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The failure of three banks in the past two weeks, including Silicon Valley Bank on Friday and Signature Bank on Sunday, is a saga of utter government ineptitude. Call these banks collapsing Biden’s bank failures. The Biden administration is obsessed with wake-up calls, while banks are headed for insolvency.
Three days before the Silicon Valley bank collapsed, Treasury Secretary Janet Yellen warned that climate change was putting the banking industry at risk. Yellen was in la-la land, speculating that future storms and tornadoes could reduce the value of bank assets.
Weather is a risk, but he ignored the much more immediate problem facing banks — the plummeting value of the bonds they hold. She was careless about the impending collapse of SVB and probably many other small banks that had bought long-term bonds when interest rates were close to zero.
In 2022, after doing nothing to tame inflation the previous year, the Federal Reserve raised interest rates repeatedly to compensate for its previous inaction. These rapid interest rate hikes, the most drastic in decades, caused bank bonds to lose value.
‘MR. THE GREAT CREATES ‘STUPID’ BANKERS SAYS FEDS SVB ANSWER ‘NATIONALIZE THE BANKING SYSTEM’
A week before Yellen’s climate change rant, Moody’s Investors Service had already delivered bad news to SVB that it was to be downgraded several notches because its bond stock was not worth enough to repay depositors. A day before Yellen’s vulgar speech, the chairman of the Federal Deposit Insurance Corp. Martin Gruenberg also warned that the declining value of bonds held by banks meant a $620 billion problem.
The Office of the Comptroller of the Currency, part of Yellen’s Treasury Department, is responsible for examining the financial health of banks. He failed to prevent the collapse of SVB.
Yellen has been an outspoken activist on climate change, women’s rights and diversity, including appointing the Treasury Department’s first racial justice official. Apparently, the hordes of bureaucrats working under her are also too busy giving diversity, equity and inclusion seminars to keep the banks from going bankrupt.
As the SVB crisis unfolded, Yellen was MIA. Now he says he’s watching several banks “struggling with the price bump” of their bonds.
Financial experts warn that smaller banks face tough problems, although big banks such as JPMorgan Chase, Bank of America, Wells Fargo and others are not well suited for trouble.
Admittedly, SVB managers made mistakes. The first rule of banking is that assets must match deposits. If depositors can ask for their money back at any time, then using their money to buy long-term bonds is risky. SVB had to sell $21 billion worth of bonds in a fire sale, at a loss of $1.8 billion.
Trading was suspended on Friday in the shares of several small banks whose share prices sank on fears they were in the same situation. On Sunday, New York bank regulators shut down Signature Bank.
President Joe Biden has created the perfect storm for what could become a series of banking failures. In 2021 he lied about inflation, saying it was temporary and “no serious economist” saw it as a threat. Yellen and Federal Reserve Chair Jerome Powell, whose first term was about to end, sided with Biden and did nothing to lower rates. It was the biggest mistake of monetary policy in half a century.
Then, in March 2022, the newly appointed Powell began aggressively raising interest rates to cure what the Wall Street Journal called “a mess, largely of the Fed’s own making.” As interest rates rose rapidly, start-up companies could no longer afford to borrow and began withdrawing their bank deposits. Without regulatory intervention, SVB’s decline was almost a foregone conclusion.
US Treasury Secretary Janet Yellen on February 27, 2023. ((Photo by Genya SAVILOV / AFP) (Photo by GENYA SAVILOV/AFP via Getty Images))
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On March 7, Powell predicted that the Fed would likely “increase the pace of interest rate hikes” to continue reducing inflation. A task made more difficult by our dead president’s budget proposal, which is an inflation accelerator.
As interest rates rise, more banks could run into trouble. Continued government incompetence is not an option.
Mr. President, get rid of your vigilante minions and appoint competent people. Our money and our jobs are at stake.
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On Sunday night, Biden said he was “firmly committed to holding those fully responsible for this mess.” Look in the mirror, Mr. President.
Instead, he looks at the list of Democratic campaign donors and rushes to their rescue. Ninety-eight percent of all political contributions from people who worked at Internet companies went to Democrats in 2020. Silicon Valley residents raised nearly $200 million for Democrats. It’s no surprise that the Treasury and the Fed are offering bailouts, whether they use that word or not.
Biden’s reckless spending and inept monetary policy are causing this string of bank failures. And John Q. Public will end up paying one way or another.
CLICK HERE TO READ MORE BY BETSY McCAUGHEY