Expect Criminal Indictments of SVB Top Executives, Here’s Why

An uninsured deposit is “…an unsecured illiquid claim on a failed bank…”

DUH!

And the Fed should step in and save their a$$es!

If you want ‘insurance’, BUY IT! Otherwise accept the risk.

Lets face it 90% of startups fail. Probably even more in high tech and the silicon valley. Often a startup is nothing more than an idea, sales literature and fundraisers. Often no marketable product or sales. I know a guy who raised 4 million for a startup in the San Francisco Bayiarrhea that was a nothing burger. He was a great fundraiser because he believed everything the engineers told him how great a company it was, and what a great idea they had. He took stock instead of salary and ended up with nothing. He was rich beyond belief in his own mind and so were his investors until they weren’t. Perhaps startups were running low on new investors and increased withdrawals to keep going.

Biden and his corrupt administration prosecute his fellow left wing crooks? Right and I’m playing shortstop for the New York Mets. If there are any, it will be a dog-and-pony show with the charges dropped a few months down the road.

In my professional career I participated in closing and ‘salvaging’ several banks, and I can tell you for certain, the management of the bank and their immediate regulators (state and federal) and their regulatory superiors (head offices) in DC knew about the bank’s business decision to exposure maintenance of its regulatory capital to the interest rate policy of the FED. All of the data was available to the insiders at the bank and regulatory institutions for years, and to the analysts who follow the company. Since the FED lowered rates almost to zero in 2008, every US Treasury bill, note, and bond issued prior to that time has matured and rolled – over to almost zero interest rate yield, no matter its maturity. The instant the FED raised rates (to fight the inflation it caused and continues to accommodate) the bank’s portfolio of UST note, bills, and bonds went ‘underwater’ and the unrealized loss in its US Treasury securities grew. So the question became in the minds of those involved, how high must the unrealized loss grow before, the loss, if realized takes the bank’s minimum regulatory capital below the required amount. This minimum is ‘jurisdictional’ in the sense the bank automatically loses its right to engage in the banking business once it fails to hold sufficient required capital. It is not discretional, it is statutory. The FED lacks the power to let Zombie banks continue in business indefinitely. So, behind the scenes, the immediate bank regulators pulled together a ‘takeover team.’ They have a takeover manual, they rehearse how and what they are going to do when they enter etc. etc. etc. The preferred time to ‘takeover’ is before the bank opens because closing after it opens or at the end of the day gets messy because the doors are locked, the locks changed, and people inside are searched before they are permitted to leave. The decision when the team strikes is kept confidential but management of the bank knows it is coming for certain, since conversation between the management and regulators about solutions are at a standstill, and everyone is repeating their words. The bank management had choices, and the reason the regulators didn’t close long ago when the paper loss made it evident the bank needed more capital to stay in business, was to give management time and opportunity to prevent a takeover. All they had to do is find a merger partner, a bank with sufficient capital for the merged entities, or raise capital through sale of stock to the public. The problem is merger talks aways fail. The proposed merger partner knows if he waits he can get it given to him for free by the regulators after they takeover, and the regulators will give it with assurances they will make good any losses they incur from operations of the taken-over bank. Instead the proposed merger partner spends weeks if not months running his fingers through the bank’s data and talks to management about their roles in the ‘merged’ bank, if merger succeeds. Raising capital through public sale fails too because the offering materials will have to reveal to the common man in plain English the fact that as long as the FED raises rates to combat the FED-caused inflation, the bank will continue to lose big money. What underwriter would underwrite such an offering? So SVB management knew the writing was on the wall for a long time, as they discussed alternatives the past year or so with the players in the industry, and their go-betweens. The reason the regulators went in mid-day, the messiest time, is probably because they found bank management was no longer cooperating. Before banks open for business on the West Coast Monday, a ‘merger’ will be announced, for the regulators need someone to run the bank, because they don’t know how and do not have enough employees in any event. The Banking Industry Democrat Darling, Jamie Dimon, will probably be given the bank with unwritten assurances.