The current blame game going on about the SVB collapse is a diversion. The media has jumped on board to provide a smokescreen so that the public will not see then obvious culprits here. We are hearing about Trump, greed by the companies involved, bad law, lax regulators, etc. None of this comes close to hitting the target. Biden and his handlers are to blame.
Simon Black, that’s a pseudonym, points out:
Silicon Valley Bank was no Lehman Brothers. Whereas Lehman bet almost ALL of its balance sheet on those risky mortgage bonds, SVB actually had a surprisingly conservative balance sheet.
According to the bank’s annual financial statements from December 31 of last year, SVB had $173 billion in customer deposits, yet “only” $74 billion in loans.
I know this sounds ridiculous, but banks typically loan out MOST of their depositors’ money. Wells Fargo, for example, recently reported $1.38 trillion in deposits. $955 billion of that is loaned out.
That means Wells Fargo has made loans with nearly 70% of its customer’s money, while SVB had a more conservative “loan-to-deposit ratio” of roughly 42%.
In 2008 the problem was that Lehmann Brothers had a considerable amount of their money tied up in mortgage bonds that became known as toxic assets. These toxic assets were of risky, no-money-down mortgages given to sub-prime “NINJAs”, i.e. borrowers with No Income, No Job, no Assets who had a history of NOT paying their bills. These toxic assets were bundled into bonds that were given a high rating.
So what kind of toxic asset brought SVB down? Black notes:
“SVB failed because they parked the majority of their depositors’ money ($99 billion) in U.S. government bonds.
“This is the really extraordinary part of this drama. U.S. government bonds are supposed to be the safest, most risk-free asset in the world. But that’s totally untrue, because even government bonds can lose value. And that’s exactly what happened.”
Let that sink in. The bank failed because they loaded up on US bonds! At the end of December SVB had roughly $15 billion in unrealized losses in US Bonds. This was due to the rising interest rates the Federal Reserve imposed to tame inflation.
Senator Fauxahontas Warren jumped into the fray probably hoping to get another bite of the apple at controlling all credit sources in the country. Either she is a complete imbecile or she is planning another failed run for the Presidency and saw a chance to lie to the American public again for her own advancement.
Warren wrote:
“Greg Becker, the chief executive of Silicon Valley Bank, was one of the many high-powered executives who lobbied Congress to weaken the law. In 2018, the big banks won. With support from both parties, President Donald Trump signed a law to roll back critical parts of Dodd-Frank. Regulators, including the Federal Reserve chair Jerome Powell, then made a bad situation worse, letting financial institutions load up on risk.”
Load up on risk? While I might agree that loading up on US bonds may not have been the best idea that SVB had, it hardly seems to be loading up on risk. Of course, Warren’s outrage is as fake as her Indian ancestry. Warren supports bailing out the billion dollar companies and venture capital firms that triggered the run on SVB. Warren is protecting people like Mark Cuban and other billionaires who donate vast sums to the Democratic Party.
Biden has said that no one is above the law. If we are making everyone play by the rules, then the limit of protection for insured funds should be $250,000. There should be no exceptions for those billionaires who happen to donate generously to political parties.
The real problem here for Biden, et al, is the collapse of SVB is on the federal government. SVB invested in the government and got burned for doing so.
SVB’s Board of Directors had only one director with any investment expertise. Was this the result of some DEI initiative?
What will be the effect worldwide of this? How many foreign entities are experiencing significant losses because they invested in US bonds? What effect will this have on the dollar’s status as a reserve currency? With Biden in charge why would anyone invest in US bonds?
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