by Dennis Miller, MillerOnTheMoney:
Chairman and CEO of JPMorgan Chase, Jamie Dimon wrote shareholders about banking turmoil, “As I write this letter, the current crisis is not yet over, and even when it is behind us, there will be repercussions from it for years to come.”
IGI Global defines a banking crisis:
1. Banking crisis reflects the crisis of liquidity and insolvency of one or more banks in the financial system. Due to bank’s sizable losses, bank encounters critical liquidity shortage…disrupting its ability in repaying the debt contracts and the withdrawals demanded by depositors.
2. A subset of financial crises that are felt acutely within the banking sector…having national and international implications wherein either the given capital of the banking system is practically exhausted,…or where the cost of resolving the problems of a financial system amounts to at least 3-5% of the national Gross Domestic Product.
Banks lose billions on high-risk investments, creating a tsunami of economic problems. Private businesses fail all the time. Why is the banking system treated differently?
TRUTH LIVES on at https://sgtreport.tv/
No one worried about a “banking crisis” until 2008. The bank bailouts amounted to trillions, punishing savers & taxpayers in the process. Repealing the Glass-Steagall act in 1999 created “too big to fail”, mega casino-banks. JP Morgan, Wells Fargo, Bank of America, Citigroup and US Bancorp control 40% of the wealth of the nation.
Banks win, we lose!
Former colleague, John Mauldin discusses the failed Silicon Valley Bank: (Emphasis mine)
“We’ll begin by noting something odd at Silicon Valley Bank: At the time it failed, some 96% of SVB’s deposits were in excess of the FDIC limit ($250,000 in most cases) and therefore uninsured.
More accurately, they would have been uninsured except that the FDIC, in consultation with the Federal Reserve Board and Treasury Secretary Janet Yellen, invoked a ‘systemic risk’ clause to extend unlimited coverage to all SVB deposits.
This decision wasn’t cost-free. Last week the FDIC announced it had, after liquidating SVB’s assets, paid out an additional $20 billion to make depositors whole.
This was charged to the FDIC’s Deposit Insurance Fund, which is funded by assessments on all banks and must now be replenished.
Also keep in mind, the FDIC is backstopped by the US Treasury if its own funds are insufficient. ‘Taxpayers’ didn’t pay anything this time but are potentially at risk.
That makes it harder to deny SVB depositors received a ‘bailout.’ …. The FDIC essentially unloaded SVB’s easily tradeable assets, sold the rest to another bank, and still had to draw from its own reserves to make good on the expanded deposit insurance guarantee.
Those who received the benefit had been clearly warned not to expect any such thing, yet they got it anyway. ‘Bailout’ seems to fit. SVB wasn’t systemic until it was.
…. We are now in a situation where many presume the insurer (FDIC) will cover far more damages than it should under its current rules.
This incentivizes both depositors and banks to take more risks on the assumption they will be bailed out if necessary.
…. The key point is to avoid privatizing profits and socializing losses.”
Bill Bonner adds:
| “Why are these big banks willing to accept such high risks even though they know the risks have the potential to cause bankruptcy? They expect the government will bail them out.”
— Urs Vrijhof-Drose |
“As with all the other efforts made by the elites…they can’t prevent the grim consequences of their own mistakes. They just move the costs onto people who don’t deserve them…and make it worse.”
So, the FDIC, in consultation with the Federal Reserve (Owned by the banks) and Treasury Secretary (former Fed head) Janet Yellen decide to invoke a “systemic risk” clause to “bail out” all SVB deposits. Unelected government bureaucrats, with total conflict of interest, put taxpayers on the hook – while Congress fiddles.
Jamie Dimon, head of the largest casino-bank lectures us about what should be done. Let’s dissect some of his preaching – with my emphasis and comments….
“The recent failures of Silicon Valley Bank (SVB) in the United States and Credit Suisse in Europe, and the related stress in the banking system, underscore that simply satisfying regulatory requirements is not sufficient. Risks are abundant, and managing those risks requires constant and vigilant scrutiny as the world evolves. Regarding the current disruption in the U.S. banking system, most of the risks were hiding in plain sight.”
Hiding in plain sight? Your bank is part owner of the Fed, the bank regulator. The President of SVB was a director of the San Francisco Fed when it failed. No surprise the obvious risks were hidden, the system is wrong, the regulators (Fed) should not be owned by the companies they oversee….
His pontification continues:
“While this crisis will pass, lessons will be learned, which will result in some changes to the regulatory system. It is extremely important that we avoid knee-jerk, whack-a-mole or politically motivated responses that often result in achieving the opposite of what people intended.
…. America (has) the best and most dynamic financial system in the world – from various types of investors to its banks, rule of law, investor protections, transparency, exchanges and other features.”
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