The Country Where Economic Freedom Has Grown the Most Over the Last Two Decades thumbnail

The Country Where Economic Freedom Has Grown the Most Over the Last Two Decades

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By Foundation for Economic Education (FEE)

Vietnam is on the path to becoming one of the world’s most vibrant economies. No country of comparable size has gained as much economic freedom since 1995.

Vietnam continues to gain economic freedom, as confirmed by the latest edition of the Heritage Foundation’s Index of Economic Freedom ranking.

The Index ranks a total of 176 countries based on how economically free or unfree they are. The comprehensive rating is based on twelve categories of freedoms. The Index divides countries into five groups, the best of which is “free” (and includes Singapore, Switzerland, Ireland, and Taiwan); the worst is “repressed” (with countries like Venezuela, Cuba, and North Korea).

Vietnam’s economic freedom score is 61.8, making its economy the 72nd freest in the 2023 Index. Its score is 1.2 points better than last year. Vietnam ranks 14th out of 39 countries in the Asia–Pacific region, and its overall score is above the world and regional averages.

What is most important, however, is not just the most recent score, but the change in the ranking over time: no country of comparable size in the whole world has gained as much economic freedom as Vietnam since 1995. Back in 1995, when the Index was first compiled, Vietnam scored a meager 41.7 points. In the intervening years, Vietnam has gained 20 points. By comparison, China had 52 points in 1995 and has gone on to lose almost four points since then. With a score of 48.3 points, China is now only 154th out of 176, a full 82 places behind Vietnam.

The US only just scrapes into the second-best of the five categories (“mostly free”, rank 25). There are now 16 countries in Europe alone that are economically freer than the US. If the United States were to lose just one more point in next year’s ranking, it would find itself in the “moderately free” category. The US has progressively dropped down the rankings in recent years.

The Heritage Foundation writes about Vietnam: “Capitalizing on its gradual integration into the global trade and investment system, the economy is becoming more market-oriented. Reforms have included partial privatization of state-owned enterprises, liberalization of the trade regime, and increasing recognition of private property rights.”

Vietnam secures strong ratings in the areas of “Fiscal Health” and “Government Spending,” and moderate ratings for “Business Freedom” and “Monetary Freedom.” Vietnam rates poorly for “Government Integrity,” “Judicial Effectiveness,” “Property Rights” and “Investment Freedom.”

If Vietnam continues on the path it embarked on in 1986 with the Doi Moi reforms, it has a good chance of becoming one of the world’s economically strongest countries. Before the economic reforms began, every bad harvest led to hunger, and Vietnam relied on support from the UN’s World Food Program and financial assistance from the Soviet Union and other Eastern Bloc countries. As late as 1993, 79.7 percent of the Vietnamese population was living in poverty. By 2006, the rate had fallen to 50.6 percent. In 2020, it was only five percent.

Vietnam is now one of the world’s most dynamic countries, with a vibrant economy that creates great opportunities for hardworking people and entrepreneurs. From a country that, before the market reforms began, was unable to produce enough rice to feed its own population, it has become one of the world’s largest rice exporters—and a major electronics exporter.

If it is to become one of the economically strongest countries in the world, Vietnam needs to make sure that its people do not forget why it has been so successful: increasing recognition of private property rights, more economic freedom, and greater integration into the global trading system.

Many countries today are doing the exact opposite and restricting economic freedom; Vietnam should aspire to gain ever more economic freedom.

AUTHOR

Dr Rainer Zitelmann

Dr. Rainer Zitelmann is a historian and sociologist. He is also a world-renowned author, successful businessman, and real estate investor.

Zitelmann has written more than 20 books. His books are successful all around the world, especially in China, India, and South Korea. His most recent books are The Rich in Public Opinion which was published in May 2020, and The Power of Capitalism which was published in 2019.

EDITORS NOTE: This FEE column is republished with permission. ©All rights reserved.

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China Brokers a Surprising Mid-East Deal

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By Neland Nobel

We think a story of major importance has been buried by the news of bank runs in the US.  While not disputing the importance of the bank run stories (we’ve written on this ourselves), the implications of China brokering a deal between Saudi Arabia and Iran are very important.  The two warring nations have achieved some kind of change in relations brokered by China, which sees itself in the ascendency.

One of the first things to be noticed is that the parties concerned could not find the US to be a fair go-between to get the deal done.  That says volumes about the decline in influence in the Middle East under the Biden Presidency.

Tensions between China and the US are rising.  Confirmation of the origins of Covid in a Chinese lab (funded by the US), warnings to China about helping Russia in the war in Ukraine, issues of trade and reshoring, and the new aggressive military and diplomatic muscle China is displaying, all are a matter of record. All that said, these countries, one a supposed ally of the US, the other an enemy, chose to have China as their mediator.

Why would the parties go with the Chinese?  Saudi Arabia may have concluded that US flirtations with Iran indicated that Iran will be getting the nuclear bomb and the US would not be able to stop them.  Making a deal while you can, must have been at least one of their motives.

Biden’s constant contempt for autocracies leaves little room for countries that are, and maybe both Iran and Saudi Arabia felt more comfortable with a fellow tyrant.

Saudi Arabia has recently not answered Biden’s phone calls and has been further irritated by US attempts to prosecute high Saudi officials for the death of a journalist.  They also failed to respond to Biden’s request to increase oil production, all while the US tries desperately to destroy the oil industry.

Iran hates the “great Satan” and likely relishes sticking it to the US.

On an even a deeper level, Iran and Saudi Arabia both are major oil and gas producers and the US has basically said that it wishes to lead the world in making sure neither country has a future for its primary export.  The US has signaled that basically, it wants to put both countries out of business over the next 10 years.  Both countries want a place to export their energy production and the US is hostile to their energy and economic interests.

On the other hand, China is eager to buy energy from both countries, and builds coal plants at a record pace, all the while maintaining the fiction of being concerned about “climate change.”   When it comes to environmental hypocrisy, they have played the US and the ever-blundering John Kerry like a fiddle.  Then again, the fact that Kerry’s stepson and President Biden’s son Hunter have both been involved in China might go some distance in explaining this hypocrisy.

From the Chinese perspective, it is wonderful to dominate the production of windmills and solar panels, minerals for batteries, and at the same time build up their refining capacity for fossil fuels.  This gives them control of the energy situation, no matter how it evolves.  If “alternatives” are a great success, they are the primary supplier.  If they are a great flop, they literally will have the West of a barrel.

China has also wanted to wean itself off the US dollar system and has been working to expand the so-called BRICS nations into an alternative payment system.  They would love to get away from the “inordinate privilege” that the US maintained in the post-war era as the issuer of the reserve currency of the world.  Both Iran and Saudi Arabia want to join the new system.

If China can convince Saudi Arabia and Iran to sell oil in yuan, this also breaks the so-called “petrodollar.”

After the severing of convertibility to gold in 1971, the US sent envoys to Saudi Arabia that said if the Kingdom would only accept dollars in payments for oil, the US would protect the Kingdom of Saudi Arabia.  This created an instant demand for dollars as it was the sole global currency needed by all nations to purchase vital energy.

But since the US has not stopped Iran from pursuing its goals in the region, and its pursuit of becoming a nuclear power,  Saudi Arabia may now feel they may not be able to rely on the US and therefore supporting the dollar in this way is no longer necessary or even helpful.  Saudi Arabia must keep huge quantities of dollars issued by a government that is dangerously managing its finances.  If they don’t get the military protection promised, they are not required to keep up their end of the bargain and take payment only in US dollars.

Without the artificial demand for dollars for settling oil payments, this reduces the demand not only for dollars but for US Treasury Bonds issued in dollars.

China has been sharply reducing its holding of dollars and Mid-East oil producers may now feel it is best to diversify both their currency and credit risk.

Finally, the US seized the foreign currency reserves of Russia, an ally of both China and Iran, and showed to the world that holding dollars in Western Banks is a risky deal.  Get crosswise with the US on any major level and the US can seize your accumulated reserves without any judicial process whatsoever.  This is another common interest among China and the oil producers of the region.  The US through its fiscal excesses, blundering foreign policy, and environmental zealotry, has done much to undermine dollar supremacy and China is more than happy to assist in our demise.

For the US, the loss of dollar supremacy will mean higher domestic inflation, and higher costs to finance our swelling deficits twin deficits.  Moreover, hostility by Democrats to US domestic energy production leaves us more vulnerable to Mideastern oil producers, especially if they ally with China and Russia.

A deal can only be made if the interests of each party are served.  They must have concluded that relying on the US is not a good thing for them and it is time for some diversification of their monetary, economic, and political risk.

For the US, this loss of influence could be a major event.  Destruction of the reserve status of the dollar and the concomitant demand for US Treasury bonds could be a much lower standard of living for the US and much higher debt finance costs.

The wild card is Israel, which cannot tolerate Iran becoming a nuclear power.  If Iran and Saudi Arabia kiss and makeup, it will be hard to unite a coalition against Iran.   Israel may not be able to use Saudi airspace if an attack on Iran is needed.  Israel does not have long-range strategic bombers and thus would require aerial refueling. Further, Israel’s primary ally is the US, and has been humiliated and lost credibility in the region.

But that simply is not enough for Biden.  He is actively supporting the Israeli domestic political opposition to Netanyahu’s judicial reforms and Democrats have openly involved themselves in Israeli politics for years, always on the side of the left-wing Labor Party.   Democrats only support left-wing governments in Israel and likely Iran and Saudi Arabia have taken note.

This Chinese-brokered rapprochement simply is another byproduct of a failing  Democrat administration.

These are just a few observations that can be made.  There are likely many other important implications that will reveal themselves over time.

Whatever this deal means, it likely means a much more difficult road ahead for the US and an existential threat to the survival of Israel.

China becomes a bigger player on the world scene and the US is weakened.  All these are thanks to one of the most corrupt and incompetent Administrations in recent history.

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Biden Treasury Secretary’s Policy Destroys Small U.S. Banks While Bailing Out Chinese Depositors, Experts Say thumbnail

Biden Treasury Secretary’s Policy Destroys Small U.S. Banks While Bailing Out Chinese Depositors, Experts Say

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By The Geller Report

Once the big four banks control all the money, they will control everything else, including what kind of business you can run, what you can and cannot say on social media, and what opinions you can hold.

This is the biggest power grab since the election rigging of 2020.

By: Jason Cohe, Daily Caller, n on March 17, 2023

  • Treasury Secretary Janet Yellen’s recent decision to backstop all uninsured deposits at two failed banks due to their “systemic risk” to the U.S. economy not only benefits the Chinese Communist Party, but also potentially endangers smaller financial institutions, experts told the Daily Caller News Foundation. 
  • Silicon Valley Bank and Signature Bank both collapsed last week, resulting in a full takeover of the financial institutions by the Federal Deposit Insurance Corporation. 
  • “It’s absolutely atrocious that we are yet again, using taxpayer money to bail out the CCP,” E.J. Antoni, research fellow for Regional Economics at The Heritage Foundation’s Center for Data Analysis, told the Daily Caller News Foundation. 

Treasury Secretary Janet Yellen’s recently announced policy to safeguard all uninsured deposits at failing banks deemed to be a “systemic risk” to the U.S. economy would destroy smaller financial institutions while simultaneously bailing out Chinese depositors, experts told the Daily Caller News Foundation.

Yellen, alongside the Federal Deposit Insurance Corporation and Federal Reserve, announced Sunday that all uninsured depositors who held accounts at the now-defunct Silicon Valley Bank (SVB) and Signature Bank would be fully covered, adding that “decisive actions” were needed to “protect the U.S. economy.” SVB was particularly popular among Chinese tech startups, as it provided easy access to U.S. investor funding, CNBC reported.

