By Timothy D. Naegele[1]
It may seem absurd to ask such a question, much less posit it as a fact to be reckoned with. But few Americans realize how close we came to a major national catastrophe during the so-called “2007–2008 financial crisis”—or what has been named “The Great Recession.”[2] I had left the U.S. Senate and was practicing law in Washington, D.C., and had the then-top lawyer for the FDIC over to my home in McLean, Virginia for dinner. He had too much to drink, and shared how worried he was that one of America’s largest banks might fail, sending uncontrollable shockwaves through our financial system, and globally.
We weathered that economic storm; and few Americans realized how close we came to the edge of an economic abyss, of unfathomable depths. It’s a fair question to ask: “Will the last economic “crash” be overshadowed by what is coming?” The number of American billionaires seems overwhelming; and their lavish spending on homes, yachts and other luxuries seems to be “beyond the pale.” Despite sanctions relating to the war in Ukraine, Russian oligarchs have lived like kings in London and elsewhere; and global wealth seems to be staggering.
But the latest headlines are:
“Turmoil at Silicon Valley Bank triggers market panic: Four biggest US banks lose staggering $52 BILLION in valuation and Dow drops 540 points”[3]
“Silicon Valley Bank is shut down by regulators in biggest bank failure since global financial crisis”[4]
“Silicon Valley Bank meltdown sparks contagion fears: ‘We found our Enron'”[5]
“Silicon Valley Bank’s Manhattan branch calls COPS on investors trying to pull their cash out as Boston tech CEO with $10M in bank describes ‘worst 18 hours of my life’: Lender is SEIZED by regulators in largest US bank failure since Great Recession”[6]
“What caused Silicon Valley Bank to collapse and will customers get their money back? Second largest bank failure in US history rattles markets and raises fears of wider risks” [7]
I testified as an expert witness for the FDIC in litigation stemming from the largest bank failure at the time, the United States National Bank in San Diego.
Today, American banks are holding bonds and other assets that have fallen in value, and lack liquidity. If they were “marked-to-market,” the banks’ valuation might fall dramatically and precipitously, potentially causing panics and “runs” on such financial institutions.
Fewer and fewer Americans trust their government today; and many are holding their monies in accounts that are not insured by the federal government. The “Great Depression II” did not come in 2007/2008. Will it come soon . . . and be accompanied by World War III?
Tragically, the group that can least afford what may be coming are America’s homeless, who are barely surviving already. And the United States has divisions that are tearing our great country apart, all the while that our enemies salivate over our seeming chaos, and calibrate their next moves against us.
_____
© 2023, Timothy D. Naegele
_____
[1] Timothy D. Naegele was counsel to the United States Senate’s Committee on Banking, Housing, and Urban Affairs, and chief of staff to Presidential Medal of Freedom and Congressional Gold Medal recipient and former U.S. Senator Edward W. Brooke (R-Mass). See, e.g., Timothy D. Naegele Resume-21-8-6 and https://naegeleknol.wordpress.com/accomplishments/ He has an undergraduate degree in economics from the University of California, Los Angeles (UCLA), as well as two law degrees from the School of Law (Boalt Hall), University of California, Berkeley, and from Georgetown University. He served as a Captain in the U.S. Army during the Vietnam War, assigned to the Defense Intelligence Agency at the Pentagon, where he received the Joint Service Commendation Medal (see, e.g., https://en.wikipedia.org/wiki/Commendation_Medal#Joint_Service). Mr. Naegele is an Independent politically; and he is listed in Who’s Who in America, Who’s Who in American Law, and Who’s Who in Finance and Business. He has written extensively over the years (see, e.g., https://naegeleblog.wordpress.com/articles/ and https://naegeleknol.wordpress.com/articles/), and studied photography with Ansel Adams. He can be contacted directly at tdnaegele.associates@gmail.com
[2] See, e.g., https://en.m.wikipedia.org/wiki/2007%E2%80%932008_financial_crisis (“2007–2008 financial crisis”)
