The Daily Broadside


Posted on 03/13/2023 5.00 AM

JCM 3/11/2023 5:57:50 PM

Posted by: JCM

vxbush 3/13/2023 6:04:03 AM
Surfboard breakfasts!
vxbush 3/13/2023 6:10:47 AM

Cable News Is Riddled With War Profiteers

So almost all the commentators on military issues are always listed by their former ranks from their time in the military and not by the current job titles. 

vxbush 3/13/2023 6:12:56 AM

Did Woke Policies Help Lead to the Collapse of Silicon Valley Bank?

I'm going to suggest "yes."

vxbush 3/13/2023 6:17:13 AM

UNREAL HuffPost Personal Propaganda: The Harrowing Tale of a Six-Year-Old’s Gender Transition

Look at how little introspection or real research takes place. If this is how most people think about things, no wonder our country is so screwed up. 

vxbush 3/13/2023 6:19:23 AM

U.S. and Iran Reach Agreement on Prisoner Swap

It's so nice of the media and the government to NOT tell us who Iran is holding prisoner from the US. And didn't help because they didn't include the names of those held, either. Sheesh.

vxbush 3/13/2023 6:20:44 AM

Some good news: Yellen Makes the Right Call Over Silicon Valley Bank Collapse

What part of "unsecured" do people not understand?

vxbush 3/13/2023 6:23:27 AM

Feel good: Former Goonie, Ke Huy Quan, realizes the American Dream with Oscar win      

Hollywood sucks, but this is a good star in his cap.

Occasional Reader 3/13/2023 6:51:53 AM
So it looks like we're in for an interesting day in the markets.
vxbush 3/13/2023 7:13:24 AM
Are the key problems the banks listed here
Occasional Reader 3/13/2023 7:27:13 AM

Reply to vxbush in 9:

Looks plausible to me.  But ZeroHedge... keep in mind, as I've seen it put (at Insty I think)  "ZeroHedge has called 25 of the last 4 economic crises". 

vxbush 3/13/2023 7:29:12 AM

In #6 vxbush said: Some good news: Yellen Makes the Right Call Over Silicon Valley Bank Collapse What part of "unsecured" do people not understand?

Well, the story has changed this morning

Federal officials announced a backstop to “fully protect all depositors” at both Silicon Valley Bank and Signature Bank, which was also closed on Sunday. “Depositors will have access to all of their money starting Monday, March 13,” the joint announcement by Treasury, the Federal Reserve, and the FDIC read. A special bank assessment will offset losses, they say; all shareholders and bondholders “will not be protected,” with senior management fired. A $25 billion fund has been initiated to protect deposits, even though the theory is that no taxpayer funds will be implicated.

vxbush 3/13/2023 7:31:09 AM

In #10 Occasional Reader said: But ZeroHedge... keep in mind, as I've seen it put (at Insty I think)  "ZeroHedge has called 25 of the last 4 economic crises". 

Oh, I know; it isn't a solid predictor of the future. I'm reading another website to see if it has better predictive power, and it seems plausible, but I haven't read far enough to confirm if the site has solid info or not yet. A Google search at this point it useless, because all it lists are the MSM news stories, which are pretty much all garbage--including the story I just linked about the SVB "backstop."

vxbush 3/13/2023 7:48:21 AM

In #12 vxbush said: including the story I just linked about the SVB "backstop."

However, the article I shared above did have this useful tidbit: 

The first words out of the mouth of Rep. Katie Porter (D-CA) when I talked to her on Sunday were: “Can you believe we have to talk about this shit again?” She was referring to a conversation we had in 2018, when she was still just a financial expert and a candidate for Congress, about S.2155, which I call the Crapo bill, a reference to its co-author (Idaho Republican Senator Mike Crapo) and its underlying contents.

The Crapo bill, designed in conjunction with four conservative Democrats on the Senate Banking Committee who went around their ranking member, Sen. Sherrod Brown (D-OH) to do it, was supposed to be simple regulatory relief for tiny community banks overburdened by the onerous rules of the Dodd-Frank Act. In reality, it was deregulation for “stadium banks,” which as I explained in my exhaustive piece at the Intercept in 2018, refers to banks that are smaller than the real giants like JPMorgan Chase and Wells Fargo, but big enough to spend money granting naming rights to a stadium.