SVB’s stock collapsed last week amid numerous customer bank runs following the institution’s disclosure of a $1.8 billion net loss on asset sales on the back of high interest rates, forcing regulators to shut down the bank. Just two days later, Signature Bank, a premier lender in the crypto space, was closed by regulators due to “systemic risks,” CNBC reported.

A bailout of uninsured depositors at the collapsed banks benefits the Chinese Communist Party at taxpayers’ expense and could lead to stricter regulatory controls that smaller U.S. banks would be unable to withstand, experts told the DCNF.

“It’s absolutely atrocious that we are yet again, using taxpayer money to bail out the CCP,” E.J. Antoni, research fellow for Regional Economics at The Heritage Foundation’s Center for Data Analysis, told the DCNF. “And so now whenever the government has these knee-jerk reactions, we end up sending dollars where the American people would not like them to go.”

During COVID-19, when the government authorized sending Payment Protection Program loans and unemployment payments, it also distributed taxpayer dollars to individuals in China, Antoni told DCNF. “Anytime the government spends money, they’re by definition spending taxpayer dollars … So taxpayers are ultimately on the hook for all of this.”

In 2012, SVB launched a joint venture with Shanghai Pudong Development Bank (SPDB), resulting in the creation of SPD Silicon Valley Bank Co., CNBC reported. The venture was focused on providing services to tech startups.

Additionally, in the wake of the SVB collapse, lawmakers may seize on the chance to create a restrictive regulatory environment that “small community banks are just not going to be able to withstand,” according to Alfredo Ortiz, president and CEO of the Job Creators Network.

Unlike big banks, smaller financial institutions face greater scrutiny from regulators, Anne Balcer, Independent Community Bankers of America senior executive vice president and chief of Government Relations and Public Policy, told the DCNF.

“There’s almost a disproportionate or heightened scrutiny on the smaller institutions,” Balcer said. “Regulators keep a much tighter leash on the community banks, which is ironic,” because they are less risky than banks like SVB.

Read more.

EDITORS NOTE: This Geller Report is republished with permission. ©All rights reserved.

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The Unconstitutional Tax on “Unrealized Capital Gains”

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By Phillip W. Magness

The Biden Administration’s 2023 budget bill made headlines by proposing a so-called “billionaire tax,” imposing a 25-percent minimum rate on the “unrealized capital gains” of the wealthiest Americans. The Biden measure rests on an economic falsehood. The new proposal rests on the work of far-left academics such as Thomas Piketty and Gabriel Zucman, who erroneously claim that wealthy Americans pay a lower tax rate, on average, than the poor. This assertion arises from a compounding of basic empirical errors, beginning with the blurring of the distinction between income (annual earnings) and wealth (net worth) as well as a fair amount of intentional statistical manipulation.

In addition to being premised on bad economic reasoning and contrived evidence, Biden’s proposed wealth tax will also likely face another obstacle: it is blatantly unconstitutional.

To see how, we must turn to the text of the Constitution itself. Article I, Section 8 of the document establishes the “Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States” with the stipulation that these measures must be uniform. A separate clause in Article 1, Section 9 stipulates that “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.”

When read together, these two clauses divide the taxing power of the federal government into two categories: direct and indirect taxation.

If a tax is indirect, it may meet constitutional muster by simple uniform application across the entire country. Consider a national excise tax on alcohol sales, one of the earliest and longest-standing federal tax measures in existence. Under the current federal excise tax, distilled spirits are taxed at $13.50 per proof gallon, regardless of the state in which they are purchased and consumed. A parallel tax similarly covers liquor that is imported from abroad, again, meeting the uniformity requirement by applying to all states.

A direct tax, by contrast, must meet the apportionment requirement of the Capitations clause, with one notable exception arising from a later amendment. As originally designed, this meant direct taxes had to be divided in proportion to the population of each state, and then assessed within the population of that state. Since state population is the determinant, this formula could conceivably lead to 50 different tax rates, under the Constitution’s design. The resulting system would likely face insurmountable political opposition, in addition to being impractical to implement and enforce.

So, how did the Constitution originally differentiate direct and indirect forms of taxation? That subject came up in one of the first major Supreme Court cases, Hylton v. United States in 1796. Borrowing his reasoning directly from Adam Smith’s Wealth of Nations, Justice Paterson wrote that “All taxes on expenses or consumption are indirect taxes.” The Court, accordingly, affirmed the constitutionality of a federal sales tax on carriages, finding that it was not subject to the apportionment formula of the census.

This outcome precluded the need to elaborate on direct taxation, however, the legal arguments from the case also settled that question. Alexander Hamilton’s brief for the case defines direct taxation to include “capitation or poll taxes,” “taxes on land and buildings,” and “general assessments, whether on the whole property of individuals, or on their whole real or personal estate.” All other taxes, Hamilton continues, “must of necessity be considered as indirect taxes.”

Although the Court determined that the carriage tax fell outside of the direct-tax classification, another federal tax almost a century later would run afoul of the apportionment rule. In 1894, Congress established a federal tax of two percent on incomes over $4,000. The measure sparked a complex array of legal challenges, on the basis that Congress had laid a direct income tax without meeting the apportionment requirement from the census. The following year, the Supreme Court struck down a key provision of the new income tax measure. Taxes on income derived from interest, dividends, and rent, the Court ruled in Pollock v. Farmer’s Loan & Trust, qualified as direct taxation. Since this tax did not meet the apportionment requirement, the Court struck it down.

The fallout from the Pollock ruling dominated national politics for the next decade, as opponents of the existing tariff-based revenue system lobbied to replace it with an income tax. The impasse finally broke in 1909, when Congress adopted the 16th Amendment (ratified in 1913).

This Amendment authorized the modern federal income tax, but not by repealing the older apportionment rule of Article 1, Section 9 as is commonly assumed. Rather, the 16th Amendment carved out a very specific exception to the existing clause. As its text states, “Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

Congress may accordingly levy a direct tax on income earnings without needing to meet the census-based apportionment stipulation. It has done so from 1913 to the present day, under the all-too-familiar form that we fill out every April. Note, however, that the Amendment’s text does not exempt other forms of direct taxation from the apportionment requirement.

A tax on “unrealized capital gains” cannot be a tax on income, as no income is generated in the process, only an estimated increase in valuation. It is “unrealized” by definition. Indeed, post-16th Amendment jurisprudence has generally held that money must be “realized” and received in order to qualify as income, most notably the 1920 case of Eisner v. Macomber.

If Biden gets his tax, it would face a steep and immediate constitutional challenge. The administration is likely banking on a series of extremely tendentious arguments by far-left law professors to argue that previous jurisprudence on this question should be discarded. These arguments often begin from the assumption that Pollock was wrongly decided, and openly advocate judicial activism from the bench, as a strategy to bypass the apportionment requirement through semantic games. Even supporters of the idea concede that this strategy is unlikely to pass muster with the current Supreme Court.

It’s a fitting realization. Much like the contrived economic arguments behind the wealth tax, its legal arguments are a result of politically motivated reasoning to bring about a new tax system that the Constitution prohibits.

*****
This article was published by AIER, American Institute for Economic Research and is reproduced with permission.

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‘No Painless Option’: Fed Faces Tough Choice on Inflation Following Bank Collapses thumbnail

‘No Painless Option’: Fed Faces Tough Choice on Inflation Following Bank Collapses

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By Casey Harper

The U.S. Federal Reserve may be less likely to use its key tool to combat inflation because of recent bank failures.

The Fed has been aggressively hiking interest rates for months to help combat inflation. While inflation has slowed, it remains elevated. Given the recent bank collapses, hiking rates again may be too risky for the Fed.

“The Federal Reserve is going to have to pick its poison – tolerate some inflation for a bit to see if its current series of rate hikes takes hold and pause or keep hiking and deal with the financial instability caused by their own policy decisions,” Jamie Cox, managing partner for Harris Financial Group in Virginia, said in a statement.

Raising rates at this time would likely be hard on the markets and the banks, but not raising them would likely mean higher inflation for much longer.

“The Fed has a choice to make about inflation: It can bring it down now, likely with a little bit of pain,” Ryan Young, senior economist at the Competitive Enterprise Institute, told The Center Square. “Or it can bring it down later, with a lot more pain. There is no painless option.”

The Federal Reserve meets March 22, and is expected to announce its decision then. The group could try to split the difference with a small rate hike.

“Politicians don’t like tradeoffs, which is why Sen. Elizabeth Warren and others are pressuring the Fed to stop raising interest rates,” Young said. “But the right thing to do is to get inflation back down. [Federal Reserve] Chairman [Jerome] Powell, for all his earlier mistakes, appears committed to finishing what he started.

“A strong labor market makes the Fed’s decision easier, although Silicon Valley Bank’s failure makes it tougher,” he added.

Powell testified before the Senate Banking Committee earlier this month where he said bigger rate hikes could be necessary to address inflation, though that was before the collapse of multiple banks in recent days.

“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” he said at the time.

The Fed raised interest rates seven times in 2022 alone. Now, experts are worried and say Americans may have to live with inflation.

“The Fed needs to hit pause and assess the full impact of its actions so far before raising short rates further,” Sheila Bair, the former chair of the Federal Deposit Insurance Corporation, told CNN.

Living with the higher prices would be hard on many Americans. The U.S. Bureau of Labor Statistics released the Consumer Price Index Tuesday, which showed consumer prices rose 0.4% in February, totaling a 6% increase over the previous 12 months. Once again, wages have failed to keep up with rising consumer prices.

Some prices surpassed the national average. Shelter, for instance, rose 0.8% in February alone, part of an 8.1% increase in the past year. And while food prices rose at the 0.4% rate, those prices have risen 9.5% in the previous 12 months. Energy prices dipped slightly, a change from the major increases in recent years.

“Core CPI came in hot: 0.5% for the month as opposed to the (still hot) 0.4% expected,” Jason Furman, an economist and Harvard Professor, wrote on Twitter. “Core CPI higher for the month than the three months than the six months.

“Core CPI came in at a 5.6% annual rate for the month of February,” he added. “In the 25 years before COVID, the single highest monthly print (out of 300 prints) was a 4.6% annual rate.”

Young said federal policy was partially to blame for the bank collapses.

“That failure didn’t come out of a vacuum, however,” he said. “The Fed kept interest rates artificially low for a long time. Businesses responded to their incentives by taking on foolish risks that they otherwise wouldn’t have. When interest rates started coming back up, as was going to happen sometime, one of the tradeoffs is that some bad bets were going to go bad. SVB’s case is a combination of years of bad management and years of bad government policy.”

*****
This article was published by The Center Square and is reproduced with permission.

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Silicon Valley Bank: The Woke Democrat Cesspool Is Deep And Wide

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By The Daily Skirmish – Liberato.US

We’re learning new details about just how big a Woke Democrat cesspool Silicon Valley Bank really was.

The Bank’s political action committee donated primarily to Democrats for 20 years.  One hundred percent of the PAC’s donations went to Democrats in 2020, as well as in 2021-2022.  Last year, the PAC donated to Senators Chuck Schumer and Mark Warner, as well as other Democrat lawmakers.  Chuck Schumer and Maxine Waters said they would return the donations to the PAC or give them to charity.

California’s Democrat Governor Gavin Newsom and his wife were closely tied to the Bank.  In 2021, the Bank gave the Newsom’s nonprofit – California Partners Project – $100,000 at the request, suggestion, or solicitation of Gavin Newsom.  The president of SVB’s investment banking arm was a founding board member of the Newsom nonprofit, so the ties go way back.  That president is still on the nonprofit’s board.  The $100,000 gift was to support the nonprofit’s campaign for California’s gender quota law for corporate boards, a Woke cause if ever there was one.  The Bank tweeted in support of the nonprofit’s effort and proclaimed the Bank and the nonprofit were aligned on getting more women in the boardroom.  The law was later struck down as discriminatory, completely unconstitutional.  No word on whether the Newsoms will return the gift.