[3] See https://www.dailymail.co.uk/news/article-11841715/Turmoil-Silicon-Valley-Bank-triggers-market-panic.html (“Turmoil at Silicon Valley Bank triggers market panic: Four biggest US banks lose staggering $52 BILLION in valuation and Dow drops 540 points”)
[4] See https://www.cnbc.com/2023/03/10/silicon-valley-bank-is-shut-down-by-regulators-fdic-to-protect-insured-deposits.html (“Silicon Valley Bank is shut down by regulators in biggest bank failure since global financial crisis”)
[5] See https://nypost.com/2023/03/10/silicon-valley-bank-meltdown-sparks-contagion-fears/ (“Silicon Valley Bank meltdown sparks contagion fears: ‘We found our Enron'”)
[6] See https://www.dailymail.co.uk/news/article-11845495/Silicon-Valley-Bank-branch-calls-NYPD-tech-investors-tried-pull-cash.html (“Silicon Valley Bank’s Manhattan branch calls COPS on investors trying to pull their cash out as Boston tech CEO with $10M in bank describes ‘worst 18 hours of my life’: Lender is SEIZED by regulators in largest US bank failure since Great Recession”)
[7] See https://www.dailymail.co.uk/news/article-11845603/What-caused-Silicon-Valley-Bank-collapse-customers-money-back.html (“What caused Silicon Valley Bank to collapse and will customers get their money back? Second largest bank failure in US history rattles markets and raises fears of wider risks”)
NaegeleBlog 
Customers With Deposits OVER $250,000 Brace For Losses
See https://www.dailymail.co.uk/news/article-11845829/SVB-largest-bank-failure-Washington-Mutual-customers-250k-brace-losses.html (“Collapse of SVB is largest bank failure in US since 2008 Washington Mutual closure: Customers with deposits OVER $250,000 brace for losses”)
LikeLike
A BITTER PILL TO SWALLOW
You might introduce yourself to Elliotwave.com. Founder, Bob Prechter has been on a outreach for the past two years with the same message: We topped out in January 2021 in the U.S. Equity markets which were overvalued by ANY metric historically. He is referring to a super cycle of the past 80 years.
( While most Westerns are not acquainted with cycles of varying lengths but the Chinese definitely are, which is why President Xi can confidently state: “Its China’s turn” now. We had our “15 minutes in the Sun” and have squandered it in the past 10 years.
REF: “Free Pass for a Changed World”:
https://my.elliottwave.com/products/club/event.aspx?guid=d3a36c43-8759-4d48-b7ba-37a69f8c2e66
All should read this complementary market analysis for free in March. Its important to at least have some brushing familiarity with the basic concepts which are discussed, especially behavioral finance.
Markets move in sequences or waves, commonly a five wave pattern up and likewise, down. We saw the first leg down last October, according to Bob. From Oct. of last year until mid-February, we had a classic “bear market rally” ( corrective wave 2) which has obviously concluded. As the markets descend into the abyss, the strongest wave of the 5-wave cycle, Wave 3, is going to cause a great many capital losses across-the-board. ( So much for the ineffectual or outdated investment rubric of safety in diversified portfolios).
Therefore, we are in for a licking and as social mood turns further negative, more social conflicts and eventually wars ( e.g. China) . Get your investments the Hell Out of China.
Its a slow train to the station in the next few years. Home foreclosures are expected to spike beginning in 2025. I fully expect more bank failures and closures in the next few years, particularly with some of the weaker regional banks. Will the FDIC run-out of funds? Anybody’s guess at this juncture. Do NOT Put your (financial) eggs in one basket !!
LikeLike
Sage advice, as always, Craig. Thank you.
While America “fumbles,” China plans its next moves.
See https://www.dailymail.co.uk/debate/article-11846065/ANDREW-NEIL-Washington-talk-not-China-invades-Taiwan.html (“In Washington the talk is about WHEN not IF China invades Taiwan – and Brexit Britain will be key to the West’s response”)
LikeLike
Ominous . . .
See, e.g., https://finance.yahoo.com/news/silicon-valley-bank-imploded-single-100000239.html (“Silicon Valley Bank imploded in a single day. It could just be the tip of the iceberg”) and https://news.yahoo.com/svb-fallout-spreads-around-world-154331383.html (“From Santa Clara to Shoreditch, SVB Fallout Spreads Around World”)
The Next Bank To Fail?
