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The Bank Crisis Has Democrats Scrambling Behind The Scenes To Find A Scapegoat

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2 weeks ago

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Liu Guanguan/China News Service/VCG via Getty Images

Democratic representatives are scrambling in the wake of the potentially contagious Silicon Valley Bank implosion, looking for a way to divert attention away from them should the crisis expand.  

One avenue for scapegoating the event that has been suggested among Dems and the media is to blame a 2018 law that eased Dodd-Frank capital requirements for midsize and small banks.  Republicans led the effort to pass the law, which President Donald Trump signed, but 33 House Democrats and 17 Senate Democrats also voted for it. 

No mention, of course, of the cancerous exposure SVB had to numerous woke investments through venture capital, including money losing ESG related projects, climate change-based companies and World Economic Forum stakeholder capitalism projects.

The Dems have found their narrative, which is an old narrative:  “The conservatives did it.”

Israeli Banks Transferred $1 Billion Out of SVB Before Collapse

What Democrats do not seem to understand is that the easing of Dodd-Frank capital requirements was in direct response to the Federal Reserve’s announced plan to tighten liquidity and raise interest rates through 2018.  With more expensive credit and a shrinking Fed balance sheet, reducing requirements for bank buffers was one of the few ways to prevent the stimulus addicted lending sector from plummeting.  The extra capital also allowed banks to continue lending to companies that engage in stock buybacks, keeping stock markets afloat.

With a larger capital buffer even more liquidity dries up, revealing the true economic weakness underneath that Dems have denied for the past few years.  So, if Biden and the Dems get what they want (more strict capital requirements for banks), then there will be an even swifter collapse of markets and the overall economy due to lack of liquidity.    

By the end of 2018, markets began to plunge anyway under the strain of higher interest rates, which led to the Fed reversing course, and this seems to be what Democrats are really hoping for.  They have called for endless liquidity measures and have consistently demanded lower rates and looser monetary policy.  However, when Donald Trump’s Administration called for rate cuts during his term, Dems attacked.  Once again, when Republicans do it, it’s wrong; when they do it, it’s good policy.  

Another issue to consider is that each successive program by the Fed to employ bailouts and QE accelerates the inflation crisis.  While both sides of the aisle seem to want helicopter money when they are in power so they can boast about rising stock markets and improved employment, the Dems are now facing a systemic stagflationary event; the same event they originally claimed did not exist.  This means that any pursuit of new QE in the face of a credit crunch would lead to an immediate spike in inflation once again, crushing the middle class.  

Are Democrats willing to accept responsibility for something like that?  Not a chance.

The Biden Administration has so far taken full credit for the slowdown of consumer inflation as well as the shrinking deficit, but these changes are only due to the tightening actions of the central bank which sets policy independent of the White House.  Democrats can’t have it both ways – They can’t take credit for reduced inflation when the Fed tightens policy against their wishes, and then not take credit for the consequences of higher inflation when they badger the Fed to inject more stimulus.

The only recourse for the political left is to somehow lay the blame on conservatives no matter which way the wind blows, inflation or deflation.   

Emergency congressional hearings have been organized to determine the cause of the SVB crisis and the course of action needed.  Democrats including Sen. Sharrod Brown and Rep. Maxine Waters were quick to applaud the backstop initiated by the Fed and the Treasury Department, attempting to calm market concerns and reassure investors and depositors that all is well.  Maxine Waters stated that Republicans and Democrats needed to “work together to protect the safety of the financial system”, which is likely a thinly veiled assertion that Republicans must support raising the debt ceiling and commit to even more spending.  

Biden took a slightly different tone, vowing to hold the people who caused the mess responsible, specifically referring to Republicans.  Of course, to legitimately hold the true culprits responsible would require that Biden punish himself – As it was the Fed along with the Obama/Biden Administration that launched the ongoing stimulus bonanza in 2008/2009.  Obama and Biden doubled the national debt from $10 trillion to $20 trillion in the span of a mere eight years.  The normalization of fiat money creation to avoid economic consequences has created the very inflationary crisis and banking weakness we are facing today. 

And, if banks cannot withstand even a moderate rise in interest rates and reduced liquidity because of their addiction to Fed stimulus, then it is fitting if the system crashes under a new Biden regime.

This post was originally published at Zero Hedge

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Economy

Video: Amid Banking Collapse, White House Says “We See A Strong Economy”

Strange choice of words

Published

2 days ago

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23 March, 2023

Steve Watson

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As inflation continues to skyrocket and amid huge banking collapses, the White House press secretary declared Wednesday that the Biden administration “sees a strong economy.”

