This past week has been about the most tumultuous week in the financial world, especially in America, since the financial crisis of 2008. Remember that debacle? I sure do. My next door neighbors were in their large home with a nice swimming pool one day, and were putting a “For Sale By Owner” sign up the next day, while they loaded up a U-Haul, their boat, dog, and kids, and hit the road. The house stayed vacant for over two years before it became known that the bank had foreclosed on them as a result of that crisis. The sign turned out to be for show. Our neighbor had lost his job after an injury, lost another one, and that was that. Horrible for a lot of people in our development, who fell into that disaster, also known as the “Housing Bubble.”
This time we have something different, for different reasons. There are a few things to know about banking that have changed in the years since I took a handful of banking and economics courses out west back in the late 1970s. Even bankers have to have a grasp on the concepts. That was not the case this past week, as two banks went under the control of the FDIC, and a third is being bid for by two of the largest banks in the country. More on that later.
The banks that went under the control of the FDIC last weekend—you probably know by now—are Silicon Valley Bank in California, which was taken over last Friday, and Signature Bank in New York, which failed last Sunday and had been under federal criminal investigation for its involvement in crypto currency exchanges—an act of madness for any traditional banking institution. A third bank is trying to dodge the collapse if its institution by offering itself up for sale to some of the largest banks in the country. One of those bank’s CEO (Jamie Dimon) is quoted above.
My bet is by the weekend JP Morgan Chase will be the new owner of the financially mismanaged First Republic Bank (also from California), the so-called “troubled lender.” First Republic Bank is at big risk for becoming illiquid—meaning it can’t move money where its clients need it to go—therefore people can’t get their money out.
But I digress. This avalanche of financial crisis began last weekend when factors related to the operation of a 40 year old California-based bank called Silicon Valley Bank “suddenly” (quotations added because it wasn’t a surprise to those responsible) found itself afoul of banking regulators in California and then the FDIC in Washington, DC. Why the Federal Reserve in nearby San Francisco wasn’t on top of this is anyone’s guess. “Asleep at the wheel” was how federal oversight of these bank failures was referred to time and again.
ESG is an acronym that stands for Environment, Social, and Governance. It’s a big deal in every business round the world, and was made that way by the World Economic Forum. The WEF’s top dog is a guy named Larry Fink, CEO of Blackrock, Inc. Many think he wants to be the next head of the U.S. Treasury or King of the World. He sure talks like it. He pushes ESG like one of the Apostles pushing the Gospel. Blackrock is doing really well with over $10 Trillion in assets under management.
ESG goes down really well with globalists like big bank CEOs, hedge fund managers like Larry Fink, many, many politicians and people who appear at big conferences that feature major world leaders. If there is an idol for mankind to worship other than the One True God that I do, this is the one that the rest of the powerful, and wealthy will have to worship at if they want to keep their place. ESG is everything to them. The World Economic Forum says that ESG investing will be a market worth $80 Trillion by next year. Money rules, and the only thing one needs after that is a convincing narrative to make one look altruistic, and not overarchingly greedy.
Playing ball with corporations, and this means banks has its risks. Little people like you and I are often left out to dry while money is being raked in. It happens all the time. While SVB was collapsing, and the bank regulators watched, the executives that were running it, were cashing out their shares for millions of dollars. You and I paid the insurance for the rest of the bailout, regardless of what Treasury Secretary Janet Yellen said today. The money comes from somewhere, after all.
While all this was going on the SVG Chief Risk Officer, whose job it is to oversee the risk of the loans and investments that the bank under rights to primarily Silicon Valley tech companies in that area, was engaged—from her office in New York City (why?)—in pushing the WEF’s progressive agenda for ESG. Never mind the quality of the loans being made, or the threat of a run. In fact for eight months before the collapse, no one was in the position at all!
Furthermore, to push a Diversity, Equity, and Inclusion (DEI) agenda favoring the People’s Republic of China—which has many interests in Silicon Valley—Silicon Valley Bank ignored many basic banking rules among them borrowing money in the form of short term loans and making long term investments in these tech ventures which wouldn’t see a return for a long time to come.
The Fed didn’t help. While they jacked up interest rates to combat inflation, it drove the price of Treasury Bonds down. Guess where SVB had a lot of its money? Down it went.
While ESG wasn’t the only reason for the collapse of this bank, it revealed a weakness that could rear its ugly head again. If you use a small, “regional” bank like I do you might be exposed to a run like those poor souls were this past week. Maybe you’ll be lucky and greedy bankers aren’t mismanaging your bank the way they were SVG, or Signature Bank or First Republic but if the big banks end up buying all the little guys up how much freedom and competition will America be left with?