See https://www.dailymail.co.uk/news/article-11846823/Fears-Silicon-Valley-Bank-collapse-hit-Republic-Bank.html (“Fears Silicon Valley Bank collapse could topple First Republic Bank next, as shares slump 40% in a month and investors voice concerns over losses on its investments”)
At one point, its share price plummeted 50 percent today.
See also https://www.dailymail.co.uk/news/article-11847169/California-wine-industry-faces-financial-crisis-majority-vineyards-locked-accounts.html (“California wine industry faces financial crisis – with majority of vineyards locked out of their accounts amid SVB collapse”) and https://www.dailymail.co.uk/news/article-11846967/Customers-line-block-outside-Silicon-Valley-Bank-collapse-sparks-fears-lose-250-000.html (“Silicon Valley Bank panic escalates: Customers line up around block outside Bay Area branch, as bank’s collapse sparks fears they’ll lose deposits over $250,000”)
The federal insurance limits are just that: limits. The depositors should have diversified their deposits with more than one bank, up to the $250,000 insurance limit at each bank.
See also https://www.bankingdive.com/news/silicon-valley-bank-buyer-liquidity-issues-spook-startup-sector-greg-becker/644715/ (“Regulators take over Silicon Valley Bank”)
The ripple effects, with much more to come . . .
See https://www.dailymail.co.uk/news/article-11848079/Mompreneurs-Etsy-hit-SVB-collapse-pay-bills.html (“Mompreneurs on Etsy say they can’t ‘pay the mortgage or feed their kids’ after their payments failed to arrive because firm used shuttered Silicon Valley Bank to process sales – as fallout from collapse hits ordinary families”) and https://www.dailymail.co.uk/news/article-11847965/Financial-markets-brace-following-Silicon-Valley-Bank-death-spiral-bank-stocks-50.html (“‘It isn’t a one off’: Financial markets brace for more pain from Silicon Valley Bank ‘death spiral’- with First Republic, Pac West and Signature Bank stocks down by up to 50% and tech giants unable to access frozen BILLIONS”) and https://www.washingtonpost.com/technology/2023/03/11/silicon-valley-bank-startups-payroll/ (“Silicon Valley Bank collapse leaves start-ups scrambling to pay workers”)
Woke Is Evil
See, e.g., https://www.dailymail.co.uk/news/article-11848705/Woke-head-risk-assessment-Silicon-Valley-Bank-accused-prioritizing-diversity-issues.html (“Woke head of ‘risk assessment’ at Silicon Valley Bank ‘prioritized’ LGBT initiatives – including organizing a month-long Pride campaign – before bank lost BILLIONS and collapsed”)
LikeLike
THE DOMINO THEORY
While our banking and financial system is now imploding, we are distracted by the recent release of the January 6, 2020 Riot, sic. insurrection tapes after two years of Democratic controls (suppression of evidence by the “Deep State” political participants).
A possible “Biden Moment” is fast approaching, possibly as early as next week. Lets just take a look at the local Wells Fargo Branch and see if depositors are concerned enough at this juncture to stand in-line for their money or drive to the ATM window and do the same. It will be interesting to say the least, either way. We truly are all living in “interesting times”. Fall of Rome, v 2.0 and I am enjoying the “really big shoe” so far.
https://www.marketwatch.com/story/20-banks-that-are-sitting-on-huge-potential-securities-lossesas-was-svb-c4bbcafa?itm_source=parsely-api&mod=mw_pushly&send_date=20230311
According to Forbes Magazine online on Friday, Wells Fargo Bank failed to deposit employee paychecks in their accounts. Rumors were rampant amongst the Armenian community here in Glendale, as a local branch has predominately Armenian employees. Sometimes “where there is smoke, there is fire”, as they say.
Wells Fargo press release on Friday stated it was simply a software glitch in their ACH system. Anyone believe Wells FraudCo anymore ? I don’t believe anybody myself, as deception is pandemic these days.
Wells Fargo Depositors Better Run Fast or risk being Last.
REF:
https://www.forbes.com/sites/nicholasreimann/2023/03/10/wells-fargo-customers-report-missed-paychecks-due-to-apparent-glitch/?sh=120a209f1ae2
LikeLike
Again, thank you, Craig.
