Behind the Banking Crisis.

I want to recommend a good piece at Conservative Tree House, which I read every day.

It is this post which connects a few dots.

This is where we need to keep the BRICS -vs- WEF dynamic in mind and consider that ideologically there is a conflict between the current agenda of the ‘western financial system’ (climate change) and the traditional energy developers. This conflict has been playing out not only in the energy sector, but also the dynamic of support for Russia (an OPEC+ member) against the western sanction regime. Ultimately supporting Russia’s battle against NATO encroachments.

The war in Ukraine, which probably would not have begun if Trump was president, led to a war of economic interests. The western democracies have invested their future in “climate change,” which used to be “global warming” before the failure to warm made that slogan obsolete. Climate change has evolved into a war on energy production. The Biden regime now has even gone after gas stoves. Since I just bought one, I have an interest. Now, they seem to be going after washing machines. Ours has failed recently so I had better be quick to replace it.

The recent Credit Suisse bank crisis is complicated by the refusal of its largest shareholder, the Saudis, to help with a bail out. Why would this be ? This brings up the topic of BRICS. This is a new financial combination made up of Russia, China, Brazil, India and South Africa.

The BRICS were originally identified for the purpose of highlighting investment opportunities and had not been a formal intergovernmental organization.[6] Since 2009, they have increasingly formed into a more cohesive geopolitical bloc, with their governments meeting annually at formal summits and coordinating multilateral policies;[1] China hosted the most recent 14th BRICS summit on 24 July 2022. Bilateral relations among the BRICS are conducted mainly on the basis of non-interference, equality, and mutual benefit.[7]

Why would Russia be seeking an alternative to the G7 since 2009? Maybe the increasing rivalry with the US and NATO?

In March 2014, at a meeting on the margins of the Nuclear Security Summit in The Hague, the BRICS Foreign Ministers issued a communique that “noted with concern, the recent media statement on the forthcoming G20 Summit to be held in Brisbane in November 2014. The custodianship of the G20 belongs to all Member States equally, and no one Member State can unilaterally determine its nature and character.” In light of the tensions surrounding the annexation of Ukrainian Crimea by Russia, the Ministers remarked that “The escalation of hostile language, sanctions and counter-sanctions, and force does not contribute to a sustainable and peaceful solution, according to international law, including the principles and purposes of the United Nations Charter.”[36] This was in response to the statement of the then Australian Foreign Minister Julie Bishop, who had said earlier that Russian President Vladimir Putin might be barred from attending the G20 Summit in Brisbane.

So, who started this ?

Now, the Saudis and Iran plan to join BRICS It seems a new alliance is forming.

an alliance based on energy policy.

Again, I go back to the geopolitical map. The yellow nations with sanctions against Russia are also the yellow nations driving the ‘Build Back Better’ climate change energy policy. The grey nations are not in alignment with either dynamic. It is not a coincidence the banking issues are all within the yellow nations.

Another way to describe these alliances is the yellow countries are all in for “climate Change” and elimination of “fossil fuels.” Those in gray are either fossil fuel producers or are in favor of continuing the conventional uses of energy.

Yellow Team -vs- Gray Team: Remember, China just brokered a deal to lessen hostilities between Iran and Saudi Arabia. The fulcrum of that agreement was economics.

Meanwhile in North America, Mexican President Andres Manuel Lopez-Obrador has said he was not willing to join the energy suicide pact pushed by Joe Biden and Justin Trudeau…. A policy break in the trilateral relationship which suddenly, and not coincidentally, aligns with the timing to make Mexico a pariah to the U.S. vis-a-vis a renewed media push on the drug cartel narrative.

BIG PICTURE NOT BEING DISCUSSED – The western politicians followed the climate change instructions of the WEF multinational corporations and banks (Build Back Better) and post-pandemic immediately started reducing energy development. The central bankers then began raising interest rates to shrink the economies of the same western nations to the scale of the now diminished energy production.

