The "total and utter incompetence” of U.S. authorities.
The "total and utter incompetence” of U.S. authorities.
'It is now clear that SVB was run by monkeys.'
At $2 a share, JPMorgan is buying Bear Stearns for a third of the price at which the troubled firm went public in 1985. Only a year ago, Bear’s shares fetched $170…When the Federal Reserve helped plan a bailout in 1998 of Long Term Capital Management, the hedge fund, Bear Stearns proudly refused to join the effort. [Revenge is a dish best served cold, right? - RH]
Even up until last week, Alan "Ace" Greenberg, Bear Stearn’s chairman for more than 20 years and a champion bridge player, still regaled its partners over lengthy lunches about gambling with the firm’s money in its wood-paneled dining room.
Interesting that college dropout Jeff Epstein went from teaching at the Dalton School to working for Bear Stearns' Ace Greenberg: Greenberg was also impressed by Epstein, then 23, a two-time college dropout and son of a parks department employee.
One of the last acts of Bear Stearns’ CEO, Jimmy Cayne, was to make a $2 million payment to a woman who charged that the legendary Chairman of Bear Stearns, Ace Greenberg, had engaged in “inappropriate touching.” The young woman was said to have had a witness to her charges.
Small world, huh?
I don’t see too many David Stockman podcast interviews, so here’s a new one. David wrote a good book about the bubble before this bubble but after that other bubble, called The Great Deformation. I always loved this passage, still quite timely today:
The fact that the abysmally unqualified Kashkari led the bailout brigade while Bair was systematically excluded from the process speaks volumes as to how completely public policy had fallen into the clutches of Wall Street. Kashkari and his posse had no sense whatsoever about the requisites of sound public finance. So in the fog of Washington’s panic, prevention of private losses quickly and completely supplanted any reasoned consideration of the public good.
Looks likes Credit Suisse is out of the woods…
The Federal Reserve is responsible for supervising--monitoring, inspecting, and examining--certain financial institutions to ensure that they comply with rules and regulations, and that they operate in a safe and sound manner.
Only six days until the next FOMC Decision!!
If you were really interested in the ecosystem, if venture capital is so important to innovation, why was the solution not to actually orchestrate a massive buyout, but instead to say ‘let’s beg the Federal government for a bailout,’ even though we don’t believe in bailouts…I mean, all of this, when you spend a few seconds looking at the response of these people, it’s the most selfish, craven, childish and greedy response they could’ve possibly had - that’s because that’s who they are…
One of the big SVB depositors who got bailed out:
Europe’s financial regulators are furious at the handling of the Silicon Valley Bank collapse, privately accusing US authorities of tearing up a rule book for failed banks that they had helped to write…
One senior eurozone official described their shock at the “total and utter incompetence” of US authorities, particularly after a decade and a half of “long and boring meetings” with Americans advocating an end to bailouts…
A former senior UK policymaker who helped negotiate global standards for bank resolution described the SVB handling as a “disaster”.
“It is now clear that SVB was run by monkeys.” - Yves Smith
Good interview with Michael Hudson. Transcript is here.
I should note that Michael Hudson is not a conservative Republican. He “identifies himself as a Marxist economist":
President Biden decided to bail [Silicon Valley Bank] out and then blatantly lied to the public by claiming it’s not a bailout.
How can it not be a bailout? He bailed out every single uninsured depositor because they were his constituency. Silicon Valley is a Democratic Party stronghold, as most of California is.
There’s no way that Biden and the Democratic Party was going to let any wealthy person in Silicon Valley lose a penny of their deposits, because it knows that it’s going to get huge campaign contributions in gratitude for the 2024 election.
So the result is that of course they bailed out the banks and President Biden weaseled his way out of things by saying, “Well, we didn’t bail out the bank stockholders. We only build out the billions of dollars of depositors.”
For those new here, any criticism of someone from one party is in no way an endorsement or apology for the actions of another party. I’m bipartisan - I loathe both major parties.
Speaking of Marxists, taxpayer-backed failed Silicon Valley Bank, which 'had no risk management whatsoever,' donated over $70 million to “BLM Movement and Related Causes”:
California Gov. Gavin Newsom praised the Biden administration’s decision to intervene on behalf of Silicon Valley Bank’s clients after the bank was taken over by the Federal Deposit Insurance Corp. last Friday amid a bank run…
CADE, Odette, and PlumpJack, three wineries owned by Newsom, are listed as clients of SVB on the bank’s website. Newsom also maintained personal accounts at SVB for years…
Newsom also didn’t mention his wife Jennifer Siebel’s professional ties to the bank. In 2021, Silicon Valley Bank gave $100,000 to the charity founded by Siebel, the California Partners Project, at the request of Newsom. John China, president of SVB Capital and responsible for SVB’s funds management, is himself a founding member of the California Partners Project’s board of directors.
