Andy Puzder is a former CEO of CKE Restaurants, Chairman of 2ndVote Value Investments, Inc., and Visiting Fellow of the Heritage Foundation
President Joe Biden announced Monday morning that his administration will conduct a “full accounting” of historic bank failures and hold those responsible for a new unfolding financial crisis accountable.
First you need to look in the mirror.
While the mainstream press will search in vain for alternative explanations, the collapse of Silicon Valley Bank (SVB) and the ensuing hysteria are at President Biden’s feet.
As of Monday afternoon, the share prices of at least 20 regional banks plunged, prompting a suspension of operations. The four largest banks in the United States, Wells Fargo, Bank of America, Citigroup and JP Morgan, took a hit in the stock market. And hedge fund billionaire Bill Ackman warns that unless the US government steps in to guarantee regional bank deposits for all Americans, the entire economy may shut down.
Despite the president’s assurances, the fear is real. And make no mistake: he created the conditions for today’s panic.
Remember that in 2021, former Clinton and Obama White House economist Larry Summers warned that Biden’s $1.9 trillion spending spree, ironically dubbed the ‘American Bailout’, was a serious economic threat. Summers called it the “least responsible” economic policy in 40 years. Obama’s former economic adviser, Steven Rattner, called it “the original sin.”
Both men recognized that wasteful government spending would unleash runaway inflation that would inevitably require the Federal Reserve to impose sky-high interest rates. But despite those warnings, the trillions in government spending kept coming.
President Joe Biden announced Monday morning that his administration will conduct a “full accounting” of historic bank failures and hold those responsible for a new unfolding financial crisis accountable. First you need to look in the mirror.
While the mainstream press will search in vain for alternative explanations, the collapse of Silicon Valley Bank (SVB) and the ensuing hysteria are at President Biden’s feet.
The ‘US bailout’ was followed by a nonsense green energy and infrastructure spending bill called the ‘Reducing Inflation Act’. Yet today, inflation remains unacceptably high.
It is also not surprising that SVB was the first bank to fail in this environment. In fact, it’s hard to ignore the irony of this.
SVB, a regional bank on the West Coast, filled its coffers with the deposits of Silicon Valley entrepreneurs, who were showered with billions of dollars in investment.
In Biden’s overheated economy, capital was easy to come by. But those who live by the sword die by the sword.
The bank took those deposits and invested them in low-yield bonds and Treasuries sowing the seeds of its own destruction.
Because when the Federal Reserve inevitably raised interest rates to cool the economy and control inflation, investments in the tech sector dried up and SVB holdings became worthless.
This was completely predictable, so why didn’t SVB see it coming?
Well, his attention was focused elsewhere.
SVB’s chief risk officer resigned in May 2022. Her replacement was not hired until 9 months later, in January 2023.
That time frame coincides with the period when new deposits for SVB faltered. With no new money coming through the bank’s doors, they should have recognized that they had a big problem. But instead of taking action to correct the course, the head of risk management at SVB’s UK branch was launching international equity and inclusion initiatives.
SVB has a website where you can read about their ‘Diversity, Equity and Inclusion commitments and progress to date’.
Of course, SVB also has an ‘ESG Reporting’ website which claims that it ‘recognizes the economic importance. . . threats of climate change’ (that’s the E in Environment, Social and Governance).
in a report 2022SVB’s parent company Chairman and CEO highlighted how the company’s “long history of service (ESG) has enabled us to seize opportunities to build a better world, and this report highlights our efforts, progress and commitment to transparency and accountability.” .’
SVB further pledged to write at least $5 billion in loans to “support clients’ sustainability businesses” and pledged to become self-neutral by 2025.
SVB’s chief risk officer resigned in May 2022. Her replacement was not hired until 9 months later, in January 2023. (Top) People lining up outside a Silicon Valley Bank office on March 13, 2023 in Santa Clara , california
In a 2022 report, the Chairman and CEO of SVB’s parent company, highlighted that the company’s “long history of service (ESG) has enabled us to seize opportunities to build a better world, and this report highlights our efforts , progress and commitment”. to transparency and accountability.’ (Top) Greg Becker, President and CEO of Silicon Valley Bank, speaks at the Milken Institute Global Conference in Beverly Hills, California
Unfortunately for SVB, there were other, more pressing economic threats, such as the potential impact of rising inflation on its bond portfolio and its undiversified client base.
As of Monday, HSBC bought that UK branch of SVB for around $1.22.
Perhaps, even if SVB hadn’t seen his exposure, US government regulators shouldn’t have.
But again, there is reason to believe that they too were distracted.
After the 2008 financial crisis, the Financial Stability Oversight Board was created for this sole purpose: to sound the alarm about lurking threats.
The council sits on the nation’s top financial managers, including Treasury Secretary Janet Yellen, Federal Reserve Chairman Jay Powell and Gary Gensler, head of the Securities and Exchange Commission.
The latest council meeting reveals pressing concerns about “climate-related financial risks,” which the group identified as “an emerging threat to US financial stability.” Not on his list of worries: bank runs fueled by interest rate-driven portfolio losses.
And this isn’t the first time we’ve seen the impact of financial gurus succumbing to distractions outside of fiscal common sense.
FTX founder Sam Bankman-Fried, dubbed the Crypto Black Knight by the Wall Street Journal, successfully promoted effective altruism and misled the world’s political and financial elites by saying all was well.
In the end, it is allegedly responsible for losing nearly $8 billion in customer money. But to his credit, he admitted that ESG and his progressive stance were a fraud, albeit a costly one for his investors.
When will the administration learn its lesson?
Apparently not soon.
A new pending rule from the Labor Department seeks to undermine a law that requires fund managers, such as those who oversee the 401k’s of millions of Americans, to seek financial returns for their clients over and above political or social objectives. The Biden rule, he guessed, would make it easier for fund managers to advance leftist causes, insulating them from regulatory action if those investments fail.
The factors that led to the collapse of SVB are widespread in our financial sector. If we approach the collapse of SVB as a single bank event, we will suffer the consequences of that decision for decades to come.
If you think it’s far-fetched to believe that the Biden administration would favor savvy political and social imperatives over basic financial common sense, then think again.