The Bank supported another Woke cause, the trained Marxists of Black Lives Matter.  This wasn’t just a pittance – the Bank gave over $70 million dollars to promote the burning of American cities in the summer of 2020, the destruction of the nuclear family as openly declared on BLM’s website, and the promotion of world communism through the global network of offices BLM opened with the generous financial support of Silicon Valley Bank and corporate America.  Black Lives Matter called the report about the $70 million “white supremacy” and distanced itself from the Bank saying it’s just run by “white people”.  Oh, and it also said ending the “gruesome exploitation” of black people will stop further bank failures.  Sure, and I’m the tooth fairy.

The Bank also pledged $5 billion dollars to fund green energy companies.  The Bank’s depositors were bailed out.  Critics called this a “gift to wealthy Democrat donors in the tech sector.”  The critics said there is no way depositors would have been made whole if they had been MAGA Republicans.  The critics also note the Democrat depositors could have purchased additional deposit insurance beyond the FDIC’s $250,000 limit on their own, but chose not to.  Evidently, being in tight with ruling Democrats WAS the insurance plan.  It’s also been noted Chinese firms are among the depositors being bailed out, something Treasury Secretary Janet Yellen has confirmed.  One Chinese company had $175 million in uninsured cash deposits at the Bank, which was just fine with the Democrats who ran the place, which will now be underwritten by higher fees imposed on all American banks for the federal deposit insurance program going forward.

SVB’s board was populated with dyed-in-the-wool Democrats – Hillary, Biden, Obama donors and only one had investment banking experience.  All you needed for the job was to be a good Democrat and to check the right diversity boxes.  What could possibly go wrong?  One board member went to a Shinto shrine to pray after Trump was elected, to get over her grief and shock after Hillary’s defeat.  The Bank crowed it had women, one black, one LGBTQ, and two veterans on the board – check, check, check, and double check.

The Bank’s alignment with Democrats was grand strategy.  “Everyone knew it was the go-to bank for woke CEOs,” one source told the New York Post. “They knew they were aligned politically. The companies SVB loaned money to all had a woke agenda,” the source said.  I can’t wait for one of them to say the strategy is still a perfectly good idea, it just wasn’t implemented correctly at SVB.  ‘We are the ones we’ve been waiting for, so we’ll do it better the next time.’  Isn’t that what they always say about socialism which has failed everywhere it’s been tried?

But that’s the Democrats, for you – corrupt to the core and congenitally unable to align with reality.  Tell me again why they deserve to govern?

©Christopher Wright. All rights reserved.

Visit The Daily Skirmish and Watch Eagle Headline News – 7:30am ET Weekdays

RELATED ARTICLE: Silicon Valley Bank Parent Company Files For Bankruptcy

Silicon Valley Bank Parent Company Files For Bankruptcy thumbnail

Silicon Valley Bank Parent Company Files For Bankruptcy

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By The Daily Caller

SVB Financial Group, the parent company for California tech lender Silicon Valley Bank (SVB), filed for Chapter 11 bankruptcy protection in New York Friday, the biggest filing of its kind since Washington Mutual Inc. in 2008.

SVB, which was SVB Financial Group’s main business, was taken over by federal regulators after it collapsed due to a bank run last week, with the Federal Reserve intervening to insure depositors. The bank announced it was filing for bankruptcy Friday in a bid to preserve the value of its assets.

“The Chapter 11 process will allow SVB Financial Group to preserve value as it evaluates strategic alternatives for its prized businesses and assets, especially SVB Capital and SVB Securities,” William Kosturos, Chief Restructuring Officer for SVB Financial Group, said in a statement. “SVB Capital and SVB Securities continue to operate and serve clients, led by their longstanding and independent leadership teams.”

SVB is under the jurisdiction of the Federal Deposit Insurance Corporation and not included in the Chapter 11 filing, according to The Washington Post. Bankruptcy offers a court-supervised reorganization to assist SVB Financial Group to find buyers for its assets besides SVB because it is under federal control, according to Reuters.

AUTHOR

JASON COHEN

Contributor.

RELATED ARTICLES:

Janet Yellen’s Policy Would Destroy Small US Banks While Bailing Out Chinese Depositors, Experts Say

SVB Had Close Financial Ties With Al Gore’s Venture Capital Firm

‘We’ve Got Some Cleanup To Do’: Former FDIC Chair Says There Will ‘Probably’ Be More Bank Failures

EDITORS NOTE: This Daily Caller column is republished with permission. ©All rights reserved.

All content created by the Daily Caller News Foundation, an independent and nonpartisan newswire service, is available without charge to any legitimate news publisher that can provide a large audience. All republished articles must include our logo, our reporter’s byline and their DCNF affiliation. For any questions about our guidelines or partnering with us, please contact licensing@dailycallernewsfoundation.org.

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Why SVB and Signature Bank Failed so Fast – and Why the U.S. Banking Crisis Isn’t Over Yet

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By MercatorNet – Navigating Modern Complexities

With over $1 trillion of bank deposits currently uninsured, the banking crisis is far from over.

Silicon Valley Bank and Signature Bank failed with enormous speed – so quickly that they could be textbook cases of classic bank runs, in which too many depositors withdraw their funds from a bank at the same time. The failures at SVB and Signature were two of the three biggest in U.S. banking history, following the collapse of Washington Mutual in 2008.

How could this happen when the banking industry has been sitting on record levels of excess reserves – or the amount of cash held beyond what regulators require?

While the most common type of risk faced by a commercial bank is a jump in loan defaults – known as credit risk – that’s not what is happening here. As an economist who has expertise in banking, I believe it boils down to two other big risks every lender faces: interest rate risk and liquidity risk.

Interest rate risk

A bank faces interest rate risk when the rates increase rapidly within a shorter period.

That’s exactly what has happened in the U.S. since March 2022. The Federal Reserve has been aggressively raising rates – 4.5 percentage points so far – in a bid to tame soaring inflation. As a result, the yield on debt has jumped at a commensurate rate.

The yield on one-year U.S. government Treasury notes hit a 17-year high of 5.25% in March 2023, up from less than 0.5% at the beginning of 2022. Yields on 30-year Treasurys have climbed almost 2 percentage points.

As yields on a security go up, its price goes down. And so such a rapid rise in rates in so short a time caused the market value of previously issued debt – whether corporate bonds or government Treasury bills – to plunge, especially for longer-dated debt.

For example, a 2 percentage point gain in a 30-year bond’s yield can cause its market value to plunge by around 32%.

SVB, as Silicon Valley Bank is known, had a massive share of its assets – 55% – invested in fixed-income securities, such as U.S. government bonds.

Of course, interest rate risk leading to a drop in market value of a security is not a huge problem as long as the owner can hold onto it until maturity, at which point it can collect its original face value without realizing any loss. The unrealized loss stays hidden on the bank’s balance sheet and disappears over time.

But if the owner has to sell the security before its maturity at a time when the market value is lower than face value, the unrealized loss becomes an actual loss.

That’s exactly what SVB had to do earlier this year as its customers, dealing with their own cash shortfalls, began withdrawing their deposits – while even higher interest rates were expected.

This bring us to liquidity risk.

Liquidity risk

Liquidity risk is the risk that a bank won’t be able to meet its obligations when they come due without incurring losses.

For example, if you spend US$150,000 of your savings to buy a house and down the road you need some or all of that money to deal with another emergency, you’re experiencing a consequence of liquidity risk. A large chunk of your money is now tied up in the house, which is not easily exchangeable for cash.

Customers of SVB were withdrawing their deposits beyond what it could pay using its cash reserves, and so to help meet its obligations the bank decided to sell $21 billion of its securities portfolio at a loss of $1.8 billion. The drain on equity capital led the lender to try to raise over $2 billion in new capital.

The call to raise equity sent shockwaves to SVB’s customers, who were losing confidence in the bank and rushed to withdraw cash. A bank run like this can cause even a healthy bank to go bankrupt in a matter days, especially now in the digital age.

In part this is because many of SVB’s customers had deposits well above the $250,000 insured by the Federal Deposit Insurance Corp. – and so they knew their money might not be safe if the bank were to fail. Roughly 88% of deposits at SVB were uninsured.

Signature faced a similar problem, as SVB’s collapse prompted many of its customers to withdraw their deposits out of a similar concern over liquidity risk. About 90% of its deposits were uninsured.

Systemic risk?

All banks face interest rate risk today on some of their holdings because of the Fed’s rate-hiking campaign.

This has resulted in $620 billion in unrealized losses on bank balance sheets as of December 2022.

But most banks are unlikely to have significant liquidity risk.

While SVB and Signature were complying with regulatory requirements, the composition of their assets was not in line with industry averages.

Signature had just over 5% of its assets in cash and SVB had 7%, compared with the industry average of 13%. In addition, SVB’s 55% of assets in fixed-income securities compares with the industry average of 24%.

The U.S. government’s decision to backstop all deposits of SVB and Signature regardless of their size should make it less likely that banks with less cash and more securities on their books will face a liquidity shortfall because of massive withdrawals driven by sudden panic.

However, with over $1 trillion of bank deposits currently uninsured, I believe that the banking crisis is far from over.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Why We Should Let Bad Banks Fail

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By Foundation for Economic Education (FEE)

Bad banks need consequences. Let them fail.

By now, you’ve likely heard about regulators closing down Silicon Valley Bank (SVB) and now Signature Bank as well.

While I’m not going to go into all the details, the basic story is described well in this article on Seeking Alpha. Essentially, SVB received a large influx of deposits as the Federal Reserve flooded the market with dollars during COVID.

From there, SVB went out and bought government bonds to store that money. But then, the Federal Reserve started enacting policies which moved interest rates up. The problem? As interest rates rose, the bonds SVB purchased in the past declined in value.

Bond prices and the interest rate have an inverse relationship. If interest rates increase, you can earn a higher return on financial assets purchased today. When that happens, bonds issued at a previously lower rate must sell at a discount to compete.

So when rates rose, SVB’s assets (composed largely of old lower-rate government bonds) plummeted in value.

The key question now is, what are we going to do about it?

I have a modest proposal—let them fail.

Allowing banks to fail may sound extreme, but it’s really the most reasonable solution. It’s true there will be some costs if the banks fail. Any time a business fails, other investors tied financially to the company lose.

But here’s the rub—people who invest in bad businesses should lose. SVB’s failure is a reflection of the fact that it was a wealth shredder. It took depositors’ perfectly good cash, and converted it into now severely devalued bonds.

Banks that destroy wealth shouldn’t be allowed to continue to do so indefinitely. And when depositors make a “run” on bad banks, they’re performing a public service.

Kicker: a run on an insolvent bank has the salutary effect of pulling the plug on a wealth-destroying machine.

— Lawrence H. White (@lawrencehwhite1) March 11, 2023

At this point, a bank bailout not only would mean the taxpayers will be left holding the bag for bankers’ mistakes—it would mean screwing up incentives in the banking industry even more.

To see the incentive problem, consider an example. Imagine a world where, no matter the circumstances, the government will pay to fix cars after every accident. What do you think this would do to the number of car accidents per year? It would sky-rocket.

If you never need fear paying a price for crashing your car, why drive carefully? There is still some incentive to avoid serious accidents due to injury, but the point is this system lowers the cost of risky behavior, and therefore lowers an individual’s incentive to be careful. Economists call this a moral hazard problem.

And this is the primary issue with bank bailouts. If the government sets a precedent that all bank failures will be ameliorated by using taxpayer money, banks will engage in risky behavior which they otherwise would not. Why be cautious with depositors’ money if you get a bailout no matter what?