FT: “A second ex-executive in SVB’s senior finance function added: “There was an overemphasis on things that weren’t important and not enough on things that are.”
“…another [SVB] former executive, who recalled weekly internal “TED talks” on social issues and classes on “how to make sure you were not committing a microaggression”.”
From the FT comments:
Bank making lazy, easy money returns on treasuries/MBS gets caught with no trunks on when the interest rate tide goes out. And the CEO didn't know this was going down and sold a big chuck of stock blind only 2 weeks before.
The Californian regulator was clearly asleep at the wheel. Why were the assumptions behind the deposit modelling not challenged ? In particular given the massive increase in the balance sheet and deposit base over a short period. No way there was robust data behind that to support such aggressive deposit assumptions ! And the interest rate risks were not modelled appropriately at all it seems. With those unrealised losses, regulators should have stepped in 6-9 months ago !
Rational Walk has a nice explainer on some differences between banks and insurance companies
From Grantspub.com:
The Ark Innovation ETF enjoyed a net $397 million of inflows on Friday, data from Bloomberg show. That’s the most bountiful one-day haul since April 2021, equivalent to more than 5% of the fund’s assets under management.
Some things never change.
Western reporters like Liesman seemed to distrust reports of widespread public despair over the Yeltsin regime’s criminal policies, preferring instead to rely upon the stock market, the pronouncements of the IMF and the results of Russian state-produced macroeconomic reports to tell them how the Russian economy was doing.
…Liesman fell into the classic trap of making one small group of English-speaking Russian politicians his most trusted source of information. That clique–including privatization czar Chubais, early Prime Minister Yegor Gaidar and allies of theirs like onetime property chief Maxim Boycko–was often referred to by Russia observers as the “St. Petersburg Mafia”
…Liesman’s unwillingness to report any negative news associated with the St. Petersburg Mafia first became glaringly obvious in early 1996, when he called privatization “the most successful and important of Russia’s reforms.” Part of the privatization effort that Liesman praised, the notorious “loans-for-shares” auctions, had just created a national scandal due to their overt criminality…
Liesman’s bureau was little more than a PR conduit for a corrupt regime, consistently averting its eyes from the ugly truth.
Today’s CNBS drinking phrase is “fortress-like balance sheet.”
“Don’t kid yourself. If Goldman and Morgan Stanley collapsed, you could forget about JP Morgan’s “fortress balance sheet”.”
Inversion Watch: At this second, the 3-month T-Bill is 130 basis points above the 10-year yield.
“If you can depreciate a currency what you’re really lowering is the price of labor.” - Michael Hudson, 2018
"We should be happier to have a job than to have our savings protected" - Christine Lagarde, October 2019
“The only thing I could say,” Black told The Debrief, “is that there was zero evidence of wolves.”
“Yahoo’s Marissa Mayer is just the latest CEO to fail at her job, see her company merged, and float away on a huge golden parachute.” Yay!
Sam Bankman-Fried said to have taken $2.2bn from FTX entities “Inquiry by bankrupt crypto exchange’s new management identifies $3.2bn in transfers to inner circle”
I mean, it’s not like $2.2 billion is a lot of money. That’s only like a half-day of Fed QE.
Congressman, I couldn't agree with you more that inflation is a tax and that inflation currently is too high. And it's a top priority of the Federal Reserve to run a policy that's going to bring inflation to a(n) acceptable level consistent with price stability as we go forward. - Ben Bernanke, July 16, 2008
So yesterday I turned on Substack’s subscription payments, which Substack routes to Stripe. A number of people signed up right away, and that was great - for about about five minutes until Stripe banned me. It felt like Twitter!
Anyway, apparently it was some mistyped information or something, and the Stripe folks took care of it today (thanks particularly to “D” for the help). I got no help from Substack though, which was a bit annoying (thanks to Linda, though, who did try).
I’ll probably start doing paid posts from now on, with some free ones mixed in maybe. All my old posts are free, and there’s a ton of stuff there.
I’ve gotten some very nice comments from people about subscribing (and at least one guy who thinks I’m an idiot who will not be subscribing!)
Remember, tomorrow is St. Patrick’s Day and you know I love the Irish, so you might get a day off.
Sláinte!
I’ve had repeated problems with Substack not accepting payments from me to various other “writers.” Payments always go through for some and never for others. There is an apparent correlation to the politics of the writer. Also I’m sure I’ve been on “the list” since I bought my first copy of Bill Cooper’s BEHOLD A PALE HORSE.
I know it looks a bit cheesy but I’ll recommend buymeacoffee again. Never had an issue with payments or receipts.
You are a national treasure. My stomach hurts from laughing so hard. And, yes, I will be subscribing.