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Banking Crisis

Four US Banks Crash In Two Months

I’m Ben Norton, and this is Geopolitical Economy Report. Today, I have the pleasure of being joined by Michael Hudson, the brilliant economist and author of many books. Michael is also the co-host of a program here, Geopolitical Economy Hour, which he does every two weeks with friend of the show Radhika Desai. I had Michael on in March to discuss the collapse of three U.S. banks in just one week – that was Silicon Valley Bank, Signature Bank, and Silvergate Bank. Yet the crisis has continued since then, and I knew I needed to bring back Michael to talk about the latest developments. In just two months, four banks in the United States have collapsed.

First Republic Bank: The Second Largest Crash In US History

On International Workers’ Day, the First Republic Bank became the second largest bank to fail in US history. The USD 233 billion institution was seized by the government and sold to banking behemoth JPMorgan Chase. First Republic is the third bank to fail in the US since March, surpassing the spectacular failure of Silicon Valley Bank (SVB) on March 10. SVB’s depositors were bailed out by the US government to the tune of USD 151 billion. Up until May 1, SVB had been the second largest bank failure in the history of the country. Capitalists in the United States did not predict that this title would be usurped less than two months later.

Current Bank Crashes Demonstrate Why We Need Public Banking

The recent collapse of Silicon Valley Bank (SVB) and Signature Bank — the second and third largest bank failures in U.S. history respectively — has laid bare the vulnerability of the private banking sector. With over 563 federally insured banks toppling between 2001 and 2023, it’s impossible to ignore: The status quo is unsustainable. Amid this financial turbulence, the need for public banking has never been more pressing. It’s high time we seriously consider public banking as a stable, transparent, and accountable alternative that would firmly anchor public interest at the heart of the financial system. After all, banking should be a public utility that benefits everyone, not a high-risk game played by bankers trying to score big profits.

US Bank Bailout Benefited Billionaires, Exposing Corruption

When current US Treasury Secretary Janet Yellen served as chair of the Federal Reserve in 2017, she confidently predicted that there would not be another financial crisis “in our lifetimes”. Less than six years later, in March 2023, three US banks collapsed in just one week. Silicon Valley Bank and Signature Bank were the second- and third-largest banks to go under in US history. And after they crashed, the government immediately bailed out their wealthy depositors. Among the main beneficiaries of this bailout were billionaires and big corporations. The government’s Federal Deposit Insurance Corporation (FDIC) insures US bank deposits up to $250,000 per customer.

Strike The Women, You Strike The Rock, You Will Be Crushed

What constitutes a crisis worthy of global attention? When a regional bank in the United States falls victim to the inversion of the yield curve (i.e., when short-term bond interest rates become higher than long-term rates), the Earth nearly stops spinning. The collapse of Silicon Valley Bank (SVB) – one of the most important financiers of technology start-ups in the United States – on 10 March presaged wider chaos in the Western financial world. In the days after the SVB debacle, Signature Bank, one of the few banks to accept cryptocurrency deposits, faced bankruptcy, and then Credit Suisse, an established European bank set up in 1856, fell due its longstanding poor management of risk.

The Banking Collapse, Housing Insecurity And More

The collapse of Silicon Valley Bank and the 50 billion dollar injection to Credit Suisse highlights the precarious state of the banking system. While the banks claim that they are too big to fail, the reality is that the people who suffer the most when banks collapse are ordinary Americans. The rich can protect themselves by moving their money into offshore accounts or investing in other assets. But the poor and working-class Americans who have their savings in these banks will lose everything if banks collapse. On this episode of Behind the Headlines, Lee Camp interviews James Fauntleroy, a regular contributor to the Revolutionary Blackout Network (RBN) show.

Banking Crisis 3.0: Time To Change The Rules Of The Game

So what caused this crisis, and what can be done to remedy it? In the midst of the 2008 economic crisis, former Fed Chair Alan Greenspan conceded that there was a flaw in his perception of the financial operating system. For 40 years, he had believed that banks could “self regulate” responsibly, a presumption that had proven to be flawed. In the case of SVB, however, the bank was not engaged in the sort of risky lending seen in the subprime crisis, and increased “stress testing” wouldn’t have saved it. It had put its deposits largely in federal securities, purported to be the safest assets available – so safe that they carry a “zero risk weighting” requiring no extra capital buffer.

