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Posts Tagged ‘Silicon Valley Bank’

Dailywire Article-Yellen Walks Back Implicit Support For Large Bank Account Holders, Prompts Investor Unease

Posted by M. C. on March 24, 2023

Big account holders know the limits. They assume a govt bail out if required. They also know banks must only hold 10% or less of deposits in reserve. Taxpayers take the hit per usual.

So what will old Yellen say next week? The fact that she was Fed chairman a few years ago tells US something about government banking. I don’t think anyone outside of Washington would hire her as their financial advisor.

By  Ben Zeisloft

Win McNamee via Getty Images

Treasury Secretary Janet Yellen prompted unease among investors after she appeared to walk back comments indicating that financial authorities would guarantee large bank deposits.

The recent collapse of Silicon Valley Bank, where the vast majority of accounts exceeded the $250,000 threshold guaranteed by the Federal Deposit Insurance Corporation, prompted the government-backed company to secure all accounts in order to prevent additional bank runs. Some investors have called for deposit insurance for all account holders across the financial system with balances above $250,000 until the crisis subsides.

Yellen vowed in remarks to the American Bankers Association on Tuesday that interventions similar to the one that protected Silicon Valley Bank account holders “could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion,” a comment that market actors interpreted as an implicit guarantee of all deposits. The senior Biden administration economist told the Senate Appropriations Committee on Wednesday, however, that she has “not considered or discussed anything” related to “blanket insurance or guarantees of all deposits.”

Markets slid on Wednesday afternoon as a result of the comments; officials at the Federal Reserve also announced an expected quarter-point target interest rate hike on Wednesday.

Pershing Square Capital Management CEO Bill Ackman had said that the earlier comments from Yellen “definitely help and hopefully mitigate the need for a temporary deposit guarantee.” He later added that the statement declaring that “systemwide deposit guarantees were not being considered” had the opposite effect.

“A temporary systemwide deposit guarantee is needed to stop the bleeding,” he contended. “The longer the uncertainty continues, the more permanent the damage is to the smaller banks, and the more difficult it will be to bring their customers back.”

Ackman noted that the rise in target interest rates to 5% renders bank deposits less attractive to savers and will prompt them to lend their money so they can benefit from the higher returns. “I would be surprised if deposit outflows don’t accelerate effective immediately,” he remarked.

Silicon Valley Bank fulfilled withdrawals by selling a long-term bond portfolio that had declined substantially in value amid Federal Reserve actions to hike interest rates. Assets in the banking system are now $2 trillion lower than their book value as a result of the rollback in monetary stimulus, which had been maintained to stimulate the economy during the lockdown-induced recession, according to a study from analysts at the National Bureau of Economic Research.

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Capitalism, except for the capitalists

Posted by M. C. on March 18, 2023

What happened over the weekend is bigger than Silicon Valley Bank; once again the wealthiest, most politically connected companies and executives are proving the rules don’t apply to them.

Eventually these excesses will have to be unwound, gradually or suddenly. When they are, you can bet that all the people who have made fortunes from cheap cash for the last 15 years will be reaching into someone else’s pockets to save themselves – just as they did over the weekend.And the only pockets left will be the federal government’s.

In other words, yours.

Alex Berenson

Back to the banks.

For a few hours on Sunday, they fooled me.

At 6:15 p.m. Sunday, the government and Federal Reserve announced they would guarantee all deposits at the two big banks they’d closed, Silicon Valley Bank and Signature Bank – removing the $250,000 limit on insured accounts to help prevent a bank run.

Taxpayers would not be on the hook for any losses, they said. The banking industry would pay for the extra insurance.

I didn’t think the deposit insurance should be extended at all.

When banks failed in 2008, we didn’t have unlimited deposit insurance, and we didn’t have widespread bank runs on healthy or unhealthy institutions. Very few individuals have more than $250,000 in their plain vanilla bank accounts (as opposed to brokerage accounts where they are saving for retirement).

So extending the limits at taxpayer expense to protect very wealthy depositors and – in the case of Silicon Valley Bank – venture-capital backed companies didn’t seem fair.

And we have limits on government backed deposit insurance for good reason. Without it, large depositors have every reason to chase the highest possible interest rates on their money, even at badly managed banks. Why? They know that even if the bank squanders their deposits on bad loans, they’ll get their money back.


This risk is not theoretical. In the 1980s, many savings and loans crashed after offering high-yielding deposits. As financial historian and journalist Roger Lowenstein explained yesterday in the New York Times:

When the Federal Reserve, under pressure of rising inflation, began to jack up rates, S.&L.’s had to pay higher rates to attract deposits…

Many switched to riskier assets to juice their returns, but as these investments soured, their problems worsened. Roughly a third, or about 1,000, S.&.L.’s failed.

But venture capitalists – led by David Sacks, a good friend of Elon Musk – spent the weekend screaming that bank runs would be inevitable if the government didn’t guarantee all depositors.

Many if not most of these folks had not-at-all hidden conflicts-of-interest – either personal deposits at Silicon Valley Bank or investments in companies that had deposits there. Nonetheless, they insisted that they were warning about bank runs solely because they wanted to save ‘Merica from bank runs!

Whether or not they were trying to worsen the crisis, their warnings certainly did. They essentially forced the government’s hand.

My old friend and colleague Jesse Eisinger (I guess he’s now a ex-friend, thanks to my reporting on Covid and the mRNAs, but that’s a story for another day) captured the dynamic nicely:

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“Woke” Asset Managers Stung By Silicon Valley Bank’s ESG Appeal | ZeroHedge

Posted by M. C. on March 16, 2023

Tyler Durden's Photo

by Tyler Durden

Never before has it been clearer how useless ESG investing has become than in the case of Silicon Valley Bank. The bank, which donated to Black Lives Matter causes and frequently touted its virtuous diversity and equity policies, has blown a hole directly through “woke” capital allocators who sought it out for this appeal.

…as opposed to…you know…the quality of the bank’s assets and its ability to generate cash. 

“Hundreds” of ESG managers have been stung by the Silicon Valley Bank collapse, Bloomberg has reported. A new report says that “915 funds registered under European Union regulations as either ‘promoting’ ESG or declaring it as their ‘objective’ had exposure” to the bank. 

The bank “tick[ed] several boxes” for these managers, including a low carbon footprint. However, the “G” in ESG – which stands for governance – seemed to take a back seat to the “E” and the “S”. 

Sasja Beslik, a sustainable finance veteran who’s now the chief investment officer at NextGen ESG told Bloomberg: “There are a lot of lazy asset managers taking ESG scores for granted. The bank’s failure was a sign that managers who go “all in on carbon are not necessarily managing other risks.”

Former senior banker at HSBC Rebecca Self said that focusing on just one component of the ESG moniker was the problem. But Rebecca – what ever happened to good ole’ ‘investing for returns’, we have to ask?

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