You cannot have a healthy free market when you privatize the profits and socialize the losses. The taxpayer’s wallet, if treated like common property, will be subject to the tragedy of the commons.

Banking, where the rules are made up and the losses don’t matter

— Brian Albrecht (@BrianCAlbrecht) March 12, 2023

And I don’t just mean that I’m against a formal bailout to save investors. I’m opposed to taxpayer dollars being reallocated to save the bottom line of anyone involved. Some may worry about small depositors, but the FDIC already insures up to $250,000 (regardless of what I or anyone else thinks about that policy), meaning every depositor who has less than that in their account is getting their money back already.

And for the larger depositors? Business deals have risks. We cannot pay people to ignore that fact. If you want to house more than a quarter of a million dollars in any one institution you should be very careful in picking.

If some individual wants to come along and buy SVB or these other failing banks and try to resuscitate them, I invite them to try. Maybe there is a profit opportunity there. But if the choice is between a bailout and letting them fail, the answer is clear to me.

If they can have the profits, they should have the losses as well.

AUTHOR

Peter Jacobsen

Peter Jacobsen teaches economics and holds the position of Gwartney Professor of Economics. He received his graduate education at George Mason University.

EDITORS NOTE: This FEE column is republished with permission. ©All rights reserved.

BIDEN BANK CRISIS: Dow Plunges 700 Points, ‘First Domino To Drop’ thumbnail

BIDEN BANK CRISIS: Dow Plunges 700 Points, ‘First Domino To Drop’

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By The Geller Report

Stock indexes are on pace for one of their worst days this year.
Woke and broke. And still Biden and the Democrats are pushing, legislating and imposing these fatal polices.

This is the poison fruit of the diversity, equity and inclusion hiring practices that elevates whining whiners and demonizes talent, intelligence and skill.

Life was golden under Trump.

Dow Plunges 700 Points As BlackRock Chief Warns SVB Collapse Merely ‘First Domino To Drop’

By: Derek Saul, Forbes, March 15, 2023: Forbes Staff

U.S. stocks plunged in Wednesday trading as concerns about the health of the global banking industry continued to weigh on the market, with one high-profile Wall Street bigwig cautioning the contagion of Silicon Valley Bank’s failure could spread further than previously anticipated.

Key Facts

The Dow Jones Industrial Average fell 717 points, or 2.2%, by 1 p.m. ET; the S&P 500 and tech-heavy Nasdaq similarly slid 2% and 1.4%, respectively.

The domestic losses come amid broad declines in stocks abroad, with the Zurich-based bank Credit Suisse’s 24% slide to a record low in share prices amid capital concerns headlining the losses.

Also stoking concerns about the fallout of Silicon Valley Bank, Signature Bank and Silvergate Capital’s recent closures was a bleak letter from Blackrock CEO Larry Fink warning the failures could simply be the first “domino[es] to drop” before a potential “cascade throughout the U.S. regional banking sector with more seizures and shutdowns coming.”

Regional bank stocks captained Wednesday’s sinking ship, with share prices of PacWest sinking 20% and First Republic dropping 23%.

Keep reading.

AUTHOR

Pamela Geller

RELATED VIDEO: Economist warns U.S. is ‘on brink of a 2008 style financial crisis’

RELATED ARTICLES:

Tucker Carlson: SVB Bank Failure Could Be An Isolated Incident But Our Leaders Seem To Want To Accelerate It

WOKE AND BROKE: While Silicon Valley Bank Collapsed, Top Exec Pushed ‘Woke’ Programs

‘Rapid Deterioration’: Moody’s Rating Service Downgrades U.S. Banking System

Credit Suisse Stock Plunges To Record Low As Bank Concerns Grow (Forbes)

Another Bank Shutdown, Signature Bank Closed, Barney Frank of Infamous Barney Frank Legislation on Board

Economic Meltdown Looming

Investor Carl Icahn Issues Grim Warning on US Economy

BIDEN’S ECONOMY: Silicon Valley Bank COLLAPSES Following Run on Bank, 2nd Biggest Bank Failure In United States History

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10 Things to Know about the Silicon Valley Bank Collapse

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By Family Research Council

This weekend was the most tumultuous for the banking sector since 2008, as an apparently prosperous, mid-sized bank completely collapsed. When the dust settled, federal regulators had taken over management of two banks while several others teetered on the brink.

Needless to say, the incident has deeply shaken Americans’ confidence in the banking industry. To complicate matters, most Americans are busy shuttling their kids to school and earning an honest day’s living (as they should be) — too busy to keep up with the cacophony of opinions firing around industry jargon amid rapidly developing facts. So, for those too gainfully employed to dig through the noise themselves, here are 10 things to know about the mini-crisis in the banking sector that occurred over the weekend.

1. Silicon Valley Bank exploded since 2020 to become the nation’s 16th largest bank.

As the name suggests, Silicon Valley Bank (SVB) was based in Santa Clara, California — otherwise known as Silicon Valley. It operated 17 branches in California and Massachusetts. This location, plus the bank’s startup friendly policies, meant that SVB was the bank of choice for many tech companies, particularly tech startups funded by venture capital, operating in Silicon Valley.

Over the past three years, SVB had more than tripled in size. It began January 2020 with $55 billion in deposits and ended December 2022 with $186 billion. Last week, it had $175 billion. Two factors contributed to its explosive growth. First, COVID lockdowns created a spike in demand for digital technologies, which is exactly what tech startups intend to provide. Second, trillions of dollars in irresponsible federal COVID spending left investors flush with cash to pour into tech startups. Most of the tech startups deposited their extra cash in SVB.

2. SVB over-invested in long-term public debt.

However, the dirt-cheap interest rates at the time made it hard for SVB to make all that dough rise. You’re likely aware that banks don’t bury your deposits in the ground like the worthless servant (Matthew 25:25-27); they lend most of it out again at interest, which is how banks stay in business. But SVB couldn’t lend all those billions of dollars out with everyone already flush with cash, so they opted instead to purchase long-term, U.S. government bonds and notes. SVB purchased $80 billion in 10-year U.S. Treasury notes, along with other public debt.

U.S. treasury notes, bills, and bonds are the primary way that the U.S. Treasury finances government deficit spending. These different securities (which differ from each other primarily in duration) are essentially IOUs that yield interest over time and can be redeemed at face value at a fixed future date. For instance, a 10-year Treasury note yields interest every six months and may be redeemed 10 years after it was issued. Once issued, these notes often change hands and are considered safe, reliable assets in an investment portfolio — which means they yield a low but certain return on investment.

Longer-term Treasury notes yield a higher return than shorter-term notes, due to uncertainty about future interest rates. For instance, when SVB was purchasing Treasury notes in 2020, 10-year notes were paying 1.5% interest, while short term notes were paying 0.25% interest. SVB opted to invest heavily in 10-year notes, which paid a higher yield.

Then, in 2022, the Federal Reserve jacked up interest rates to try and combat inflation. The Fed raised the target range for federal funds interest eight times in 12 months, from 0.00%-0.25% to 4.25%-4.50%. Suddenly, SVB’s 10-year loans paying 1.5% interest weren’t so lucrative anymore.

Around the same time, venture capital funding for tech startups dried up, and those companies (many of which take years to become profitable, if they ever do) began to draw on the funds they had stored up in SVB. To cover these withdrawals, SVB had to sell its long-term Treasury notes. But because market interest rates have risen, and the Treasury notes’ interest rate remains fixed, SVB couldn’t find a buyer willing to pay full price for the notes, and it had to sell $21 billion in assets at a loss of $1.8 billion.

3. SVB experienced an old-fashioned bank run.

Once it announced the losses, some investors smelled trouble and began to pull out even more money. Customers eventually withdrew an eye-popping $42 billion, a quarter of all deposits. In a new twist on an old-fashioned bank run, Silicon Valley Bank simply ran out of money to give customers on Friday, and had to shut its doors. SVB was the largest bank failure since Washington Mutual in 2008.

Andy Kessler, analyst with The Wall Street Journal, blamed SVB managers for making three critical mistakes: reaching for yield just before interest rates were set to rise, misreading its customers’ cash needs, and not selling equity to cover losses. “You’re really only allowed one mistake; more proved fatal,” he said.

In response to the bank failures of the Great Recession, Congress in 2010 passed legislation authorizing the Federal Deposit Insurance Corporation (FDIC) to insure “$250,000 per depositor, per insured bank” in case of collapse. (Congress created the FDIC in 1933, in response to the Great Depression, as part of FDR’s New Deal.) The goal was to eliminate or mitigate bank runs by creating a safety net to protect consumers.

However, most of SVB’s depositors (“something like 85% to 90%,” wrote The WSJ’s Editorial Board) had deposits that exceeded that threshold. That’s because most of SVB’s clients were companies or wealthy Silicon Valley types, and not ordinary Americans. The streaming company Roku, for example, had $487 million (26% of its cash) deposited in SVB. Unusually for a post-Great Recession bank, the vast majority of money deposited in SVB was not insured by the FDIC.

4. SVB run takes out Signature Bank, hits other banks hard.

SVB’s abrupt fall hit other medium-sized banks like a shock wave. The hardest hit was New York City-based Signature Bank, another medium-sized bank with many corporate clients above the FDIC insurance threshold. At the end of 2022, Signature had 40 locations and $88 billion deposits. But customers withdrew $10 billion from Signature on Friday, forcing the bank into the third largest bank closure in U.S. history.

Another bank to take a hit was First Republic, a San Francisco-based bank around the same size as SVB, which also had a high proportion of uninsured stocks. Its stock fell hard (as of this writing, it is down more than 60% in value) after it announced that it had gained access to $70 million in loans from the Federal Reserve and JPMorgan Chase. While the announcement likely means the bank will not fail, it also leaves investors wondering whether it was about to fail.

Bank stocks suffered across the board. The KBW NASDAQ index of commercial banks was down 11%, as even the largest, most secure banks took a hit. Some regional bank stocks like PacWest Bancorp, Zions Bancorp, and Comerica were down more than 20%. Many of the stocks grew so volatile that exchanges temporarily froze trading on them. The stock plunge could affect banks’ ability to raise money by selling shares, if they need to do so as a last resort.

5. Feds bail out all depositors, even those above insurance limit.

Federal regulators scrambled over the weekend to respond to the Friday collapse of SVB and Signature Bank. California and New York bank regulators placed SVB and Signature Bank, respectively, into receivership with the FDIC. The FDIC fired the previous executive teams and will essentially run the insolvent banks until it can find private buyers.

On Sunday, the Treasury Department, the Federal Reserve, and the FDIC issued a joint statement on the bank failures, announcing that they were “taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system.”

“Depositors will have access to all of their money starting Monday, March 13,” they promised, but “Shareholders and certain unsecured debtholders will not be protected.”

“No losses will be borne by the taxpayer,” the joint statement continued. “Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.”

6. Federal response creates incentives for bad behavior.

This last declaration from the federal agencies amounts to the government taking money from banks that did not collapse, in order to pay off the uninsured deposits from the banks that did collapse. National Review’s Philip Klein wrote,

“Defenders of this decision will try to make it seem as if it’s an extraordinary, one-off decision by regulators, but in practice, it has created a huge moral hazard by signaling that the $250,000 FDIC limit on deposit insurance does not exist in practice. The clear signal it sends is that when financial institutions make poor decisions, the government will swoop in to clean up the mess.”

“Moral hazard” is an economic concept that describes how people will engage in riskier behavior if they are protected from the consequences.

7. Federal government compounds bad policymaking with more bad policymaking.

While SVB executives bear some of the blame for the bank’s sudden collapse, poor federal policymaking played a role, too.

COVID-era lockdowns and excessive deficit spending — including direct payments to individuals kept from working by government policy — helped to create the cash glut that led SVB to grow too big, too fast, with nowhere to reinvest its deposits. These panic-driven polices, which didn’t even make sense at the time, occurred in both 2020 and 2021, under both a Republican and a Democratic president, and many of the spending packages received bipartisan support.

