Silicon Valley Bank was closed by bank regulators on Friday. In an unusual move the closure took place during the business day and not after the markets had closed. Its failure was the second largest in US history and the largest since the financial crisis of 2008. On Sunday Signature Bank was closed as well.
The main problem for these two banks has been the unlimited spending of the current administration. This caused raging inflation that the Federal Reserve has tried to tamp down by raising interest rates. The banks held significant portions of their assets in long term Treasury bonds. These bonds were only paying 1% to 1.5% in an environment where the Fed had raised rates 450 basis points during the last year.
This savaged the value of those bonds and made it difficult for the bank to meet day-to-day cash operations without incurring significant losses. In fact, if the bank had been forced to mark to market of their portfolio, they would have been underwater for some time.
Will this problem spread?
Just got off of a zoom meeting with Fed, Treasury, FDIC, House, and Senate.
A Democrat Senator essentially asked whether there was a program in place to censor information on social media that could lead to a run on the banks.
— Thomas Massie (@RepThomasMassie) March 13, 2023
Is there any independent or Republican in the country who is surprised by the fact that the Democrats would jump to censorship? Their standard operating procedure is to use any and every crisis as an opportunity to reduce the freedom and liberties of the American public.
EXCLUSIVE: Senator Mark Kelly Called For Social Media Censorship To Prevent Bank Runs
Democrats are demanding ever-more censorship in a widening social media panichttps://t.co/M0xEK0b2vb
— Michael Shellenberger (@shellenberger) March 13, 2023
I will ask Congress and banking regulators to strengthen the rules for banks to make it less likely that this kind of bank failure happens again.
We must protect American jobs and small businesses.
— President Biden (@POTUS) March 13, 2023
It is true that during the Trump administration banking regulations were changed. The particularly onerous and costly regulations were reduced for SMALLER banks. In a very real sense, a second banking system was created in this country. In this system were mostly community banks.
These banks that were taken over are not small banks. They are not part of the revised system of banking regulations. They were still under the regulations that Obama/Biden imposed. So, once again Biden is lying to deflect blame from where it should really reside which is with his administration.
About the Trump changes, Barney Frank (D), the former Financial Services Chairman, said, “I don’t think that had any effect. I don’t think there was any laxity on the part of regulators in regulating the banks in that category, from $50 billion to $250 Billion.”
Is this the first salvo in trying to take over the whole banking system, to nationalize banking for the benefit of the political elite? How about Central Bank Digital Currencies (CBDC)?
One question that should always be asked, “Why now?”