The most important part of the Crapo bill was Section 401, which increased by five-fold the threshold for enhanced regulatory standards, from $50 billion in assets to $250 billion. Silicon Valley Bank’s CEO, Greg Becker, lobbied explicitly for this change. It meant that banks under $250 billion would not be subject to additional stress tests and heightened capital and liquidity requirements. SVB topped out around $200 billion, after growing rapidly in the past few years.

The final rule for enhanced regulatory standards said that all banks eligible for them would have to “hold a buffer of highly liquid assets based on projected funding needs during a 30-day stress event.” The rules in the Federal Register say: “In general, the more a company relies on short-term funding, the larger the required buffer will be.” As Daniel Davies explains, this was the part of Dodd-Frank designed to prevent bank runs, ensuring that banks have both the structural funding necessary to carry out operations and the emergency funding to handle sudden withdrawals.

Silicon Valley Bank had an unusually high amount of its assets placed in long-term government and mortgage securities, creating a mismatch and, yes, a reliance on short-term funding, namely those deposits that could be withdrawn at any time.

Its rapid growth was also a function of the Crapo bill, since it removed the regulatory hurdles banks would encounter by growing larger. Indeed, banks immediately started scooping up rivals, and the consolidation led to risk-taking affecting a wider class of customers.

You all have to play by the law; not me, said every CEO.

vxbush 3/13/2023 7:57:41 AM

This Prospectus article I linked is really providing fruit: 

The idea that bank customers who are small businesses drove the bank run at SVB, because their accounts inevitably have more than the FDIC deposit insurance limit in them and are therefore exposed to losses, is an amazing oversimplification.

Contrary to their belief, Silicon Valley big-brains are not the first ones to figure out that deposit insurance doesn’t protect their payroll accounts. Companies manage this small risk of bank failure through recognized insurance strategies. There are private-sector solutions like Intrafi’s Insured Cash Sweep, which essentially cuts up large accounts into $250,000 pieces and splits them across the banks participating in its network. CDARS, another Intrafi product, is a less liquid option that segments cash into CDs. Some prior FDIC officials have expressed anger at these schemes, but there also are cash management accounts with a “sweep” feature, or additional insurance to take out (this Forbes story has several examples).

Any risk manager worth their salt at a company knows of a panoply of ways to avoid the threat of bank failure on deposits. “The pain of having to explain this,” Porter said to me.

vxbush 3/13/2023 7:59:32 AM

One more: 

The other possibility is that SVB wanted that money kept with them. There are very strange stories coming out about how SVB required companies to hold their money with them in exchange for venture debt agreements, and then give cheap “white glove” service to founders: low-interest mortgages, lines of credit, and the like. SVB might have had a reason to want their hands on that money exclusively.

So you have depositors that either didn’t know the first thing about risk management, or were bribed by the bank into neglecting it. And you have a bank that didn’t have a chief risk officer for close to a year, that put their entire risk management on auto-pilot and got blindsided by interest rate-fueled losses. “Interest rates do two things, they go up and down. SVB did not foresee and manage properly that inevitable thing,” Porter said.

lucius septimius 3/13/2023 9:39:38 AM

I checked to make sure I didn't have any money in the failing banks, which I didn't.  Nor much in the way of bank stocks.  All my mutual funds are doing their best impression of Kamikaze pilots though.

Yay Biden!!

vxbush 3/13/2023 9:49:50 AM

In #16 lucius septimius said: I checked to make sure I didn't have any money in the failing banks, which I didn't.  Nor much in the way of bank stocks.  All my mutual funds are doing their best impression of Kamikaze pilots though.

Rampant rumor mongering is going on in various circles about this pushing us toward digital currencies. I can't say that I see how our current point A of SVB failing pushes people to point E of digital currencies, but that's where the fear porn is going. 

vxbush 3/13/2023 10:01:16 AM

Apparently this was a real tweet. 

lucius septimius 3/13/2023 10:44:50 AM

In #17 vxbush said: but that's where the fear porn is going. 

