(RightWing.org) – This week’s financial news is the collapse of Silicon Valley Bank. That collapse was completely predictable — it was a woke business more interested in virtue-signaling than making sensible investment decisions — but it’s also exposed a much bigger problem. And this one could take down the whole financial system.
$620 billion of unrealized losses, overall equity 2.2 trillion. If a run on the banks would happen it could be fatal even for several large US banks like JP Morgan and Citi. This crisis isn’t over. The US Treasury simply bought some time. pic.twitter.com/2xNvfIrN9b
— Kim Dotcom (@KimDotcom) March 13, 2023
Silicon Valley Bank (SVB) was a perfect example of all that’s bad about woke businesses. The bank boasted about the diversity of its board, but when its risk management officer quit last year, it took eight months to replace her. That’s unfortunate because a risk management officer was exactly what they needed; SVB’s “assets” — mostly low-yield Treasury bonds — turned out to be worth a lot less than they’d paid for them. Then, when they tried to offload them at fire-sale prices to solve a cash flow issue, they accidentally sparked a run on the bank by panicked investors.
However, now it turns out that SVB wasn’t the only bank sitting on low-value assets. In fact, the Federal Deposit Insurance Corporation (FDIC), which guarantees deposits and compensates account holders if a bank collapses, says the difference between what American banks say their assets are worth and what they’d actually get if they sold them adds up to a massive $620 billion black hole. The main culprit is bonds that were bought when interest rates were a lot lower. Because these also pay out at a much lower interest rate than what we have now, they’re worth a lot less than banks bought them for. This isn’t really a problem unless the bank is forced to sell them, but that can happen. It happened to SVB, and now some other regional banks are looking shaky.
So far, nobody’s been directly harmed by the SVB collapse; the FDIC broke its own rules and covered the full value of deposits, ignoring the $250,000 ceiling. That’s good news for people who put their money in the fashionable woke bank, but it could be very bad news if more banks fail and need to be bailed out. Now that the FDIC has revealed the massive scale of the junk assets held by our banks, it’s clear there’s a real risk of another financial crash like 2008.
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