CBC’s Caitlin Huey-Burns asked Karine Jean-Pierre about Joe Biden’s support for Federal Reserve Chairman Jerome Powell and what the Fed is doing to attempt to reduce inflation. 

“We understand what the American people are feeling, that is why we have made it a priority to do everything that we can to lower costs for Americans,” Jean-Pierre responded.

Then came the kicker.

“We do not see a recession or pre-recession. We see a strong economy and it’s because of the work that this president has done,” Jean-Pierre declared.

You don’t see it or there isn’t a recession?

Strange choice of words.

Keep saying it and it might become reality:

When asked if there will be an economic downturn owing to two giant bank collapses, KJP had no answer, other than to quote the Fed chairman saying the economy is sound:

Powell claims that rampant money printing isn’t driving inflation:

Treasury Secretary Janet Yellen claims that just growing debt forever is sustainable:

Are they wilfully ignorant or just flat out lying?

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    Economy

    Elon Musk Responds To Biden’s “Pay Your Fair Share” Tax Tweet

    “I paid more income tax than anyone ever in the history of Earth”

    Published

    5 days ago

    on

    20 March, 2023

    Steve Watson

    Hannibal Hanschke-Pool/Getty Images

    The world’s richest man Elon Musk has responded to a tweet sent out by Joe Biden calling for higher taxes for billionaires, noting that he’s paid more tax than any human ever in the history of the planet.

    Biden sent out the following tweet calling on rich people to “pay your fair share,” along with a claim that the average tax billionaires pay is three percent.

    Musk responded, noting that he paid a whopping 53 percent tax on Tesla stock options at both the state and federal level, and that he paid more taxes than any person on Earth in 2021 ($11 billion) and will do so again for the 2022 fiscal year.

    Musk also called for a fact check on Biden’s three percent claim.

    Musk’s call led to the following correction from the Tax Foundation being added to Biden’s tweet, showing how Biden is either just flat wrong or lying:

    Others chimed in on Musk’s comments:

    While others had some choice responses for Biden:

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    Economy

    SVB’s London Bankers Received Up To $36 Million In Bonuses Days After BoE-Orchestrated Bailout

    Published

    6 days ago

    on

    19 March, 2023

    Zero Hedge

    David L. Ryan/The Boston Globe via Getty Images

    Bankers at the London branch of Silicon Valley Bank reportedly received tens of millions of dollars in bonuses just days after the Bank of England orchestrated a rescue package that led to Europe’s largest lender, HSBC, buying the failed bank’s subsidary for just £1, Sky News reports.

    Sources described the bonus pool as “modest”, and said it totalled between £15m and £20m.

    It was unclear on Saturday how much had been awarded to Erin Platts, the UK bank’s chief executive or her senior colleagues.

    One insider said the bonus payments were a signal of HSBC’s confidence in the talent base at its new subsidiary and that the buyer had been keen to honour previously agreed payments in order to help retain key staff. –Sky

    Israeli Banks Transferred $1 Billion Out of SVB Before Collapse

    What’s more, bonuses were reportedly doled out to US staff just hours before the Santa Clara, California-based bank collapsed. The bank was taken into FDIC ownership, while SVB Financial Group has filed for Chapter 11 bankruptcy protection as it looks to find buyers for their remaining assets.

    The UK arm of (formerly) SVB employs around 700 people. The London branch’s ‘guided demolition’ was coordinated with UK Prime Minister Rishi Sunak, who played a pivotal role in an emergency auction that drew interest from several challenger banks, including the Bank of London and Oaknorth.

    According to insiders, if HSBC hadn’t stepped up, the bonuses wouldn’t have been paid, while another insider pointed out that stock held by senior executives and other employees had been rendered worthless amid the implosion.

    “The UK’s tech sector is genuinely world-leading and of huge importance to the British economy, supporting hundreds of thousands of jobs,” said chancellor Jeremy Hunt. “We have worked urgently to deliver on that promise and find a solution that will provide SVB UK’s customers with confidence.”

    “[This] ensures customer deposits are protected and can bank as normal, with no taxpayer support.”

    The government had been lobbied intensively last weekend by hundreds of tech entrepreneurs about the parlous state of SVB UK.

    They warned of “an existential threat to the UK tech sector”, adding: “The Bank of England’s assessment that SVB going into administration would have limited impact on the UK economy displays a dangerous lack of understanding of the sector and the role it plays in the wider economy, both today and in the future.”

    The founders warned Mr Hunt that the collapse of SVB UK would “cripple the sector and set the ecosystem back 20 years”. -Sky

    “Many businesses will be sent into involuntary liquidation overnight,” were SVB UK not rescued, wrote the entrepreneurs.

    This post was originally published at Zero Hedge

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