When 56-year-old Silicon Valley Bank [SVB] CEO Gregory W. Becker sole $3.6 million in stock March 10, he clearly anticipated the March 11 run-on-the-bank when depositors, some of the nation’s biggest hedge and private equity funds, pulled out their cash. By the time the panic liquidated SVB to the point it had to close their doors, it was too late. White House officials, led by 77-year-old Treasury Secretary Janet Yellen saw 2008’s financial crisis written on the walls, prompting an emergency call to Fed Chairman Jay Powell. Working with Yellen, Powell announced that the Fed would infuse SVB March 12 with $60 billion in bailout funds to cover all bank deposits. Rocking confidence again in the banking sector, it’s possible that Becker knew for weeks-or-months that SVB was failing before he liquidated the lion’s share of his company stock.
President Joe Biden, 80, faced with another White House crisis, demanded more accountability and stiffer penalties for banking CEOs. But bank liquidity problems have multiple causes, including the macroeconomic picture where the Ukraine War fueled the worst inflation in 40 years, especially in energy and food markets. Biden can call for stiffer penalties today but he’s responsible for the geopolitical atmosphere that has U.S. and world financial markets reeling in anxiety. Word that First Republic Bank also experienced a liquidity crisis, JP Morgan CEO Jamie Dimon stepped in with Powell to generate the capital needed to make the bank whole, some $30 billion in new capital infusions. Dimon convinced the nations’ biggest banks to kick in capital, knowing that without the bailout, the contagion could spread to other small banks around the country.
Treasury Secretary Janet Yellen made the rounds today reassuring the public that the U.S. banking sector was securing, knowing the Fed already bailed out SVB. Dropping 9.2% today, Bank of America showed weakness, similar to smaller banks that took big hits on Wall Street over the last few days. Yellen doesn’t reassure financial markets when analysts are concerned about nationalization of U.S. financial institutions. Fed bailouts were rampant in 2008, when Federal Reserve Chairman Ben Bernake bailed out Bear Stearns but let Lehmann Brothers go bankrupt. Fed historians recall when former Fed Chairman Alan Greenspan bailed out Oct 1, 1998 Hedge Fund Long Term Capital Management to the tune of $3.5 billion. Seems like small change compared to the $60 billion for SVB. But that was then, this is now, a world of difference in the last 15 years.
Capitalists prefer to see markets take care of themselves rather than depend on government to socialize banks’ losses especially if gross mismanagement or negligence occurred. Biden wants to blame CEOs for incompetence or negligence when the geopolitical events like the Ukraine War is more significant in creating unstable market conditions JPMorgan’s Dimon said March 6 that the Ukraine War was the overarching uncertainty in U.S. and global financial markets. What does Biden have to see before he realizes that ending the war is the top priority, whether or not 70-uear-old Russian President Vladimir Putin stays as head of Russia. Biden said March 26, 2022 in Warsaw, Poland that Putin should not remain Russian President. Since then, Biden funded a proxy war using Ukrainian troops to battle the Kremlin. Biden continues the war without end.
Since the SVB collapse, Biden and Congress have done everything to shift the blame on unscrupulous CEOs, not the geopolitical conditions that make financial stability impossible. Dimon told the press March 6 that the Ukraine War destabilizes U.S. and world markets. Biden refuses to see the damage his done to the global economy. Ukraine’s 45-year-old President Volodymyr Zelensky presides over a bankrupt government, depending on U.S. tax dollar to fund his government and dwar against the Kremlin. Biden has been unwilling to admit that the first year of war has destroyed Ukraine’s infrastructure, wrecked its economy and destabilized world financial markets. After a cold winter, Biden and Zelensky prepare to take on the Russian Federation with new ferocity, armed with more lethal weapons. So, there’s no attempt to move the Ukraine War to the peace table.
Biden refuses to acknowledge the damage he’s done to the U.S. and global economy with the unending Ukraine War. Bailing out SVB and First Republic Bank sets a precedent to the federal government to tack bailouts on to the national debt. All depositors thought, until now, they had federal insurance, limiting deposits to $250,00 per account. Because SVB accounts, largely with private equity and hedge funds held millions in cash, the Fed decided to make the institution whole, bailing out all accounts, not matter how large. Whether Berger did something illegal dumping millions in shares knowing the bank was insolvent is anyone’s guess. What’s known for sure is that the Ukraine War has fueled the worst inflation in 40 years, destabilizing U.S. and world financial markets. JPMorgan’s Dimon told the truth when he said the Ukraine War upends U.S. and world markets.
About the Author
John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He’s editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.