This cash glut also caused inflation, which the Federal Reserve has tried to fight by raising interest rates. Despite the bank collapses, on Monday stock traders said there was an 85% probability that the Fed will raise rates another 0.25% when it meets next week. Like a water skier lifted airborne by one wave and body-slammed by the next, SVB exploded with massive deposits, only to wipe out when massive withdrawals combined with massive interest rate hikes.

Now, federal agencies propose to clean up the damage by guaranteeing uninsured deposits, a signal that these deposits are virtually insured.

8. President Biden signals confidence in banking system.

President Biden briefly addressed the banking issue Monday morning, “Thanks to the quick action of my administration the past few days, America is going to have confidence that the banking system is safe. Your deposits will be there when you need them.”

9. U.S. federal government can do little to boost confidence in banks.

Throughout the 21st century, the U.S. federal government has essentially pledged itself as the backstop for any collapse of the financial sector.

That policy only works so long as the U.S. federal government remains solvent. In a report last month, the Congressional Budget Office projected that the U.S. government will spend more money in interest payments on an ever-growing national debt than on national defense by 2028; it also projected that Social Security will become insolvent in 2033. Meanwhile, a divided Congress is at loggerheads about raising the debt ceiling, which the government hit on January 19, with Democrats and Republicans at odds about whether spending cuts should go along with a debt ceiling increase.

So, it’s worth wondering how much pledges by the U.S. federal government can boost credibility in the banking system. In fact, the latest (2022) Gallup public opinion poll found that a higher percentage of Americans have a “Great deal” or “Quite a lot” of confidence in banks (27%) than in Congress (7%) or the Presidency (23%).

10. Worldly wealth is fleeting, but a Christian can trust in God.

Reading an in-depth explainer about the collapse or tottering of several bank institutions and an emergency response from the federal government has the potential to provoke fear or anxiety in anyone, particularly a person who is cautious by nature. But while there’s room for prudence, a biblical response will not get stuck in that rut.

“No one can serve two masters, for either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve God and money,” Jesus told his followers (Matthew 6:24). Clearly Jesus means that we should serve God instead of money. But what reasons does he give?

Jesus had just said, “Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal, but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also” (Matthew 6:19-21). Earthly treasures have a tendency to up and leave.

Proverbs makes the same point, “Do not toil to acquire wealth; be discerning enough to desist. When your eyes light on it, it is gone, for suddenly it sprouts wings, flying like an eagle toward heaven” (Proverbs 23:4-5).

Building your life on worldly wealth is “like a foolish man who built his house on the sand” (Matthew 7:26). It might look just fine while all goes well, but when “the rain fell, and the floods came, and the winds blew and beat against that house,” Jesus said, “it fell, and great was the fall of it” (Matthew 7:27). By contrast, said Jesus, “Everyone then who hears these words of mine and does them will be like a wise man who built his house on the rock,” which “did not fall in the storm, “because it had been founded on the rock” (Matthew 7:24).

Are you trusting your future happiness to a bank’s survival, or to your heavenly Father?

Jesus gives another reason to serve God rather than money: the kindness of God will supply the needs of his children. Consider the birds and the lilies, he said. “If God so clothes the grass of the field, which today is alive and tomorrow is thrown into the oven, will he not much more clothe you?” (Matthew 6:30).

“Therefore,” Jesus applies the lesson, “do not be anxious, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ … Your heavenly Father knows that you need them all. But seek first the kingdom of God and his righteousness, and all these things will be added to you.” (Matthew 6:31-33).

AUTHOR

Joshua Arnold

Joshua Arnold is a staff writer at The Washington Stand.

RELATED ARTICLE: Woke Priorities Borrowed Trouble for Belly-Up Bank

RELATED TWEETS:

WOW… Silicon Valley Bank gave $73,450,000 to “BLM Movement & Related Causes”

— Charlie Kirk (@charliekirk11) March 14, 2023

Newsom Under Fire For Failing to Disclose Personal Ties to Silicon Valley Bank While Lobbying for Bailouthttps://t.co/rojwrzGJUm

— Collin Rugg (@CollinRugg) March 14, 2023

EDITORS NOTE: This Washington Stand column is republished with permission. All rights reserved. ©2023 Family Research Council.

The Washington Stand is Family Research Council’s outlet for news and commentary from a biblical worldview. The Washington Stand is based in Washington, D.C. and is published by FRC, whose mission is to advance faith, family, and freedom in public policy and the culture from a biblical worldview. We invite you to stand with us by partnering with FRC.

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Former Treasury Official Says U.S. Banks On Verge Of ‘Nationalization’

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By The Daily Caller

A former Treasury Department official said Tuesday that American banks were on the verge of being nationalized following the Friday collapse of Silicon Valley Bank and the government’s response.

“What the authorities did over the weekend was absolutely profound. They guaranteed the deposits, all of them, at Silicon Valley Bank. What that really means — and they won’t say it, and I’ll come back to that — what that really means is that they have guaranteed the entire deposit base of the U.S. financial system. The entire deposit base,” Roger Altman, a former deputy Treasury secretary in the Clinton administration, told CNN host Kaitlan Collins. “Why? Because you can’t guarantee all the deposits in Silicon Valley Bank and then the next day say to the depositors, say, at First Republic, sorry, yours aren’t guaranteed. Of course they are.”

WATCH:

Federal regulators shut down Silicon Valley Bank Friday after its stock price collapsed and customers began a bank run following the financial institution’s disclosure of a $1.8 billion loss on asset sales due to high interest rates, CNBC reported. Depositors who had accounts at Silicon Valley Bank and Signature Bank, which was shut down by regulators Sunday, will be able to fully recover their funds, the FDIC announced Sunday in conjunction with the Treasury Department and the Federal Reserve.

“So this is a breathtaking step which effectively nationalizes or federalizes the deposit base of the U.S. financial system. You can call it a bailout, you can call it something else, but it’s really absolutely profound,” Altman continued. “Now, the authorities, including the White House, are not going to say that because what I just said of course implies that they have just nationalized the banking system. Technically speaking, they haven’t. But in a broad sense, they are verging on that.”

When Collins called Altman’s statements “remarkable,” Altman emphasized that he had not said the banks had been nationalized.

“I said they are verging on that because they have guaranteed the entire deposit base. Usually the term nationalization means that the government takes over the institution and runs it and the government owns it,” Altman explained. “That would be the type of nationalization we have seen in many other countries throughout the world. Obviously, that did not happen here. When you guarantee the entire deposit base, you have put the federal government and the taxpayer in a much different place in terms of protection than we were in a week ago.”

AUTHOR

HAROLD HUTCHISON

Reporter.

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‘At Some Point Should We Not Do That?’: CNBC Host Questions Rep. Patrick McHenry If US Is Bailout Nation

‘It Didn’t Work’: Scarborough Says Biden Failed To Calm Bank Fears

‘No Sign Of Falling’: Obama Economist Sounds Alarm On Stubborn Inflation

EDITORS NOTE: This Daily Caller column is republished with permission. ©All rights reserved.

All content created by the Daily Caller News Foundation, an independent and nonpartisan newswire service, is available without charge to any legitimate news publisher that can provide a large audience. All republished articles must include our logo, our reporter’s byline and their DCNF affiliation. For any questions about our guidelines or partnering with us, please contact licensing@dailycallernewsfoundation.org.

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‘Rapid Deterioration’: Moody’s Rating Service Downgrades U.S. Banking System

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By The Geller Report

It’s coming down fast, folks. Literally and figuratively.

Biden voters have destroyed this country.

‘Rapid Deterioration’: Major Rating Service Downgrades U.S. Banking System

By: Spencer Brown | Townhall March 14, 2023 12:00 PM

Following the biggest bank failure since the financial crisis of 2008, Moody’s Investor Service has downgraded its rating of the “U.S. banking system” in the latest sign that President Biden’s Monday morning attempt to assuage concerns went over like a lead balloon.

Moody’s cuts outlook on entire U.S. banking system to negative, citing ‘rapidly deteriorating operating environment’ – CNBC

Moody’s — one of three major rating entities — downgraded its outlook for the U.S. banking system from “stable” to “negative” on Tuesday morning “to reflect the rapid deterioration in the operating environment following deposit runs at Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank (SNY) and the failures of SVB and SNY,” Moody’s explained.

In addition to downgrading the entire banking system, Moody’s also issued warnings for several individual banks “with substantial unrealized securities losses and with non-retail and uninsured US depositors” that “may still be more sensitive to depositor competition or ultimate flight” and end up “with adverse effects on funding, liquidity, earnings and capital.”

The unrealized losses, specifically, have become substantial:

View FDIC Unrealized Gains (Losses) on Investment Securities infographic.

The specific institutions being monitored by Moody’s for “potential downgrades” include INTRUST Financial, Western Alliance, Comerica, Zions Bancorp, and First Republic.

Markets, however, did not seem to move much on the news.

Moody’s just cut its outlook on U.S. banking system to negative due to ‘rapidly deteriorating operating environment’

Keep reading.

AUTHOR

Pamela Geller

RELATED VIDEO: Biden: ‘Economy is strong as hell’ despite inflation | Morning in America

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EDITORS NOTE: This Geller Report is republished with permission. ©All rights reserved.

Digital Currency and the Next Financial Crisis thumbnail

Digital Currency and the Next Financial Crisis

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By Paul Kupiec

In 2019 when Facebook announced plans to issue a new global stablecoin, Libra, governments took notice. The potential for Libra to be seamlessly adopted by more than 2.3 billion Facebook users challenged the idea that governments alone are vested with the power to issue “money” and raised legitimate concerns about the impact of stablecoins on financial stability.

The G-20 governments directed the Financial Stability Board (FSB) to study the implications of privately issued stablecoins and make recommendations regarding the need for new regulations. In addition, several central banks, including the Federal Reserve, began studying the idea of issuing their own “digital currency” to directly compete with stablecoins. When recently questioned about the Fed’s position on digital currency, Chairman Powell responded, “You wouldn’t need stablecoins, you wouldn’t need cryptocurrencies, if you had a digital US currency. I think that’s one of the stronger arguments in its favor.”

If a major reserve currency central bank like the Federal Reserve issued its own digital currency (FRDC) and made it available globally, it would diminish the appeal of stablecoins. Although FRDC may reduce the financial stability issues associated with stablecoins, they create their own stability issues. In this essay, I provide an overview of stablecoins and central bank digital currency, and discuss the financial stability concerns associated with both forms of digital money.

What is a Stablecoin?

Stablecoin cryptocurrencies, as exemplified by Facebook’s original Libra proposal, are not actually currencies. They are digital coins that can be traded and used as a store of value and a means of payment. The Libra Association proposed a mechanism that will encourage these digital tokens to trade at stable values relative to a reference fiat currency, but there is no guarantee they will maintain a stable fiat-currency value.

The original Libra plan was to base Libra on a basket of fiat currencies. Diem, the successor organization to Libra, will initially launch a single-currency stablecoin called Libra denominated in US dollars. The plan is to create and maintain Libra on a one-to-one exchange basis with the US dollar.

After a Libra coin is purchased, it can be used as a medium of exchange by transferring Libra coins using Diem’s privileged distributed ledger system. “Diem validators” access the ledger and charge fees to process Libra transactions. According to Diem documents, “The Libra network would not itself provide for, record, or settle conversions between Libra coins and fiat currency or other digital assets…any such exchange functionality would be conducted by third-party financial service providers.” In other words, Libra cannot be redeemed for fiat currency, it must be sold on a cryptocurrency exchange.