Fear mongering is a growth industry.  We went through something similar in 2008 and survived.  Given that one of the things this latest collapse may lead to is the death of Bitcoin etc. it's hard to see how it would lead to the imposition of another digital currency.  As the WSJ said, it will more likely lead to more stupid monetary policy and a growth in idiot populism.

lucius septimius 3/13/2023 10:45:06 AM
I left a couple of notes on the Frontier, one for Buzz.
JCM 3/13/2023 10:57:59 AM

Reply to vxbush in 18:

That didn't age well.... OUCH!

buzzsawmonkey 3/13/2023 11:00:34 AM

My thanks to all those who were willing to put up with my Frontier vaporings, and even respond with sympathy and support.

The main problem is that my current move is not only an incredibly arduous physical task, but that the lengthy process of finding space for things in a very limited area forces me to deal with offloading an accumulation of over 65 years' worth of material---and, in the process, wondering where and how and to whom to get rid of it, as I have no direct descendants.  The super-concentrated life review/assessment adds to the stress of the physical effort.

Occasional Reader 3/13/2023 12:05:14 PM

So I'm reminded of an old cartoon (from the New Yorker, I think) of one broker at an exchange saying to another, "things must be bad; the only new orders coming in are for canned food and ammunition."

It seems that's not what today has tuned out (so far) to be, which is good.  A bad day for regional banks, and some mutual funds, yes, but not TEOTWAWKI. 

lucius septimius 3/13/2023 12:25:04 PM
Later this week I'm having lunch with an old friend (and former student) who is a political consultant.  He wants to pick my brain - be interested what he has in mind.
JCM 3/13/2023 12:25:18 PM

Close to home or work as it be and making national news.

Podcaster And Husband Murdered: ‘Absolute Worst Outcome For A Stalking Case,’ Police Say

Husband was on our antenna team, I chatted with him in a couple meetings.

buzzsawmonkey 3/13/2023 12:27:48 PM

In #24 lucius septimius said: He wants to pick my brain

Rest assured that if I had to pick a brain, I'd pick yours over many, many others.

lucius septimius 3/13/2023 12:30:07 PM

Reply to buzzsawmonkey in 26:

I suspect he wants my opinion on the whole crisis in academia right now - I would suspect that the state legislature is looking at what other Republican state governments have done and planning it's own moves.

(and thank you!)

Occasional Reader 3/13/2023 1:16:20 PM

In #26 buzzsawmonkey said: Rest assured that if I had to pick a brain, I'd pick yours over many, many others.

4 out of 5 zombies recommend lucius's brain (for their zombie patients who eat brains). 

Occasional Reader 3/13/2023 2:25:15 PM

WELL, so I just happened by my local bank branch, as was pleased to see it's not closed and guarded by paratroopers, with an angry mob forming outside, or anything like that.

So, today was a much better day than anticipated!

Kosh's Shadow 3/13/2023 5:03:45 PM

I think a lot of SVB business customers were start-ups and were too small to have risk managers. They let the bank handle their money.

I've worked for companies that small. One was so small the CEO also took tech support calls. Another had only online tech support, and I would guess the CEO there handled them too.

Kosh's Shadow 3/13/2023 5:05:06 PM

In #28 Occasional Reader said: 4 out of 5 zombies recommend lucius's brain (for their zombie patients who eat brains). 

There should be a zombie movie where zombies invade the Capitol and other government buildings and starve to death.

Kosh's Shadow 3/13/2023 5:06:27 PM

Looks like I will be working from home Tuesday and maybe Wednesday. 12-18" snow from tonight until Wed. morning.

Pre-COVID, very linited work from home where I work. Now, much better.

Kosh's Shadow 3/13/2023 5:57:00 PM
Jukebox  listen to how today's surveillance culture was predicted
Kosh's Shadow 3/13/2023 6:09:48 PM
Jukebox - probably the song for too many of our lives
Kosh's Shadow 3/13/2023 6:33:58 PM
Another jukebox

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