As you may recall, I have written extensively about Wells Fargo.
See, e.g., https://naegeleblog.wordpress.com/2019/09/27/wells-fargo-an-american-banking-nightmare/ (“Wells Fargo: An American Banking Nightmare”)
Its problems and deception never seem to end. Once, it was one of the most trusted financial institutions in America, if not the world. But Richard Kovacevich ran it into the ground, and escaped scot-free.
LikeLike
Yellen Says No Federal Bailout For Silicon Valley Bank
See https://apnews.com/article/silicon-valley-bank-bailout-yellen-deposits-failure-94f2185742981daf337c4691bbb9ec1e (“Yellen says no federal bailout for Silicon Valley Bank”)
Janet Yellen is the former Chairperson of the Federal Reserve Board, and now Secretary of the Treasury. What she has announced is consistent with my experiences in buying seven federally-insured financial institutions from the federal government; namely, there were no federal bailouts of them.
See, e.g., https://naegeleknol.wordpress.com/accomplishments/ (“(1) Southern California Savings by The Securities Groups (1982); (2) Fidelity Federal Savings and Loan of Baltimore (1984), (3) American Heritage of Illinois (1984), (4) Fidelity Savings & Loan of Martins Ferry, Ohio (1985), (5) Brighton Federal of Colorado (1985), and (6) Century Savings of Kansas (1985) by Household Bank, F.S.B.; and (7) United Bank of San Francisco by Hibernia Bancshares Corporation (1986)”)
The government had closed the financial institutions, often on a Friday (e.g., to minimize the chances of “runs” by depositors); and we opened on Monday, with a new financial institution, which had new management, etc. The accounts of the former financial institutions were insured up to the federal insurance limits (e.g., today they are $250,000); and anything over that amount was uninsured. Obviously, when we reopened, customers wanted to make sure that their accounts still existed, and that their monies were safe.
In the case of United Bank of San Francisco — which was America’s largest minority bank at the time, and was headquartered at the edge of Chinatown in San Francisco — many or most of the depositors spoke various Chinese dialects, and little or no English. Thus, we brought in interpreters who would explain to them what was happening, and took out ads in Chinese-language newspapers.
In each and every instance, our acquisitions went smoothly. However, massive planning went into each, to achieve this result.
. . .
See also https://finance.yahoo.com/news/silicon-valley-bank-imploded-single-100000239.html (“Silicon Valley Bank imploded in a single day. It could be just the tip of the iceberg”)
LikeLike
Bizarre . . .
See https://www.dailymail.co.uk/news/article-11851461/Federal-Reserve-announces-depositors-Silicon-Valley-Bank-protected.html (“Federal Reserve announces that ALL depositors at Silicon Valley Bank will be protected as another bank – Signature Bank – closes, and an auction is held for SVB’s assets”)
Let’s understand what has happened here. As Chairperson of the Fed, Janet Yellen let our economy get out of control, with inflation running rampant. Her successor Jerome Powell has been acting responsibly by tightening up, but it’s a herculean and thankless task — trying to reign in an advancing economic storm.
Yellen was rewarded by Joe Biden with the Treasury job; and her first major test involves Silicon Valley Bank (SVB). Not satisfied with the congressionally-enacted $250,000 insurance limits, and fearful of runs on other banks and financial institutions, Yellen is saying that all deposits at SVB will be covered fully. But she is yet to announce explicitly where the money will come from — namely, America’s taxpayers, which is being denied.
And what about any wrongdoing at SVB? Apparently it will be swept under the proverbial rug and ignored. The fact that insiders may have benefited before the bank’s collapse seems irrelevant to the Biden Administration. And the woke activities of the bank are being ignored — aka covered up — as well.
See, e.g., https://www.dailymail.co.uk/news/article-11848705/Woke-head-risk-assessment-Silicon-Valley-Bank-accused-prioritizing-diversity-issues.html (“Woke head of ‘risk assessment’ at Silicon Valley Bank ‘prioritized’ LGBT initiatives – including organizing a month-long Pride campaign – before bank lost BILLIONS and collapsed”)
Much worse may occur . . .