The raising of interest rates, while late in the present circumstances, is the conventional way to fight inflation. I have memories of 21% mortgage rates in 1980. However, we have never seen levels of national debt like this since World War II and even then it was held by US citizens with war bonds. We are in uncharted territory economically and I see no recognition of the plight we are in by the Marxists currently running our country. The climate delusion, if not refuted at some point, is a suicide pact by the West.

Biden’s promise to refund all deposits, even those above the statutory limit of $250,000. “nationalizes all bank deposits,” and resembles the South Sea Bubble of 1720.

Then, in 1720, parliament allowed the South Sea Company to take over the national Debt. The company purchased the £32 million national debt at the cost of £7.5 million. The purchase also came with assurances that interest on the debt would be kept low.

Interesting how history repeats itself, first as tragedy and then as farce,

26 thoughts on “Behind the Banking Crisis.”

  1. The assertions of moral hazard seem questionable. Remember, the bank was destroyed. Stock and most bonds went to zero. Executive stock positions and stock options are now worthless, and both executives and board members will likely face extensive and very expensive litigation. This all seems like a pretty good don’t-let-this-happen-to-you incentive for others going forward.

  2. The question is whether it is contagious. The same cause might be in the obsession with fossil fuels. I doubt most leftists even know about petrochemicals.

  3. “The assertions of moral hazard seem questionable.”

    Yes, executives and stockholders in SVB may get burned — but what about the depositors? The depositors who placed individual accounts in the $Million range (far above the DCIC insured range) all get their money back. That is where the assertions of moral hazard are accurate.

  4. Gavin…I understand that point. But putting money into a *checking account* or similar at a regulated commercial bank shouldn’t require due diligence on the level of that appropriate when investing in a stock or an angel deal or a VC fund.

    Companies or funds putting in say $100MM are large enough to have a Treasury department and devote resources to studying risk in various banks. But there are plenty of startups and early-stage companies that have 5-10 employees, some of whom are part-time. Given all the activities and risks that founders need to worry about, is it likely that the safety of a checking account in a 40-year-old highly-respected bank would rise to the top of the stack? Is extensive due diligence on checking accounts, conducted by every corporate and large individual depositor in the country, really a good use of resources?

    It’s not a perfect analogy, but how many people research the safety record of a US scheduled airline before booking a ticket?

    Looking forward, one possible approach would be that banks are required to offer optional insurance above the $250K level, up to perhaps $5 or $10 million, that insurance to be provided by commercial carriers which would be strongly incented to research banks very carefully.

  5. Looking forward, one possible approach would be that banks are required to offer optional insurance above the $250K level, up to perhaps $5 or $10 million, that insurance to be provided by commercial carriers which would be strongly incented to research banks very carefully.

    I agree but there are some accounts that had $250 million and will be bailed out b y taxpayers. Even NPR sees what it is.

    “If your definition is government intervention to prevent private losses, then this is certainly a bailout,” said Neil Barofsky, who oversaw the Troubled Asset Relief Program, the far-reaching bailout that saved the banking industry during the 2008 financial crisis.

    Under the plan announced by federal regulators, $175 billion in deposits will be backstopped by the federal government.

    Officials are doing this by waiving a federal deposit insurance cap of $250,000 and reaching deeper into the insurance fund that is paid for by banks.

    This whole thing resembles the 1980s S&L bailout and for the same reasons.

  6. All these years when you and I thought that $250,000 limit on insured deposits was real, well, it turns out the actual limit was to infinity and beyond. One minor point, you and I paid for that measly $250,000 insurance with lower interest rates. The banks take the FDIC assessment straight off the top. Not so for jumbo accounts. There are provisions for and you can buy insurance to cover that risk but like the junker spewing smoke and miscellaneous parts as it bounces down the hiway, these masters of the universe had better things to spend their money on than insurance. With so many banks sitting on these huge accounts, they bet that they were safe.

    Since all these outsized accounts have been insured de facto all these years, I have a modest proposal. Trace each of these accounts back to the day it first exceeded $250,000 and calculate an appropriate assessment to cover the unfunded risk. The account holder can pay this amount and ongoing costs of insurance henceforth or their account will be frozen to allow the bank to undertake the orderly liquidation of assets so they may be paid.