Today’s Banking Crisis: Deep Origins And Future Directions

It’s been a week since the collapse of the Silicon Valley Bank, the 16th largest bank in the US at the time of its collapse and reportedly a source of funding for half of all the tech start ups in the US. It’s now become clear the more general banking crisis that has emerged is not due simply to a rogue, mismanaged bank that over-extended itself during the recent tech boom and then somehow mysteriously imploded in just 72 hours, March 7-9, until seized by the FDIC on the morning of March 10, 2023. Deeper, more systemic forces are at play—in the case of both the SVB collapse and the now spreading contagion to US regional banks as well as to European banks.

Bailout Of Silicon Valley And Banks Is $300 Billion Gift To Rich Oligarchs

The US government printed $300 billion in a week to save collapsing banks and bail out Silicon Valley oligarchs and venture capital firms, paying them all of their uninsured deposits. Meanwhile, some of the very same Silicon Valley tycoons who benefited from this bailout have tried to cynically rebrand themselves as subversive populists, claiming they are fighting against the big Wall Street banks with which they have closely collaborated. Three banks collapsed in the United States in the span of one week in March 2023: Silvergate Bank, Silicon Valley Bank, and Signature Bank.

What Will It Take To End The Billionaire Bailout Society?

In case we need any more proof, the bailout of the Silicon Valley Bank (SVB) is yet another overt sign that we are operating within a new version of capitalism. The wealthiest among us have little fear of losing money from their most important financial investments. They know they will be bailed out, and the rest of us will pick up the tab. The crisis at SVB has made a mockery of bank deposit insurance and private banking. In the US, bank deposits are insured up to $250,000. If the bank fails, those with accounts below that amount are fully protected. But deposits over that amount are not. The reason is straightforward.

Why The US Bank Crisis Is Not Over

President Biden has done everything that he could to confuse the public as to what is happening. His March 13 speech assured voters that the SVB “rescue” was not a bailout. But of course it was a bailout. Uninsured SVB depositors who did not qualify for safety from losing a penny were rescued without losing a penny. What Biden implied, correctly, was that it was not a taxpayer bailout. But then what was it? It was a demonstration of how powerful Modern Monetary Theory (MMT) is. The banking assets sufficient to “make depositors whole” was simply created by the banking authorities.

Why The US Banking System Is Breaking Up

The breakup of banks that is now occurring in the United States is the inevitable result of the way in which the Obama administration bailed out the banks in 2008. When real estate prices collapsed, the Federal Reserve flooded the financial system with 15 years of quantitative easing (QE) to re-inflate real estate prices – and with them, stock and bond prices. What was inflated were asset prices, above all for the packaged mortgages that banks were holding, but also for stocks and bonds across the board. That is what bank credit does. This made trillions of dollars for holders of financial assets – the One Percent and a bit more.

The Looming Quadrillion Dollar Derivatives Tsunami

On Friday, March 10, Silicon Valley Bank (SVB) collapsed and was taken over by federal regulators. SVB was the 16th largest bank in the country and its bankruptcy was the second largest in U.S. history, following Washington Mutual in 2008. Despite its size, SVB was not a “systemically important financial institution” (SIFI) as defined in the Dodd-Frank Act, which requires insolvent SIFIs to “bail in” the money of their creditors to recapitalize themselves. Technically, the cutoff for SIFIs is $250 billion  in assets. However, the reason they are called “systemically important” is not their asset size but the fact that their failure could bring down the whole financial system.

Silicon Valley Bank Fails; Deposits Of Venture-Backed Companies Frozen

Silicon Valley Bank, the 16th largest in the US, was shut down and put under the control of California Department of Financial Protection and Innovation on Friday. This failure is set to send ripples across smaller technology companies. Even though there is good reason to think that uninsured depositors will eventually be made whole or nearly whole, some may have had so much of their working funds tied up at Silicon Valley Bank that it may be hard for them to find work-arounds, particularly with so many other companies in the same pickle. While is it is likely someone will cobble together financing, at what speed and on what price?
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