interests love more than anything else, it’s privatizing profits but socializing the risks. So like clockwork …

Here we go again: Wall Street billionaires demanding public bailouts of failed banks

UPDATE: Friday, Mar 10, 2023 · 8:19:42 PM +00:00 · kos Just watch, all the usual suspects will make the same f’n arguments: They can f’ themselves. I am so livid, I am still throwing shit around my house. Sorry if you come into my house and see the...

www.dailykos.com

No. Hell no. Fuck no. Eat shit and fucking die no.

For once I agree with you.

 

[multivita-man]

Somebody will buy the bank.

Why?

The federal government is pretty good at strong arming other banks into eating the loss for them under threat of investigations into some practice or the other.

Right, that's why banks get big bailouts. Capitalize the gains and socialize the losses, lol.

In this case, however, they had to take a couple billion in losses by selling off low interest bonds to try to increase cash on hand which signaled they were out of cash which caused a run on the bank, particularly by people who had deposits over the FDIC insured limits.

Like 95%+ of the deposits were uninsured according to one source I read. That seems like a wild statistic but that's reflective of the client base. It's a bank for Bay Area VCs, not a First National Bank of Anytown, USA.

This liquidity problem is going to be more common over the next few years with the Fed addicted to interest rate hikes.

Yup, would agree to this. There will be other banks that fit this profile and they will meet this same fate. Not sure if I agree that this is going to be a small/regional bank contagion event though. Not as long as they did conventional banking and over-achieved their stress tests.

 

[JohnDB]

Silvergate bank is the next one to close....they dealt with crypto currencies....and the crypto market was always pump and dump.

How these banks work is that venture capitalists would invest in tech startups and deposit the money into SVB. Then these tech startups would draw the money to pay employees as they went about doing business.

Software companies pay developers and code monkeys to write code as well as tech support and etc....out of their cash deposits by venture capitalists at SVB. Most of which are NOT insured by FDIC. Over 85% of deposits were not insured by the government....and right now in this economy who wants to invest in a tech startup?

So....because of this bank failure its going to be interesting to see who survives.
Software companies? Rocket motor companies? Medical research?

There really isn't much the Government can do.

 

[skews13]

For once I agree with you.

This isn’t political. This the result of the repeal of anti trust laws in the 80’s, and the repeal of Glass-Stegall in the 90’s.

It’s a concerted effort since the 30’s by the Wall St class to repeal as much of the New Deal regulations as possible.

Which were put into place for a good reason by a President popularly elected by the people, Four times for a good reason.

Any system where 5 people have more money than 50% of the population, and banks with hundreds of billions in assets that fail anyway, is a failed system.

It’s allowed to continue only because of the true elites of the Wall St class, and the politicians they pay off to keep it that way.

 

[beagle9]

So you think that just because the govt. did what right wingers are always sniveling it should do means that business people are supposed to ignore sound practices and are actually obligated to steal and make stupid gambles with other peoples' money???

As always, the right snivels whenever they get caught being dumbasses, and their corporate heroes regulate themselves. lol nobody forced anybody to hide so much bad paper inside bundles of good paper; businesses did that all by themselves.

It's also legal to murder babies in many states; according to your 'logic' that means we HAVE to kill babies, right? It's legal! All babies now have to be aborted now ...

So you are a leftist... Glad to know that. So when Trump was using the tax codes in the legal ways that the tax codes were written and presented, then you leftist went berserk when trying to get him on anything you could come up with.

So Trump told you all - "hey, change the laws and codes if you don't want people to use them in the ways that they are written".

 

[multivita-man]

Silvergate bank is the next one to close....they dealt with crypto currencies....and the crypto market was always pump and dump.

How these banks work is that venture capitalists would invest in tech startups and deposit the money into SVB. Then these tech startups would draw the money to pay employees as they went about doing business.

Software companies pay developers and code monkeys to write code as well as tech support and etc....out of their cash deposits by venture capitalists at SVB. Most of which are NOT insured by FDIC. Over 85% of deposits were not insured by the government....and right now in this economy who wants to invest in a tech startup?

So....because of this bank failure its going to be interesting to see who survives.
Software companies? Rocket motor companies? Medical research?

There really isn't much the Government can do.

And the moral hazard in me says there isn't much the government should do. However...

There are going to be a lot of companies and their employees impacted by this event who did nothing risky other than having their capital tied up in a bank. Moreover, it's not like SVB was necessarily making reckless bets; they just made decisions about where to park their excess holdings that looked fine in one environment but turned out to be bad in different one all within the span of a year.

With that being said, a lot of the tech sector, their VCs, and investors broadly were fighting more stringent banking regulation and even pushed for leaner rules. I can't tell if any regulation had been proposed that would have addressed or prevented this outcome, which is the result of really unprecedented economic conditions.

But I do wonder when we're going to learn our lessons about creating these perfect pro-growth storms. We're forgetting the lessons of the 1920s and 30s. This is not the worst that can happen. The 2008 scenario - as bad as it was - isn't the worst that can happen. The worst that can happen is a situation in which there is massive unrealized risk that spreads far wider across all the major institutions that results in catastrophic losses that even the taxpayer can't bail out. We think it can't happen, but it can, especially as we are dealing with budding crises on multiple fronts.

 

[beagle9]

This isn’t political. This the result of the repeal of anti trust laws in the 80’s, and the repeal of Glass-Stegall in the 90’s.

It’s a concerted effort since the 30’s by the Wall St class to repeal as much of the New Deal regulations as possible.

Which were put into place for a good reason by a President popularly elected by the people, Four times for a good reason.

Any system where 5 people have more money than 50% of the population, and banks with hundreds of billions in assets that fail anyway, is a failed system.

It’s allowed to continue only because of the true elites of the Wall St class, and the politicians they pay off to keep it that way.

Good post, and as you say it takes two to tango. The government is involved or it doesn't happen. People always protect their own, but like you say this shouldn't be political, but more about who keeps breaking the law, and who keeps letting them. I thought the government has former wall Street crooks that are serving time, otherwise working with them to stop this kind of stuff ?