    Consider that it takes at least 400 normal depositors to make a $100,000,000 run or one of these super geniuses to wake up with a bright idea. Do they still give toasters for starting a new account? I foresee things getting a lot more complicated for CFO’s.

  7. Remember, being on the right team means you never have to say you’re sorry.

    And why should you?

    Several executives, including the bank’s president of private wealth management, the chief credit officer, and the CEO, sold a combined $7 million in shares in the two months leading up to the stock’s crash. Executive Chairman James Herbert II also sold $4.5 million worth of shares in the same timeframe.

  8. I’m having a hard time following the logic of Sundance’s article, I mean seriously the Saudis as a global disruptor? That’s for starters.

    The most unremarked part of the collapses is the presence of Barney Frank on Signatures board and what worries me the most about it is that his presence.(pre-collapse) is considered unremarkable. Frank is the quintessential political creature with 40 years in elected office, 30 in Congress its all he knows.

    Don’t get me wrong, I see logic in having a guy with political experience on the Board. His appointment could be quite innocent and there is no obvious pro quid pro. However this is the guy who chaired the House Financial Services Committee and was of Dodd-Frank fame and it stinks

    A while back I was asked to give comments on political corruption and being in Maryland at the time I used some local examples. Corruption has moved beyond Spiro Agnew’s bags of cash. Rather it’s gotten more sophisticated with politician’s kids being the bag men (Hunter) or using book sales for city contracts (Catherine Pugh)

    An even softer, subconscious form of corruption is the prospect of post-office employment affecting in-office decisions. Retired flag officers going to defense contractors? Retired regulators going to industries they regulated? What about congressional critters? Even with a cooling off period, it’s human nature to not antagonize a prospective future employer

    The fact that Frank’s board slot.hasn’t generated more.outrage is not only it’s commonplace but that those we expect to be outraged on our behalf don’t want to upset the apple cart because they too want to cash in

  9. David Sacks: “”The person who is licking his chops over this whole thing, who doesn’t want a bailout of the regional banks, is Jamie Dimon because he manages JP Morgan Chase, the biggest bank. So I don’t get these would-be populists who think they are being helpful here; all they are doing is being useful idiots for the big four banks because without the government intervening to solve the mess that they created, all the cash goes to the top four banks.

    My view is we need a vibrant regional banking system in this country because if you don’t have that, our freedom is going to be greatly curtailed. The easiest way to have a social credit system is to force everybody’s money into four banks, and then they can just implement the system through their terms of service. Who runs these four banks? All these people who are politically connected in Washington and Davos.””

  10. If you don’t believe that Climate Change is a real problem, then the actions of my government in Canada and yours in America, seem insane. If you do believe it is a real and worsening problem then you lot are crazy, and most of the first world’s governments are doing what they can, not much, to deal with it.

    As to the war in Ukraine, it can be easily shown to be entirely America’s doing.

    It was QE that began in 2008, when the fan was seriously threatened, a result of decades of indulgence, that has screwed your, and the rest of the world’s financial pooch. This so badly broken now the incoming depression will probably last a long time.

    Thanks America.

  11. If you don’t believe that Climate Change is a real problem, then the actions of my government in Canada and yours in America, seem insane.

    Agreed. The motives for the moral panic, and “climate change” is definitely a religion, are obscure. It may have begun as a clever way to get politicians to fund climate research but it has gotten out of control with politicians like Castro’s son attacking agriculture up north when that is the principle source of Canada’s revenue. The Dutch farmers have struck back but they are outnumbered by city dwellers who are still in the grip of this delusion.

  12. The Saudis are players based on their money, and the prevalence of people willing to sell themselves for money. Biden’s war on US oil production has probably helped the Saudi bank accounts, returning them to their earlier role of big ticket players.

  13. The Board of SVB included only one member with extensive banking and economic expertise, all the others were typical representatives of stakeholder values and NGO/non-profit political operators. Their interest rate risk management was egregiously bad following a period of helicopter cash, insane government spending, and subsidized green and ESG related startups in their loan portfolio.

