The Silicon Valley Bank Bailout Is The Latest Reason The Uniparty Needs To Go 

Maxine Waters, Mitt Mitt Romney and Janet Yellen, Treasury Secretary Janet Yellen and all other Washington politicians can agree on one point: Silicon Valley Bank (SVB), executive should lose their jobs. Equity holders should also lose everything. However, SVB depositors must be compensated. 

“Failing to intervene and make sure depositors get all their money back will hurt normal people and destabilize the entire U.S. banking system,” They say. They also assure us that this is not a bailout. Many of the Nationalist Right These talking points were echoed by others. 

They are mistaken. They don’t know the banking system, the regulations and the incentives that are being created. At worst, they are — as is certainly the case for Democrats like Eric Swalwell — arguing solely for the interests of large and wealthy investment firms that had money at SVB without regard for the interests of normal working Americans. 

We need to understand the reasons by looking at what happened to SVB during the crisis. 

Silicon Valley Bank Collapses

SVB has seen a tremendous increase in its value over the past 10 years, as cheap capital was flooded into the sector by the Federal Reserve’s Easy Money Programs.

Banks are responsible for managing assets and liabilities. Assets include loans and government securities, while liabilities include deposits and debt. SVB’s core business was serving Silicon Valley’s entrepreneurs and wealthy investment funds that buy and sell these startups. That meant taking in an explosion of deposits from these investment funds as cheap money from the Fed flooded in — a liability — and making loans to startups and venture capital funds with those deposits — an asset.  

SVB, however, used its rapid deposit growth to plough, unlike other banks where only 75 percent of deposits are used for loan purposes. It owns nearly 60% of its assets into government securities — some treasuries but mostly mortgage-backed securities. These securities can be purchased in the following ways: “safe,” This means that these securities are not subject to default risk. However, they do fluctuate in value as interest rates change. This is why most banks will pay to remove this interest rate risk or have them hedged. SVB’s huge bond portfolio was not hedged. SVB was betting on lower rates by using customer deposits. It didn’t turn out that way as rates increased throughout 2022. 

Once depositors figured out that any selling of the unhedged bond portfolio to meet depositor withdrawals would lead to big losses and be unable to cover all withdrawals, there was a rush to the exits — a bank run. 

Financial media have covered everything, but left out two important points. The first is that nobody knows how solid the remaining 40 percent of SVB’s assets, which were granted as loans. These loans were at least partially given to failing speculative technology or cryptocurrency companies.

Second, SVB’s bank run was not the type you see. “It’s a Wonderful Life.” SVB’s depositors aren’t small business owners  — who are covered up to $250,000 by the FDIC — they are some of the most sophisticated and wealthy financiers in the world. They have been a huge beneficiary of the Fed’s easy money policies for the last 10 years. But now, they are being hurt by the reverse. The cast of characters above aren’t advocating for FDIC-insured amounts being met. They specifically advocate that all persons with more than the FDIC insured amount be fully compensated. 

These depositors were not only sophisticated but also took a calculated risk in order to receive a higher rate of interest on their SVB deposits. SVB was a risky investment, and publications such as Grant’s Interest Rate Observer had warned about its portfolio of bonds for a while. The majority of these depositors are wealthy donors to the Democrat Party, and other leftist causes. This makes it easier for the government to act. 

Yes, it is a bailout

If the Biden administration, or any other cast member insists that this isn’t bailout, it is a game of word games. They insist that the taxpayer isn’t being rescued. “on the hook,” This is a fabrication. It is a lie. “taxpayer” It isn’t worth it, but “bank customers” They are all over the country. An FDIC fund that essentially taxes banks — including the small bank in your hometown — is being used. The Deposit Insurance Fund held $128 billion as of last year. 

SVB had $175 billion of deposits. However, only 89 percent, or $156 trillion, were insured. This was because the $150,000 FDIC insurance limit was exceeded. The insurance fund may be completely overwhelmed depending on how severe the SVB asset writedowns are. This is still to be determined. Again, “bank customers” The difference would be made up by the worker. The fact is that Americans who work are a majority of the population. They are subsidizing once more the bailout of coastal oligarchs.

This creates an incentive or moral hazard where large, wealthy entities can search for the bank offering the highest return on their deposit, no matter how irresponsible the bank’s behavior. They believe that they will be reimbursed their money in the event of a bank collapse. Arguments that SVB depositors would suffer a small decrease in their deposits over $250,000 could cause a banking collapse are also disingenuous. Because the Democrats’ 2011 Dodd-Frank legislation created some large banks that were basically deemed to be “essentially” banks, there is reason for concern. “too big to fail,” The money will then flow from deposits at banks such as SVB and smaller regional banks to the too-big–to-fail bank. 

SVB’s unhedged bond portfolio and the associated risks are very high. Out of step With the rest of the U.S. bank system. There are many ways to combat this risk if it is an issue. One option is to increase the amount of FDIC insurance. The government could also offer to intervene in the event of a bank’s financial problems. It doesn’t matter if rich SVB depositors are not made whole, it isn’t a serious situation. 

Market chaos will only serve to further prove this point. One, the U.S. is in a significant slowdown. More is at work than the banking sector. Another reason for the stress on the banking industry is that Fed easy money policies have created excess (and inequality). This will continue to be exposed during the slowdown. 

Get rid of the bums

The politically connected got immediate relief from Washington. We will have to deal with any incoming waves of unemployment, market stress, or other banking problems because none of the core problems are being addressed.

Politically, there are two problems. The Democrats, despite being totally oligarchic and controlling a large portion of the country’s lower class, are still in control. The Republicans, the junior party, practice buffet-style libertarianism. Republicans like Romney pretend to believe in markets but always clamor to intervene when they or their friends are affected — even while they couldn’t care less about the economic problems facing their actual voting base. 

The time is right for the United States to crack down on its political system. Radical populism, which makes Donald Trump appear tame in comparison, is the answer. Of course, any more bank bailouts should be paid for by taxes on the rich — they are the ones who benefit, after all. We should, however, let SVB fail and its depositors lose, while we reintroduce manufacturing jobs to the heartland. 

The government will always choose winners and losers. It is time for the roles to be reversed.