Presuming Diem is successful, additional single currency-based versions of Libra are planned to be introduced over time. Eventually, Diem will offer a basket-currency Libra coin comprised of a portfolio of single-currency Libra coins with fixed portfolio weights.

The Diem organization mechanism is to maintain a one-to-one exchange rate between the US dollar and Libra. When a Libra coin is created, the dollar proceeds are used to purchase an equivalent value of high-quality, short-term, liquid dollar-denominated assets held by the Diem “Reserve.”

Libra coins do not have any legal ownership claim on Reserve assets, the Diem organization owns the Reserve. The Reserve’s interest income will be used to offset the cost of running the Diem payments system. If necessary, the Diem organization has pledged to maintain the fixed exchange rate with the US dollar by liquidating Reserve assets and using the proceeds to purchase Libra coins on cryptocurrency exchanges and retire them when Libra coins trade below the target value. Conversely, Diem organization members will issue new Libra coins if the coin trades above that exchange rate. Should the value of a Libra coin be depressed by extreme selling pressure, the Diem organization has the option of suspending stabilization operations to avoid selling Reserve assets at “fire sale” discounts.

There are some parallels between stablecoins and money market mutual funds (MMFs). Under normal market conditions, MMFs can be redeemed at par—meaning a share in an MMF with $1 net asset value can be redeemed for $1 in US government fiat currency. Unlike stablecoins, MMF shares cannot be used to directly pay for goods and services. Shares must first be redeemed with the MMF fund and exchanged for US dollars which in turn can be used to pay for goods and services using traditional payments systems to settle transactions.

The FSB began analyzing issues associated with privately issued stable coins in 2019. In a report issued in 2020, the FSB concluded that, unless stablecoins are properly designed, managed, and required to comply with appropriate regulations across the globe, stablecoins could well create important stability risks for the financial system. The FSB identified significant issues in the design, governance, safety, soundness, and anti-money laundering regulations that should be addressed before governments allow global stablecoins to gain momentum. The Diem organization’s planned launch of the Libra coin was delayed so Diem organization plans could be revised in light of FSB’s recommendations.

Among the most concerning issues identified by the FSB is the risk that stablecoin investors might lose confidence in the value of the coin and “run”— i.e., rush to sell their coins for fiat currency, forcing stablecoin issuers to liquidate reserve assets en masse to support the stable coin’s market value on cryptocurrency exchanges. Massive reserve asset liquidations could depress reserve asset valuations further, depleting confidence in the stablecoin’s value, and disrupting important short-term funding markets like those for commercial paper.

Stablecoins are designed to attract investors that prioritize liquidity and the safety of their account balances. Any mechanism that attempts to maintain a stable exchange rate between stablecoins and the underlying currency by liquidating reserve assets that are not immediately convertible into fiat currency, at least not without a significant discount, is susceptible to runs. If stablecoin Reserve assets are sold at a discount, the remaining Reserve balances will no longer fully back the outstanding stablecoins’ value. Remaining coinholders will be forced to bear the losses generated by forced asset sales thereby creating an incentive for all coinholders to seek redemptions at the first sign of liquidity stress.

The widespread adoption of privately issued stablecoins would likely create a new source of financial stability risk—the risk that investors would lose confidence in the value of the coin and run, flooding cryptocurrency markets with sell orders, thereby creating the losses in coin value feared by investors.

MMFs faced similar issues in the 2008 financial crisis. Post-crisis regulatory reforms attempted to remove MMF shareholder incentives to rush redemptions. New regulations imposed asset maturity and liquidity requirements on MMF asset holdings and allowed MMFs to impose redemption fees or temporary redemption suspensions when faced with excessive redemptions. Similar features have been introduced into Diem’s revised operating plan.

The events of March 2020 demonstrated that post-crisis MMF reforms were insufficient to stop massive redemptions at Prime MMFs whose assets include a significant percentage of liquid, high-quality, short-term corporate debt. Fearing Covid-driven corporate downgrades and defaults, institutional investors ran to avoid potential MFF redemption fees preferring the safety of investments with a government guarantee. To restore investor confidence and ensure that short-term corporate funding markets continued to function, the Federal Reserve was forced to create special lending facilities to liquefy MFF assets without creating fire-sale losses. Unlike MMFs, there is no lender of last resort to liquefy stablecoin assets at favorable prices should these coins experience a run.

Will the Government FRDC Make the Financial System Safer?

One approach for attenuating the financial stability risk created by stablecoins is to limit their growth by offering a more competitive alternative. Many people, including Federal Reserve chairman Powell, believe that central bank digital currency, if issued by a major reserve-currency central bank like the Federal Reserve, would be a more attractive alternative to stablecoins.

The Bank for International Settlements defines central bank digital currency as, “a digital payment instrument, denominated in the national unit of account, that is a direct liability of the central bank.” To purchase FRDC, should it ever be issued, one would provide the central bank or a designated intermediary of the central bank with Federal Reserve Notes (paper money) or a bank deposit transfer and receive in return an account with an equivalent amount of FRDC.

FRDC could be designed like an electronic coin that can be transferred over the internet using a system similar to Diem’s permissioned distributed ledger. More likely, FRDC would be transferred electronically on a single ledger maintained by the Fed. The Fed would likely use approved intermediaries to interface with retail account holders so the Fed did not have to keep track of retail accounts or satisfy anti-money laundering and other requirements that banks and money transfer services must comply with. Intermediaries would accept paper dollars or bank deposits and credit the customer’s intermediary account with an identical amount of FRDC. The intermediary would be required to back each retail account FRDC dollar issued with a FRDC deposit in an account at a Federal Reserve bank.

If the Fed decided to issue FRDC, it could well reduce the appeal of privately issued stablecoins and reduce the urgency of the globally coordinated efforts needed to ensure financial stability. The catch is FRDC may create its own source of systemic risk.

FRDC is the ultimate safe dollar asset. Large uninsured deposit balances at banks and MMFs can experience losses when banks fail, or the net asset values of MFFs shares fall below $1 (a.k.a. “break the buck”). FRDC is a direct liability of the Federal Reserve so there is no risk that FRDC will default.

The ultra-safe nature of FRDC creates a destabilizing force opposite of a stablecoin run. FRDC facilitates panicked uncontrolled disintermediation in a financial crisis. Faced with an elevated risk of default losses in a financial crisis, institutional investors holding large balances in uninsured bank deposits and MMF accounts will pull their balances from banks and MMFs to purchase FRDC. In a financial crisis, private sector financial institutions would likely hemorrhage funds as investors ran to the safety of FRDC. The mass transfer of bank and MMF balances into FRDC will constrict the availability of credit to businesses and consumers because the Fed will not replace the business and consumer credit provided by banks and MMFs.

Deposits are typically a bank’s cheapest source of funding and the primary instrument banks use to fund loans and other investments. A run from bank deposits into FRDC will force banks to contract their lending and replace lost deposits with a more expensive source of funding. Withdrawals from MMFs will prevent them from purchase commercial paper and other short-term liabilities that are an important source of funding for many large businesses and corporations. Either way, a run into FRDC would restrict the availability and raise the cost of private sector credit. To prevent further economic damage, the Fed would likely be forced to establish new emergency lending facilities to replace the contraction in bank and MMF credit caused by an institutional investor run into FRDC.

No Solution

The widespread adoption of privately issued stablecoins would likely create a new source of financial stability risk—the risk that investors would lose confidence in the value of the coin and run, flooding cryptocurrency markets with sell orders, thereby creating the losses in coin value feared by investors. Panic selling pressure will require massive reserve asset liquidations to stabilize coin values. The forced sale of illiquid assets will depress the prices of the liquidated and comparable assets, reinforcing the incentive to run, and disrupting private short-term credit markets. The key weakness of privately issued stablecoins is the lack of a credible lender of last resort with the power to liquefy illiquid private sector debt instruments into a stablecoin’s base fiat currency.

Central bank digital currency is often promoted as a way to solve the financial stability issues associated with stablecoins. Unfortunately, the ultra-safe nature of central bank digital currency creates a new source of financial instability: the risk of a massive run into central bank digital currency out of bank deposits and MMF accounts. Widespread disintermediation would severely restrict the supply of short-term private credit and likely force the Federal Reserve to use its lender of last resort powers to create emergency lending programs to support private credit markets.

*****
This article was published by Law and Liberty and is reproduced with permission.

TAKE ACTION

There is an important runoff election for the Phoenix City Council District 6 on March 14. Conservative Sal DiCiccio (R) is term limited and will be replaced by the winner of this race. The two candidates are Republican Sam Stone and Democrat Kevin Robinson. If you live in District 6 (check here), you either received a mail-in ballot or you must vote in person (see below).

This is a very important race that will determine the balance of power on the City Council. Phoenix, like many large cities in conservative states, has tended blue with the consequences many cites suffer from with progressive governance. Have you noticed the growing homeless problem in our city?

Conservative Sam Stone is the strong choice of The Prickly Pear and we urge our readers in District 6 to mail your ballots in immediately and cast your vote for Sam Stone. Learn about Sam Stone here. Sal DiCiccio’s excellent leadership and term-limited departure from the Phoenix City Council must not be replaced by one more Democrat on the Council (Democrat Robinson endorsed by leftist Mayor Gallego). Sam Stone is a superb candidate who will bring truthful and conservative leadership to the Phoenix City Council at a time when the future of Phoenix hangs in the balance between the great history of this high quality, desert city we can live in and are proud of or the progressive ills of Los Angeles and San Francisco.

Mail-in ballots were sent to registered voters in District 6 on the February 15th. Mail your ballot no later than March 7th – it must be received by the city no later than March 14th to be counted. If you are not on the Permanent Early Voting List you must cast your ballot in person.

In-person balloting at voting centers will occur on three days in mid-March:

  • Saturday, March 11: 10 a.m. to 4 p.m.
  • Monday, March 13: 9 a.m. to 6 p.m.
  • Tuesday, March 14: 6 a.m. to 7 p.m

In-person voting can be done at the following locations:

  1. Sunnyslope Community Center, 802 E. Vogel Ave.
  2. Bethany Bible Church, 6060 N. Seventh Ave.
  3. Devonshire Senior Center, 2802 E. Devonshire Ave.
  4. Memorial Presbyterian Church, 4141 E. Thomas Road
  5. Burton Barr Central Library, 1221 N. Central Ave.
  6. Eastlake Park Community Center, 1549 E. Jefferson St.
  7. Broadway Heritage Neighborhood Res. Ctr., 2405 E. Broadway Road
  8. South Mountain Community Center, 212 E. Alta Vista Road
  9. Cesar Chavez Library, 3635 W. Baseline Road
  10. Pecos Community Center, 17010 S. 48th St.

You can also vote in person at City Hall through March 10th on the 15th floor. City Hall is at 200 W. Washington St.

Ohio Sues Norfolk Southern Over Toxic Train Derailment thumbnail

Ohio Sues Norfolk Southern Over Toxic Train Derailment

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By The Daily Caller

Republican Ohio Attorney General Dave Yost sued Norfolk Southern on Tuesday over a train derailment that set off a massive chemical disaster that has residents concerned about the well-being of their community.

The 106-page lawsuit intends to hold Norfolk Southern accountable for covering all financial costs associated with the Feb. 3 derailment that resulted in hazardous chemicals polluting the air and water, according to the text. The lawsuit cites 58 counts against Norfolk Southern for violating several federal and state environmental laws including state hazardous waste, water pollution control, solid waste and air pollution control laws.

Yost accused Norfolk Southern of several Common Law violations including public nuisance for the chemicals released into the environment, negligence for the operational defects and trespassing for contaminating natural resources.

“Ohio shouldn’t have to bear the tremendous financial burden of Norfolk Southern’s glaring negligence,” Yost said in the press release. “The fallout from this highly preventable incident may continue for years to come, and there’s still so much we don’t know about the long-term effects on our air, water and soil.”