    The moral hazard is not the typical financial risk of uninsured excess deposits, but the nakedly political nature of the FDIC/Treasury/FED policy making.

    Sundance at Conservative Treehouse is a faintly ridiculous propagandist who finds conspiracies everywhere that support his agenda. More serious commentators have observed the Western lunacy of pushing decarbonization and similar green agenda and “equity” investment coupled with governmental punishment of rational and productive investments.

    BRICS, MENA, Latin America, and especially the China axis see through the delusions and pragmatically pursue their true interests. Even in the West, the hypocrisy of Germany (nuclear bad, lignite good) shows the delusions are not sufficiently strong just yet to overrule simple self-preservation.

    The rot runs deep, Gramscian as well as techno-utopian. But alignment of interests is a stronger likelihood than WEF deep conspiracy.

  14. Climate change is obviously real. Sea levels rise faster than before, rising average global temperatures and sea temperatures, Arctic, Antarctic and glacier melt all significant everywhere. Species extinction at an accelerating rate is real too, somewhat known to be attributable to habitat loss which in turn is somewhat attributable to climate change [but also to more mundane environmental factors, expanding human habitation, etc. and maybe still-unknown factors]. Consequences like desertification are real too, though desertification has and will continue to have other causes as well, and of course some places will get wetter as those places get dryer.
    All of which seems indisputable on easily observed facts that are unlikely to be a titanic weight of multi source lies.
    It would be bizarre if human industrialization the last couple of centuries had NOT had any effect. The output has been substantial and unprecedented. Sure, nature itself has thrown a lot of stuff up in the past but, then, usually with even more radical climate impacts.
    Even the medium let alone worst case scenarios on the table will present serious problems for human civilization, economic, political, demographic, and environmental including protection of unfortunately located habitations, which is many of them. These are not trivial. And those of us living in the castle on the hill will benefit by mitigating the problems somewhat to reduce the number of the mobs around the walls.
    But, there are countervailing factors.
    One is just the sheer annoyance of being told every year that we have 5-10 years until we are doomed, for 40 years now. I appreciate that this is somewhat a trivial consideration, but it is also not, and I do not respect those on the advocates’ side who dismiss these profound failures and panics as though they cannot have had an impact on the thoughts of rational people.
    Another is the assumption we will all be extinct. The last time I looked, the worst case scenario on the table should not end high tech civilization, let alone civilization, let alone the human race. Stop saying that.
    A third was the idea, current around the turn of the century, that technological solutions were all pie in the sky, distractions from the fascists and capitalists trying to avoid the vital near total emission cuts that, in 2000, would have meant the end of technological civilization and were rightly deemed impossible by sane people. Now that technological solutions are OK again, the people who pooh poohed that approach have no memory of doing so.
    A fourth is the failure to realize that the contest for the future is still on. Western countries do not do themselves favours by committing suicide while China or even India go from strength to strength.
    The situation is not simple, not obvious, and there is not a clear path unless the end of the west and the dominance of China is actually the goal. Which for some it is.

  15. Sundance at Conservative Treehouse is a faintly ridiculous propagandist who finds conspiracies everywhere that support his agenda.

    I don’t buy his conspiracy theories about WEF but the facts are what they are. Only the countries with “Green” agendas that oppose traditional energy sources are having bank troubles. Much of this is due to inflation, which is why I compare it to the 1980s S&L crisis. At least most S&Ls were not involved in weird delusions like CRT and climate hysteria.

    By the way, is still above water.

    There are rock jetties and docks in the Med which have been unchanged in 2000 years. Same water level. Those affected by erosion or river deltas, like Ephesus, are not due to sea levels.

  16. Mike K – that was my tongue-in-cheek point. Back when I still rode a dinosaur to school I noticed an argument style where a very dramatic statement was made, immediately followed by a rush of statements. Either the speaker didn’t want to step back and examine the dramatic statement, or he/she didn’t want the listeners to step back and examine it.

