From: lessgovt@gmail.com   
      
   The Joe Biden Banking Crisis   
   By Holman W. Jenkins, Jr., March 21, 2023, WSJ   
   Some points worth considering in the recent bank bailouts:   
      
   • JPMorgan, Citibank and other giants provided $30 billion in deposits to   
   help shore up First Republic Bank, which makes them—guess what?—uninsured   
   depositors. If First Republic were still to fail and be seized by regulators,   
   would the $250,000    
   limit on insured deposits be waived for these conspicuously unsympathetic   
   lenders? The politics would be harrowing. No wonder JPMorgan and friends are   
   scrounging up an alternative private rescue for First Republic.   
      
   • Silicon Valley Bank failed because its “safe” assets declined in value   
   because of higher interest rates and inflation. Now the Fed, for purposes of   
   lending to the banks, is crediting this collateral with its original value. If   
   you could sell 65    
   cents to the Fed for a dollar, why would you ever reverse the transaction? You   
   wouldn’t. The Fed says the loan terms are limited to a year but the problem   
   is unlikely to be solved in a year.   
      
   • The dollar is faltering amid the predictable global flight to safety.   
   Dollar holders may be figuring out that they, and not just U.S. taxpayers,   
   have volunteered for unlimited dilution if the government needs to print money   
   to uphold the financial    
   system.   
      
   A great imponderable was Joe Biden’s decision of Sunday, March 12. Would   
   letting Silicon Valley Bank fail the normal way, with big customers required   
   to accept modest haircuts on their uninsured deposits, cause a nationwide bank   
   run and economic    
   calamity?   
      
   Biden must think so but the information isn’t available to let us judge the   
   matter independently.   
      
   We do know he got a lot of help in deciding to bail out Silicon Valley   
   Bank’s uninsured depositors from its uninsured depositors, including tech   
   entrepreneurs and venture capitalists who worked the phones and social media   
   and skew heavily Democratic in    
   their political giving.   
      
   We know that lobbying for the bailout was California Gov. Gavin Newsom, a   
   Democratic up-and-comer whose personal business and nonprofit ties with   
   Silicon Valley Bank were extensive.   
      
   Did the bank’s progressive dabblings contribute to its failure—or its   
   rescue? Its investment in political window dressing at least tells you what   
   management believed about its political environment.   
      
   No bank is safe if depositors run and keep running. A big capital cushion does   
   zip. If depositors are running because of general economic conditions, or if   
   the run itself tanks the economy, the assets a bank might hope to sell to pay   
   off fleeing    
   depositors are likely to be falling too if not unsellable altogether.   
      
   All banks exist on confidence that something like this isn’t about to   
   happen. In one way, today’s nut is tougher than 2008’s. Then, housing   
   assets on bank balance sheets, though greatly depreciated in the market,   
   continued to perform. Banks were    
   still in the black on the spread over their deposit costs. If there was no   
   run, they could continue indefinitely and grow out of trouble.   
      
   Let’s just say the whole economy still has to solve the problem Silicon   
   Valley Bank would have had to solve to stay alive. Financial institutions’   
   fixed-rate assets not only have been badly dinged in market value, the mingy   
   income streams they    
   generate can’t keep up with rising deposit rates and operating costs. This   
   problem didn’t first surface with Silicon Valley Bank but with U.K. pension   
   funds during the short, unhappy premiership of Liz Truss. Remember the cynical   
   way the Biden admin    
   piled on to suggest Truss’s garden-variety pro-growth nostrums were to blame?   
      
   Today’s banks can hardly be independent from the government that underwrites   
   confidence in the insurance, regulatory and economic systems on which they   
   rest. This also gives govt an opportunity to bungle that confidence. We   
   haven’t seen yet which the    
   Biden administration has achieved, bracing up confidence in the banks or   
   helping to weaken it.   
      
   In Biden’s shoes, any reader might have made the same better-safe-than-sorry   
   decision to bail out a midsize California lender. I bet most, though,   
   wouldn’t have made the decisions two years earlier that helped create the   
   problem of two Sundays ago.   
      
   Biden essentially embraced the progressives’ modern monetary theory, which   
   admittedly became universal amid the pandemic, positing that the U.S. govt   
   could print and spend money without inflation. Biden arrived, as I noted at   
   the time, with an “   
   overwhelming priority to pass a superfluous domestic bailout package, on top   
   of those already passed, so [he] could claim credit for the pandemic recovery   
   already visible around the corner.”   
      
   That recovery was shaping up to be a rocket ship. By pouring unnecessary fuel   
   into its engines, Mr. Biden contributed to the destabilizing rise in inflation   
   and interest rates that spawned today’s bank panic, the end of which may not   
   be in sight.   
      
   FDR and Obama can rightly say they inherited their meltdowns. Biden can claim   
   authorship of his.   
      
   https://www.wsj.com/articles/the-joe-biden-banking-crisis-svb-jp   
   organ-citibank-lenders-interest-rates-inflation-dollar-financial   
   system-deposits-bank-run-8bd36b0b   
      
   --- SoupGate-Win32 v1.05   
    * Origin: you cannot sedate... all the things you hate (1:229/2)