The state seeks civil penalties, compensatory and punitive damages and “for declaratory and injunctive relief, to remedy Defendants’ violations of law,” the lawsuit reads. It requests a minimum of $75,000 in federal damages, although Yost acknowledged in the press release that  “the damages will far exceed that minimum as the situation in East Palestine continues to unfold.”

“The derailment has caused substantial damage to the regional economy of the state of Ohio, its citizens and its businesses,” the lawsuit reads. “The citizens of the region have been displaced, their lives interrupted and their businesses shuttered.”

Norfolk Southern promised to “make it right for the people of East Palestine and the surrounding communities” in a statement sent to the Daily Caller News Foundation.

“We are making progress every day cleaning the site safely and thoroughly, providing financial assistance to residents and businesses that have been affected, and investing to help East Palestine and the communities around it thrive,” the statement read.

The efforts include creating a “long-term medical compensation fund” and “to provide tailored protection for home sellers if their property loses value due to the impact of the derailment,” according to the statement.

The lawsuit also requests Norfolk Southern conduct soil and groundwater monitoring at and near the derailment site and be prohibited from dumping toxic waste in Ohio waterways or at the site.

The Environmental Protection Agency (EPA) was on the scene hours after the derailment and has continued to monitor the air and water quality, according to its website. Residents and workers have reported sicknesses including migraines and nausea since the crash.

AUTHOR

ALEXA SCHWERHA

Contributor.

RELATED  ARTICLE: Yet Another Norfolk Southern Train Derails As CEO Testifies Before Congress On East Palestine

EDITORS NOTE: This Daily Caller column is republished with permission. ©All rights reserved.

All content created by the Daily Caller News Foundation, an independent and nonpartisan newswire service, is available without charge to any legitimate news publisher that can provide a large audience. All republished articles must include our logo, our reporter’s byline and their DCNF affiliation. For any questions about our guidelines or partnering with us, please contact licensing@dailycallernewsfoundation.org.

Another Bank Shutdown: Signature Bank Closed thumbnail

Another Bank Shutdown: Signature Bank Closed

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By The Geller Report

There will be no accountability and no correction because it is Democrat malfeasance.

Barney Frank was the US Rep behind the Dodd-Frank bill put in place after the 2008 bank crash. The government arguably caused the failure and then turned around and put in a massive amount of regulations in response to the failure.

The monstrosity was the Dodd-Frank bill, named in part for Barney Frank.(TPG)

This is the same Barney Frank whose boyfriend, Stephen Gobie (whom Frank had once hired as a male prostitute) was running a male-brothel out of his home.

The US government shut down Signature Bank on Sunday.

On Friday, regulators closed Silicon Valley Bank, sparking panic among startups and VCs.

By: Yahoo Finance, March 13, 2023:

Both banks had a huge amount of customer deposits that were not insured by the FDIC. There are others.

A second bank was shut down by the US government on Sunday. This time it was Signature Bank.

What does this financial institution have in common with Silicon Valley Bank? They both had huge amounts of customer deposits that were not insured by the FDIC.

The FDIC insures US bank deposits up to $250,000 per account to prevent bank runs and failures. The demise of SVB, and now the collapse of Signature Bank, have stretched this system to a breaking point.

On Sunday, the US Treasury, Federal Reserve, and FDIC said in a joint statement that all depositors of SVB will be made whole on Monday. The authorities are completely ignoring the $250,000 insurance limit. SVB had $173 billion in total deposits and roughly 88% of that was not covered.

That’s more than $150 billion in extra deposits that the FDIC has suddenly decided to insure.

The authorities are giving the same special exemption to Signature Bank, so all depositors will be made whole there too. Signature had $89 billion in total deposits, and 90% of those were not insured by the FDIC. That’s another $79 billion that this agency is taking on its shoulders.

“By insuring all deposits at SVB and Signature, regulators judged the risk of cascading effects to other regional banks and the broader economy to be more significant than the moral hazard of increasing FDIC limits,” said Rich Falk-Wallace, CEO of data analytics firm Arcana and a former portfolio manager at hedge fund Citadel.

In the case of SVB and Signature, the high percentage of uninsured deposits is partly a function of having a relatively small number of clients with large balances. At SVB, for example, Roku revealed it had almost $500 million in deposits at the bank, extending far beyond the $250,000 guarantee.

Keep reading.

AUTHOR

Pamela Geller

RELATED TWEET:

Barney Frank, the Namesake of the Behemoth Dodd-Frank Legislation, on Board of Failed Signature Bank https://t.co/18IgKJEGLX

— The Gateway Pundit (@gatewaypundit) March 13, 2023

RELATED ARTICLES:

BIDEN’S BANKING CRISIS: At the 11th Hour, Regulators Will Protect All Silicon Valley Bank Depositors

Failed Democrats Blame Trump for Silicon Valley Bank Collapse

EDITORS NOTE: This Geller Report is republished with permission. ©All rights reserved.

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Electricity Prices are Soaring in Heavy Wind Energy States

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By Steve Goreham

United States electricity prices are rising rapidly, up 18.1 percent over the last two years. Renewable energy advocates claim that wind and solar installations produce cheaper electricity than traditional power plants, but power prices are rising as more wind and solar is added to the grid. In fact, electricity prices are soaring in leading wind energy states.

Over a 12-year period from 2008 to 2020, US average electricity prices rose only eight percent, according to the US Energy Information Administration. This was much lower than the inflation rate of 20 percent over the same period. But power prices rose five percent from 2020 to 2021 and an additional 12.5 percent last year. Most of this rise was due to rising US inflation, but the share of electricity generated from wind also rose from 8.4 percent in 2020 to 10.2 percent in 2022.

Headlines announce that electricity generated from renewables is lower cost. Scientific American stated in 2017, “Wind Energy is One of the Cheapest Sources of Electricity, and It’s Getting Cheaper.” In October, 2020 Bloomberg announced that “Wind and Solar Are the Cheapest Power Source in Most Places.”

It is true that the cost of building US wind and solar generating facilities has come down. Wind construction costs are down about 20 percent since 2013 and solar construction costs have fallen more than 50 percent, both approaching the costs for natural gas power plants. But construction costs are only part of the cost of electricity generation.

Electricity prices in states with the highest penetration of wind systems are rising faster than the national average. US average electricity prices rose 27 percent from 2008 to 2022. But in eight of the top 12 wind states, power prices rose between 33 and 73 percent over the 14-year period. Prices rose in Iowa (36%), Kansas (54%), Illinois (33%), Colorado (37%), California (73%), Minnesota (53%), Nebraska (37%), and Washington (35%), which are the number 2, 4, 5, 6, 8, 10, 11, and 12 leading states in terms of electricity generated from wind, respectively. Price increases were lower than average in Texas, Oklahoma, North Dakota, and New Mexico, the other four leading wind states. The data shows that deployments of wind systems produce higher electricity prices.

In Europe, the nations with the most wind and solar capacity deployed, including Austria, Belgium, Denmark, Germany, Ireland, Spain, and Sweden, experience the highest residential electricity prices. Residents of Bulgaria, Hungary, Poland, and Romania, where few renewables are deployed, pay half as much per kilowatt-hour as the leading renewable countries. Denmark and Germany have deployed over 1,600 watts per person of wind and solar, the highest density in Europe. Electricity prices for Denmark (29 eurocents per kilowatt-hour) and Germany (32 eurocents/kW-hr) are the highest in Europe, and two and one-half times the prices in the US, where renewable penetration remains lower. In Europe, like the US, wind (and solar) deployments raise electricity prices.

Wind systems increase electricity prices in three ways. First, wind intermittency raises power prices. Wind system electricity output can vary between full-rated output to near zero within a period of only a few hours. Wind systems typically produce between 25 percent and 40 percent of rated output. In 2020, US power plant utilization levels were nuclear (92.5%), natural gas (56.6%), hydroelectric (41.5%), coal (40.2%), wind (35.4%), and solar photovoltaic (24.9%).

The intermittency of wind and solar means that, if always-on electricity is to be supplied, reliable coal, natural gas, and nuclear generators must be maintained as wind and solar systems are added to the power grid. Power system operators know that up to 90 percent of the capacity of traditional generators must remain operational to prevent system blackouts. Therefore, addition of renewables boosts both the capacity and the number of needed systems, raising the cost of electricity.

Second, backup coal and natural gas systems must be run at lower utilization rates as operators push for higher percentages of renewable output. The low utilization levels for coal and natural gas systems in 2020 mentioned above are because these systems are scaled back in favor of wind and solar output. Backup systems are not able to operate profitably at low utilization levels, raising system costs and electricity prices.

Third, wind (and solar) systems require more and longer transmission power lines than traditional power plants. Coal, gas, and nuclear plants are located near population centers and tend to be large-capacity plants. These plants can be connected to the grid with relatively short, high-capacity transmission lines. Wind systems tend to be located in remote areas, such as on ridgelines, often far from cities. Wind and solar are spread out over wide areas and require 100 times the land of traditional plants. Longer transmission systems over wide areas need to be deployed for wind and solar, raising system costs and electricity prices.

As more wind systems are added to the power grid, residents should prepare for soaring electricity prices.

*****
This article was published by CFACT, Committee For A Constructive Tomorrow and is reproduced with permission.

TAKE ACTION

There is an important runoff election for the Phoenix City Council District 6 on March 14. Conservative Sal DiCiccio (R) is term limited and will be replaced by the winner of this race. The two candidates are Republican Sam Stone and Democrat Kevin Robinson. If you live in District 6 (check here), you either received a mail-in ballot or you must vote in person (see below).

This is a very important race that will determine the balance of power on the City Council. Phoenix, like many large cities in conservative states, has tended blue with the consequences many cites suffer from with progressive governance. Have you noticed the growing homeless problem in our city?

Conservative Sam Stone is the strong choice of The Prickly Pear and we urge our readers in District 6 to mail your ballots in immediately and cast your vote for Sam Stone. Learn about Sam Stone here. Sal DiCiccio’s excellent leadership and term-limited departure from the Phoenix City Council must not be replaced by one more Democrat on the Council (Democrat Robinson endorsed by leftist Mayor Gallego). Sam Stone is a superb candidate who will bring truthful and conservative leadership to the Phoenix City Council at a time when the future of Phoenix hangs in the balance between the great history of this high quality, desert city we can live in and are proud of or the progressive ills of Los Angeles and San Francisco.

Mail-in ballots were sent to registered voters in District 6 on the February 15th. Mail your ballot no later than March 7th – it must be received by the city no later than March 14th to be counted. If you are not on the Permanent Early Voting List you must cast your ballot in person.

In-person balloting at voting centers will occur on three days in mid-March:

  • Saturday, March 11: 10 a.m. to 4 p.m.
  • Monday, March 13: 9 a.m. to 6 p.m.
  • Tuesday, March 14: 6 a.m. to 7 p.m

In-person voting can be done at the following locations:

  1. Sunnyslope Community Center, 802 E. Vogel Ave.
  2. Bethany Bible Church, 6060 N. Seventh Ave.
  3. Devonshire Senior Center, 2802 E. Devonshire Ave.
  4. Memorial Presbyterian Church, 4141 E. Thomas Road
  5. Burton Barr Central Library, 1221 N. Central Ave.
  6. Eastlake Park Community Center, 1549 E. Jefferson St.
  7. Broadway Heritage Neighborhood Res. Ctr., 2405 E. Broadway Road
  8. South Mountain Community Center, 212 E. Alta Vista Road
  9. Cesar Chavez Library, 3635 W. Baseline Road
  10. Pecos Community Center, 17010 S. 48th St.

You can also vote in person at City Hall through March 10th on the 15th floor. City Hall is at 200 W. Washington St.

