A run on the banks
Was the Silicon Valley Bank the first domino to fall?
I’ve told you before how I was affected by the Great Recession.
I don’t quite get that sense of foreboding regarding last week’s failure of the Silicon Valley Bank (SVB), but I notice a lot of other people have. One interesting statistic of note to me is the failure of SVB ended an 867-day streak where our nation had zero bank closures - it was the second-longest streak on record. However, the longest streak came in the economic boom that came just before the streak’s screeching halt in 2007. But between 2007 and 2015, when the number finally came down to single digits, there was a huge shakeup in the banking industry. The drip, drip, drip of three banks failing in 2007 accelerated in the second half of 2008 as 25 banks failed that year, leading to eye-popping numbers like 140 in 2009 and a Depression-like 157 in 2010. The number slowly dwindled over the next few years, finally reaching single-digits again in 2015 but affecting millions.
Adding to the panic, on Sunday the FDIC shut down Signature Bank, which catered to the cryptocurrency industry.
Now the caterwauling is about how depositors are being bailed out at taxpayer expense, despite protests by the Biden regime that there’s no taxpayer money involved and the funding comes from an insurance program banks contribute to. Well, how else would banks pay that money if it weren’t for their customers? That’s a point my Patriot Post editor borrowed from National Review’s Philip Klein, who said:
Under one estimate from a Jefferies analyst, when liquidated, SVB has the assets to pay off 95 percent of deposits. This is no doubt one reason why regulators are stating so confidently that they don’t expect this to cost taxpayers money. Another reason is that they claim any losses incurred would be repaid by “a special assessment on banks” which will inevitably end up being passed on to their customers.
Sometimes you need to show a little love to your peeps - speaking of which…
Anyway, that “special assessment” may as well come from you and me, and chances are it’s going to account for more than 5% of the total as no one pays full price in a fire sale, which is what this would be.
But at a time when the government throws around cash like it’s Monopoly money, I suppose even if 100 banks went belly-up they would be the white knight riding to their rescue. “Too big to fail” beats “too little to succeed” once again.