The stories you want. The opinions that matter.
No, thanks
Tag: silicon valley bank
The 'Anti-Woke' Right-Wing Bank That Promptly Went Bankrupt

The 'Anti-Woke' Right-Wing Bank That Promptly Went Bankrupt

What do you want your bank to be? I want mine to be nearby. I want it to have nice tellers. I want my deposits to be government insured in the event of a failure. Check, check, check.

Should I worry that my bank is too woke, whatever anyone means by "woke" these days? Right-wingers are peddling the argument, tailored for the rubes, that when financial institutions factor such concerns as the environment, social equity and governance (ESG) into their business, they are endangering themselves.

Donald Trump Jr. tweeted that the failure of Silicon Valley Bank "is what happens when you push a leftist/woke ideology and have that take precedent over common sense business practices." Wonder how he would explain his father's six bankruptcies. Leftist ideology was probably not behind them, but something must have taken precedence over "common sense business practices."

Wall Street Journal columnist Andy Kessler, noting that SVB's bank board was 45 percent women and had one Black and one "LGBTQ+" member, opined that SVB may have been "distracted" by diversity concerns. It happened that the board was over 50 percent white and male, but hey.

If a private company adopts policies and hiring practices antithetical to its business interests, then it suffers. That said, the executives and stockholders at Bank of America, JPMorgan Chase, and Citigroup — companies accused of wokeness — are doing quite well, thank you.

One of SVB's big customers was Peter Thiel's Founders Fund. Thiel is a multibillionaire entrepreneur and major backer of Donald Trump and other right-wing pols. SVB went under because of problems in risk management.

As for his banking acumen, Thiel had previously put millions in GloriFi, an "anti-woke" bank that collapsed in a spectacular manner. It seemed a group of super-rich investors thought they could make some bucks marketing a bank for "plumbers, electricians and police officers" who are "fed up with big banks that don't share their values." The idea of peddling patriotic banking to the little guys was born in some festive plutocratic gatherings held in the 16,000-square-foot Dallas home of investor Toby Neugebauer.

GloriFi was to offer the usual banking services: accounts, credit cards, mortgages and insurance. But the hook was the claim it would give good Americans the freedom to celebrate "love of God and country." It was offering "respect" for people they insisted "don't feel loved," Neugebauer said. Flags and pictures of blue-collar workers surrounded by family filled its website.

One thing GloriFi was not offering the plumbers, electricians or police officers was advantageous interest rates.

Having burned through $50 million, GloriFi shut down last November under a fusillade of anti-woke mismanagement. For example, it tried but failed to make credit cards out of the material used for shell casings(!). Neugebauer abused its employees when in his cups, which was a lot of the time, according to The Wall Street Journal.

GloriFi stiffed vendors. (Would that include electricians and plumbers?) It did provide work for police who were called to a P.F. Chang's in Dallas, when Neugebauer angrily threatened to ruin the life of a high-ranking employee who wanted to leave the company.

GloriFi must have had Bank of America quaking with fear.

The enterprise shut down last November, right after Thiel spent $32 million trying to elect a Congress to his liking. The super-patriot was also obtaining a passport from Malta. That gave him citizenship in four countries.

As Thiel apparently sees it, America is where you make your money, not where you pay taxes. (He used a chink in U.S. tax law to shelter $5 billion from federal taxes.) Paying taxes, after all, is a job for the plumbers, electricians and police officers.

Follow Froma Harrop on Twitter @FromaHarrop. She can be reached at fharrop@gmail.com. To find out more about Froma Harrop and read features by other Creators writers and cartoonists, visit the Creators webpage at www.creators.com.

Reprinted with permission from Creators.

Danziger Draws

Danziger Draws

Jeff Danziger lives in New York City and Vermont. He is a long time cartoonist for The Rutland Herald and is represented by Counterpoint Media Syndicate. He is the recipient of the Herblock Prize and the Thomas Nast (Landau) Prize. He served in the US Army in Vietnam and was awarded the Bronze Star and the Air Medal. He has published eleven books of cartoons, a novel and a memoir. Visit him at DanzigerCartoons.
Bitcoin

How Crypto-Backed Ponzi Schemes Endanger Our Banking System

The collapse of Silicon Valley Bank (SVB) last week raises serious issues far more significant than the obvious ones cited by the financial press and a broad range of Washington politicians.