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‘Economic Meltdown’ Looming On Monday, March 13th

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By Dr. Rich Swier

Bill Ackman predicted the lack of government intervention to guarantee SVB FDIC insured deposits would lead to an ‘economic collapse.’

Risks include:

1. Depositors at small banks move to JP Morgan
2. Everyone moves from cash to treasuries & money markets
3. Bank assets are no longer backed by deposits
4. More runs on banks
5. Socialists cheer on demise of small banks
6. Execs at big banks get mega rich

‘Irreversible mistake’: Hedge fund manager Bill Ackman warns of ‘economic meltdown’ following Silicon Valley Bank collapse

By Jesse O’Neill, NY Post, March 12, 2023:

Hedge-fund manager Bill Ackman predicted that an “economic meltdown” was looming on Monday following Friday’s collapse of Silicon Valley Bank.

In a rambling, 649-word, one-paragraph tweet Saturday, the billionaire predicted that uninsured bank customers would rush to withdraw cash Monday unless the government steps in to guarantee their funds and “fix a-soon-to-be-irreversible mistake.”

The 16th largest bank in the US, which provided financing for a large chunk of the country’s venture backed tech and health companies, was taken over by the Federal Deposit Insurance Corporation Friday as its stock plummeted due to liquidity concerns tied to rising interest rates.

It marked the largest bank collapse since the 2008 financial crisis, and it stranded billions of dollars belonging to companies and investors, whose deposits in excess of $250,000 are not covered by the FDIC.
Bill Ackman, the founder and CEO of Pershing Square Capital Management in Manhattan, predicted the lack of government intervention to guarantee SVB funds would lead to an ‘economic collapse.’
Bloomberg via Getty Images

“Absent @jpmorgan@citi or @BankofAmerica acquiring SVB before the open on Monday, a prospect I believe to be unlikely, or the gov’t guaranteeing all of SVB’s deposits, the giant sucking sound you will hear will be the withdrawal of substantially all uninsured deposits from all but the ‘systemically important banks’ (SIBs),” Ackman wrote.

The FDIC was said to be looking to find a bank that would merge with the failed California institution over the weekend, as the US weight the creation of a fund that would allow regulators to reinforce deposits if other banks fail in the wake of the collapse, according to Bloomberg.

Read more.

AUTHOR

Pamela Geller

RELATED TWEETS:

So let’s understand, the Biden regime is sending HUNDREDS OF BILLIONS to a corrupt dictatorship (that launders money for the Democrat criminal racket)
but they won’t cover the failed FDIC bank deposits in a bank run caused by Biden’s catastrophic economic polices. #SVBCollapse

— 🇺🇸 Pamela Geller 🇺🇸 (@PamelaGeller) March 12, 2023

Hi, I’m Lindsey. A bit about me:
– Ohio mother of 4
– I employ a team of 15 as a start-up founder & CEO of Strongsuit
– drive a used Honda Odessey
– husband works in manufacturing
– The financial future of my company, team and family are at risk w/ the collapse of SVB (1/23)

— Lindsey Michaelides (@lcmichaelides) March 11, 2023

RELATED ARTICLES:

America’s biggest banks lost more than $50 billion in a single day

BIDEN’S ECONOMY: Silicon Valley Bank COLLAPSES Following Run on Bank, 2nd Biggest Bank Failure In United States History

America’s Biggest Banks Lost More Than 50 billion Dollars In A Single Day

EDITORS NOTE: This Geller Report is republished with permission. ©All rights reserved.

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WOKE AND BROKE: While Silicon Valley Bank Collapsed, Top Exec Pushed ‘Woke’ Programs

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By The Geller Report

Silicon Valley Bank went woke, it’s now broke.

Asleep at the wheel While Silicon Valley Bank collapsed, top exec pushed ‘woke’ programs

A head of risk management at Silicon Valley Bank spent considerable time spearheading multiple “woke” LGBTQ+ programs, including a “safe space” for coming out stories, as the firm catapulted toward collapse.

Jay Ersapah, the boss of Financial Risk Management at SVB’s UK branch, launched initiatives such as the company’s first month-long Pride campaign and a new blog emphasizing mental health awareness for LGBTQ+ youth.

“The phrase ‘you can’t be what you can’t see’ resonates with me,’” Ersapah was quoted as saying on the company website.

“As a queer person of color and a first-generation immigrant from a working-class background, there were not many role models for me to ‘see’ growing up.”

Her efforts as the company’s European LGBTQIA+ Employee Resource Group co-chair earned her a spot on SVB’s “outstanding LGBT+ Role Model Lists 2022,” a list shared in a company post just four months before the bank was shut down by federal authorities over liquidity fears.

In addition to instituting SVB’s first “safe space catch-up” — which encouraged employees to share their coming out stories — and serving on LGBTQ+ panels around the world, Ersapah also spent time over the last year serving as a director for Diversity Role Models and volunteering as a mentor for Migrant Leaders.

“I feel privileged to co-chair the LGBTQ+ ERG and help spread awareness of lived queer experiences, partner with charitable organizations, and above all, create a sense of community for our LGBTQ+ employees and allies.”

SVB was abruptly shut down Friday by the California Department of Financial Protection and Innovation shortly after it disclosed it had taken a $1.8 billion hit from a $21 billion fire sale of its bond holdings.

It faced a cash crunch due to surging interest rates, and a recent meltdown in the tech sector led many customers to pare their deposits

Keep reading

AUTHOR

Pamela Geller

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Budget; What Budget?

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By Bruce Bialosky

Our leaders have failed at a national balanced budget. They do not even begin to address whether we are anywhere near the possibility of a balanced budget.  Charges are flying back and forth about whether anyone wants to cut Social Security and/or Medicare as some demagogue the issue.  It is time to take a simple “helicopter” view of what is actually happening.

In 2022, our federal government spent $6.48 trillion.  The breakdown:

  1. Social Security — $1.22 trillion, comprised of three parts: Payments to seniors $1.03 trillion, $144.7 billion for disability; $48.4 billion – other.
  2. Defense – $1.03 trillion, composed of $759.8 billion for defense and $271 billion for veterans.
  3. Medicare $756.1 billion.
  4. Transfers to states – $1.21 trillion.
  5. Transfers payments – $619.3 billion. Only $36.3 billion of that is paid for by the recipients as those are payments related to unemployment insurance.
  6. Interest payments – $483.5 billion.

The government received $5.03 trillion in revenue:

  1. Payroll Taxes – $1.50 trillion comprised principally of $1.09 trillion Social Security and $344 billion for Medicare.
  2. Income taxes and other taxes — $3.50 trillion.

Clearly, there are many items to discuss.  First, you can see that Social Security already has expenditures exceeding collections.  There is no fund saved somewhere to make up the difference. If there were no massive payments for disability and “other,” the fund would be solvent. No question that there are many deserving recipients of disability benefits but there are many who are not.  The disability recipient pool expands dramatically any time there is an economic downturn, and no one polices that.

Notice the expenditures for Medicare are more than twice the revenues.  This is after significant increases in the tax base occurring in the ACA passed during the Obama Administration.  Not clear how this can possibly get close to being balanced.

Why so much money is paid out to the states instead of the states making their own tax collections remains a mystery. Over $600 billion of this is for medical care programs. That means the federal government is funding over $1 trillion for unfunded medical care.

The taxpayers of the states are unwilling to vote themselves to be taxed, but the feds are willing to simply print more money.  The feds enjoy supplying the funds because it gives them control over the state and municipal governments.  Without all these transfers the budget would have been close to balanced. 

The interest payments are already skyrocketing with the return to more normal interest rates.  Our irresponsible elected officials were willing to incur greater debt when the interest rates were much lower.  They had to know that would change and we would have a serious problem.  The massive amount of interest has already increased from over $300 billion to $783 billion annualized and it is a good bet that will go higher.

Some people keep harping on the fact that we should increase tax collections on wealthy individuals and corporations.  We have already increased tax collections as the reduced rates spurred higher collections.  The top 1% of earners pay 40% of income taxes while earning a far smaller share of that income. Does anyone really believe we can close this $1.45 trillion budget imbalance simply by collecting more from large corporations and the very financially successful ones? If we collected 100% of high-earners’ income we would still be nearly a trillion dollars short of a balanced budget.  Seems implausible to me. 

If we combine the four factors of defense, social security, medical care, and interest payments, the current amount being paid out is $4.4 trillion. That is almost the entire revenue of the federal government.  Since two of those expenses are programs people have paid into to receive benefits and defending the country is the primary aspect of what the federal government should be doing, there is little flexibility.  The problem is everything else the federal government does and for the most part badly.

Our President is spending much time criticizing Republicans about phantom proposals to cut Social Security and Medicare. On the other side, Republicans are swearing fealty to an unsustainable system.  Biden appears unwilling to negotiate on reducing any element of the budget to create a positive atmosphere to raise the debt ceiling. He is proposing even greater levels of expenditures. All of these talking points may change but currently makes little sense.

The CBO (Congressional Budget Office) has stated unless there is a change, the increase in the national debt will be $19 trillion over the next decade. The CBO likewise stated federal spending on Social Security and Medicare will explode over the next decade.

You can evaluate for yourself whether our current national finances are sustainable year after year with trillion-dollar deficits. It seems to me something has to change and change quickly.

*****

This article was published in Flash Report and is reproduced with permission by the author.

TAKE ACTION

There is an important runoff election for the Phoenix City Council District 6 on March 14. Conservative Sal DiCiccio (R) is term limited and will be replaced by the winner of this race. The two candidates are Republican Sam Stone and Democrat Kevin Robinson. If you live in District 6 (check here), you either received a mail-in ballot or you must vote in person (see below).

This is a very important race that will determine the balance of power on the City Council. Phoenix, like many large cities in conservative states, has tended blue with the consequences many cites suffer from with progressive governance. Have you noticed the growing homeless problem in our city?

Conservative Sam Stone is the strong choice of The Prickly Pear and we urge our readers in District 6 to mail your ballots in immediately and cast your vote for Sam Stone. Learn about Sam Stone here. Sal DiCiccio’s excellent leadership and term-limited departure from the Phoenix City Council must not be replaced by one more Democrat on the Council (Democrat Robinson endorsed by leftist Mayor Gallego). Sam Stone is a superb candidate who will bring truthful and conservative leadership to the Phoenix City Council at a time when the future of Phoenix hangs in the balance between the great history of this high quality, desert city we can live in and are proud of or the progressive ills of Los Angeles and San Francisco.

Mail-in ballots were sent to registered voters in District 6 on the February 15th. Mail your ballot no later than March 7th – it must be received by the city no later than March 14th to be counted. If you are not on the Permanent Early Voting List you must cast your ballot in person.

In-person balloting at voting centers will occur on three days in mid-March:

  • Saturday, March 11: 10 a.m. to 4 p.m.
  • Monday, March 13: 9 a.m. to 6 p.m.
  • Tuesday, March 14: 6 a.m. to 7 p.m

In-person voting can be done at the following locations:

  1. Sunnyslope Community Center, 802 E. Vogel Ave.
  2. Bethany Bible Church, 6060 N. Seventh Ave.
  3. Devonshire Senior Center, 2802 E. Devonshire Ave.
  4. Memorial Presbyterian Church, 4141 E. Thomas Road
  5. Burton Barr Central Library, 1221 N. Central Ave.
  6. Eastlake Park Community Center, 1549 E. Jefferson St.
  7. Broadway Heritage Neighborhood Res. Ctr., 2405 E. Broadway Road
  8. South Mountain Community Center, 212 E. Alta Vista Road
  9. Cesar Chavez Library, 3635 W. Baseline Road
  10. Pecos Community Center, 17010 S. 48th St.

You can also vote in person at City Hall through March 10th on the 15th floor. City Hall is at 200 W. Washington St.

STAY INFORMED

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