  17. But putting money into a *checking account* or similar at a regulated commercial bank shouldn’t require due diligence on the level of that appropriate when investing in a stock or an angel deal or a VC fund.

    That’s exactly what the FDIC limit indicates. You can, if you like, advocate for bumping the level of insurance up. But the existence of the FDIC should damn well tell you that banks carry risk, and if you can’t be bothered to assess that risk, then you ought not be playing the game, and your losses from ignoring that risk are an obvious consequence of making stupid assumptions.

    Heck, one of the limiters on what banks will do with the funds they caretake is supposed to be that large account holders won’t deposit those large amounts in a bank that might kill itself; the very fact that nobody is apparently paying attention is proof that the system is broken/everyone assumes that with just a little bit of political arm twisting the government will cover it.

    Which doesn’t even get into the legality of the bailout; what the FDIC covers is spelled out in statutory language; using it to cover anything beyond that seems obviously illegal, although I’ve seen no one actually commenting on the legality, just on whether or not it’s wise.

  18. There are rock jetties and docks in the Med which have been unchanged in 2000 years. Same water level.

    If I recall, there is also a set of stairs carved into a rocky New Zealand shore which has shown no rise in the last hundred years.

    But in any case, if measurable increase in sea level was occurring we’d never stop hearing about it.

    Instead, I’ve seen computer generated simulations of what various cities will look after the sea rises.

    Not quite the same as an actual event, in my view.

  19. …I’ve seen no one actually commenting on the legality, just on whether or not it’s wise.

    I noticed the same.

    I recall years ago reading of a truck driver who managed to save up something like $900k only to lose most of it in a failed bank, with the letter of the law waved in his face to justify the refusal of the FDIC to cover his loss.

    Now I get to watch various rich donors to the demonrat party get made whole, when their woke bank implodes, because reasons. The law is not waved, but waived.

    By now, I figure anyone paying attention has figured out that the law is another sham, intended to justify whatever the regime is doing, if needed, and otherwise ignored, if needed.

    If it is needed to keep anti-regime protesters in prison without trial for years- well, then we must follow the sacred letters of the law, all of them, so we can’t just let them pay a fine. I’m sure there’s a court decision that explains why keeping those people in jail for years doesn’t violate their right to a speedy trial, because of course there is.

    Similarly, it also doesn’t violate the law when murderers, rapists, shoplifters, arsonists, etc, are released after arrest, over and over again, by criminal loving prosecutors who feel bad for them.

    The law is whatever the regime needs it to be. I’d bet somewhere in the millions of pages of law-words that comprise the US code there is complete legal justification for bailing out wealthy depositors, and of course the justification for not jailing the swarms of antifa arsonists is the completely legal prosecutorial discretion.

    Apologies for rambling off topic, but that’s why I didn’t make this comment yesterday. I knew it would do so. But yes, Boobah, the lawlessness was noticed, even if no one bothered to comment upon it.

  20. My bank due diligence began and ended with being sure I was dealing with a bona fide FDIC insured bank. I’ll bet most of you did the same. The limit isn’t an issue. While not totally innocent of balance sheets and accounting, I doubt I would have caught SVB’s problems if I had looked and, again, I’ll bet most of us are in the same boat.

    At some point, long before my balance approached 9 figures and taking cognizance of the well documented limit of automatically insured deposits, I would have made arrangements to limit exposure. I can remember hearing about companies devoting a fair amount of attention to doing just that as well as maximizing returns on loose cash..

    What seems to have happened is that the long period of near zero short term interest rates encouraged a lot of people to get lazy and complacent. Since there was no return to be made, why waste the effort and cost to shuffle funds between different accounts? What could go wrong?

    One can imagine a banker being disquieted by the prospect of having to make good on those huge balances on no notice. Since I read this morning that there are at least 200 more banks in the same danger as SVB, I must have an overactive imagination. At least, no one was misgendered or deadnamed. It’s only money after all.

  21. At some point, long before my balance approached 9 figures and taking cognizance of the well documented limit of automatically insured deposits, I would have made arrangements to limit exposure.

    Unless, of course, you were a well connected big time Democrat donor.

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