Chief among these are bank loans against dubious assets. That’s not getting much if any attention in the news or from Washington and is likely to soon be swept under the rug, allowing needlessly risky banking practices to continue.

Before its collapse last week, SVB made loans against Bitcoin and other cryptocurrencies.

The question: why is any bank anywhere allowed to accept crypto as collateral for loans?

Why do banking regulators allow our federally insured and regulated banks make loans using magic internet money as collateral? That’s a crazy policy, no different than allowing banks to accept buckets of ice cubes in winter as collateral, even though they melt come spring and evaporate in summer.

Bitcoin and its imitators are not money. They are not currency. They’re hardly used to buy and sell, an unsurprising fact given that by design the Bitcoin system can process only seven transactions per second compared to many thousands of transactions per second for credit cards.

Indeed, except for laundering proceeds from drug trafficking as well as hiding assets from creditors, estranged spouses, and the tax police, cryptocurrencies have no use.

High-tech Ponzi Scheme

Cryptocurrencies and their cousins, Non-Fungible Tokens or NFTs—are just a high-tech Ponzi scheme. Instead of Charlie Ponzi or Bernie Madoff personally running the con, the crypto scam relies on decentralized computer blockchain and “mining” of mathematical solutions.

Bitcoin’s supposed inventor, who went by the pseudonym Satoshi Nakamoto, has never been identified. He or she has since vanished, leaving holders with a digital string worth only as much as the next fool, or crook, will pay for this imaginary asset.

Early participants in Ponzi schemes profit mightily if they cash out while the gullible souls who get sucked in later wipe out. That is what happened to SVB, America’s 16th largest bank, which was big on crypto loans.

Many Bitcoin “investors” have already been wiped out as the “market cap” of Bitcoin plummeted from nearly $1.3 trillion in 2021 to about $389 billion on Friday, down almost 70 percent.

Why do banking regulators allow our federally insured and regulated banks to make loans using magic internet money as collateral? That’s a crazy policy, no different than allowing banks to accept buckets of ice cubes in winter as collateral, even though they melt come spring and evaporate in summer

Silicon Valley Bank is just one of many federally insured financial institutions that accept crypto currency as collateral for loans. Some banks will loan you 90 percent of the seeming value of your crypto, though 50 percent loan-to-value is more common and that appears to be the standard at SVB based on its web pages.

Zero Interest Crypto Loans

All sorts of financial news outlets offer advice on borrowing against crypto. These include NerdWallet, and the increasingly naïve and unreliable Forbes. People with crypto can even borrow at zero interest. Gadzooks!

For a sober look at the big risks of crypto loans read Investopedia’s essay.

In the wake of the second largest bank failure in history, you should be deeply concerned that for more than four decades we have failed miserably at regulating banks. That history contrasts with the period from 1935 until voters abandoned the moderating and successful New Deal banking rules in favor of Reaganomics.

We took a wrong turn when the prudent New Deal banking regulations in effect from 1935 were killed by Reaganomics, which re-regulated banks to reduce regulations and increase the risk of financial institutions failing. (There is no such thing as deregulation, only new regulation, which in our time on terms typically means regulations favoring corporations, including banks, over customers, financial prudence, and public safety.)

Congress’s Role Is Critical

What we need now are Congressional hearings to examine the reasons that cryptocurrencies can be collateral for bank loans.

Even if you don’t own Bitcoin or its growing list of alternatives, this story matters to you for multiple reasons.

Your money is only insured up to $250,000. Any money above that isn’t insured. That means if you’re a trustee of a nonprofit, for example, and it’s got $1 million in the bank, you or the organization you help lead is at risk of being wiped out in a bank failure.

The federal government is covering all deposits for SVB and at Signature Bank in New York, which failed Sunday. But that doesn’t mean it always will. During an earlier banking crisis nonprofits with more than the guarantee then in effect of $100,000 lost their deposits above that sum, which got very little news coverage at the time.

If people want to buy crypto, they should be free to do so. But they should not be allowed to put our bank deposits and investments at risk by using these digital tokens as collateral for loans. After all, it’s your, and my bank deposits, along with those of businesses, nonprofits, and our governments that the banks use to make loans, so it’s not like we don’t have a deep interest in blocking crypto of any kind as collateral for loans.

Reprinted with permission from DC Report.

Silicon Valley Bank

GOP Blames SVB Crash On Biden, But Trump Rolled Back Bank Regulations

Prominent Democrats pointed fingers at a Trump-era law that weakened oversight over banks like SVB.

Republicans are blaming the collapse of Silicon Valley Bank on Democratic policies and "woke" politics, using the crisis as a political cudgel against President Joe Biden and his party.

Experts say that SVB, based in Santa Clara, California, failed because of poor decision-making by bank leadership and bad investments. But that hasn't stopped Republicans from making baseless accusations and false statements about the situation. Democrats, meanwhile, have pointed out that it was former President Donald Trump who was responsible for loosening oversight of banks like SVB.

Rather than "woke" politics, reports say the bank invested in too many low-interest rate bonds, and when it tried to solve the problem, it spooked investors, who responded by trying to take their money out of the bank all at once, leaving it without enough money to give customers and ultimately taking the bank down. Republicans, meanwhile, are using cliched rhetoric around inflation, immigration, and diversity efforts to attack the administration over the bank's collapse.

"Banks are failing, groceries are unaffordable, cartels control our border & fentanyl is flooding our streets," Rep. Mary Miller (R-IL) tweeted on Sunday. "Joe Biden has led a drastic decline by putting AMERICA LAST. How much more damage will he do in the next 2 years? He should be IMPEACHED over the border alone!"

Rep. Clay Higgins (R-LA) made similar comments.

"Biden & his leftist policies are crashing banks, evaporating wealth, crippling us w/ debt, settling into WWIII, crime is rampant, & cartels control our border," he tweeted on Sunday. "But hey, they’ve established gender diversity in our schools, they’re fixing climate change and our military is woke."

And Rep. William Timmons (R-SC) blamed Democrats for inflation that is "now bringing down banks."

Donald Trump Jr., Trump's eldest child, falsely said banks didn't fail during his father's tenure.

"I don’t remember banks collapsing under Trump," he tweeted. "But don’t worry guys it’s only a matter of time till Biden/media blames him for that too. It has nothing to do with high interest rates / fed rate hikes necessitated by record inflation caused by his out of control spending."

In fact, 15 banks failed while Trump was in office, according to the Federal Deposit Insurance Corporation (FDIC), in Nebraska, Kansas, Illinois, Texas, Kentucky, Ohio, New Jersey, West Virginia, Utah, Louisiana, Wisconsin, and Florida.

Democrats are blaming the collapse of SVB and the ensuing closure by regulators of Signature Bank in New York on a law signed in 2018 by Trump that rolled back oversight of small and midsize banks like SVB. The rollback raised the dollar amount banks had to be responsible for in order to be considered too big to fail and said banks that were not worth at least $250 billion did not need to submit to stress tests. SVB CEO Greg Becker had lobbied the then-Republican-held Congress to roll back the regulation.

Sen. Elizabeth Warren (D-MA), who warned in 2018 that weakening oversight of so-called small and midsize banks could lead to situations like the ones SVB and Signature are currently in, wrote in an op-ed published in the New York Times Monday that SVB "suffered from a toxic mix of risky management and weak supervision."

"Had Congress and the Federal Reserve not rolled back the stricter oversight, S.V.B. and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks," Warren wrote. "They would have been required to conduct regular stress tests to expose their vulnerabilities and shore up their businesses. But because those requirements were repealed, when an old-fashioned bank run hit S.V.B., the bank couldn’t withstand the pressure — and Signature’s collapse was close behind."

Biden also blamed the Trump law in part for the SVB collapse during remarks at the White House on Monday morning:

During the Obama-Biden administration, we put in place tough requirements on banks like Silicon Valley Bank and Signature Bank, including the Dodd-Frank Law, to make sure the crisis we saw in 2008 would not happen again.

Unfortunately, the last administration rolled back some of these requirements. I’m going to ask Congress and the banking regulators to strengthen the rules for banks to make it less likely that this kind of bank failure will happen again and to protect American jobs and small businesses.

Reprinted with permission from American Independent.