See, e.g., https://justthenews.com/nation/economy/biden-administration-tries-stave-financial-crisis-second-bank-fails (“Biden administration tries to stave off financial crisis as second bank fails”) and https://news.yahoo.com/svb-fallout-spreads-around-world-154331383.html (“SVB Fallout Spreads Around World From London to Singapore”) and https://www.france24.com/en/live-news/20230312-british-tech-sector-at-serious-risk-after-svb-collapse-govt (“British tech sector ‘at serious risk’ after SVB collapse: govt”)
LikeLike
Ticking Time Bomb
See https://www.dailymail.co.uk/news/article-11852345/Americas-620-billion-ticking-time-bomb-FDIC-reveals-unrealized-losses-banks.html (“America’s $620 billion ticking time bomb: FDIC reveals the extraordinary amount of ‘unrealized losses’ across U.S. banks amid fears more will collapse after the sudden failure of SVB and Signature”)
LikeLike
SHARE AND SHARE ALIKE
I think banks are going to start failing faster than the FDIC can react. (Snowball effect). At some point in the near future after a few more go down, the public will start to realize the actual (debt) problems in the financial system are huge. Then, at some time further into the process, the public ( Cattle) will crack and break into a run (stampede) on their local bank branches (The Big 4 Retail Banks).
Everyday people will react to news coverage elsewhere but not consider whether their banks are still O.K. Fear of losses will gradually take hold and stampede the herd. This is why the Biden Administration and Treasury Secretary Janet Yellen have decided this weekend in an emergency meeting to make ALL SVB Bank depositors whole. This includes insured AND uninsured depositors alike. The cost: $ 150 billion, which will just be created anew ( sic. printed ). NO HAIRCUTS! “Moral Hazard” is back again after a long hiatus.
If the Public were to eventually panic then ALL the banks would be affected and pandemonium would likely break-out. Depending on how geographically widespread the depositor panics are, all banks might have to impose Greek-like cash withdrawal limits per customer a day or a week ( also known as capital controls ). This potentially would make Joe Biden the Democratic equivalent of Herbert Hoover. (Karma)
A real financial collapse would include riots of angry bank customers which might necessitate a return of contract security guards (unarmed) at bank branch premises, as occurred during the Covid lock-downs and aftermath in 2020-2021. People without funds or cash will get hungry desperate, and head to the local grocery store to steal food. More guards as our society completely unravels into chaos.
Just remember:
Political leaders start wars but “The People” start rebellions. ( Think the French Revolution). Our turn may be coming sooner than people might think. Living in “Interesting Times”, for sure.
LikeLike
Thank you as always, Craig.
“Interesting Times,” indeed. A potential financial collapse, coupled with World War III, as the butchery continues nonstop in Ukraine, and China calculates its moves against Taiwan and elsewhere.
And Brain Dead Joe is in the White House . . . at least part-time.
LikeLike
Does Anyone Trust Joe?
See https://www.dailymail.co.uk/news/article-11853651/Bank-shares-plummet-71-pre-market-trading-despite-Bidens-backing.html (“Biden says ‘US banking is safe’ as shares plummet up to 74% in pre-market trading despite president’s guarantee scheme for SVB and Signature Bank – amid fears of a rout when stock market opens at 9.30am”)
SGM Choozoo from Maryland commented on MailOnline:
“Nothing Biden can say or do can calm anybody whatsoever. The guy is a walking vegetable.”
https://www.dailymail.co.uk/news/live/article-11853893/SVB-Bank-Collapse-live-updates.html?ito=twitter_share_comment_text#comments
See also https://www.dailymail.co.uk/news/article-11853651/Bank-shares-plummet-71-pre-market-trading-despite-Bidens-backing.html (“Trading HALTED in three banks after shares fell as much as much 75% when market opened at 9.30am – moments after Biden said ‘US banking is safe’: Contagion spreads to First Republic Bank, Western Alliance and PacWest”) and https://www.dailymail.co.uk/news/article-11853651/Bank-shares-plummet-71-pre-market-trading-despite-Bidens-backing.html (“Trading temporarily HALTED in dozens of banks after shares fell by up to 75% when market opened at 9.30am – moments after Biden said ‘US banking is safe’ – as contagion spreads to heavyweights Wells Fargo, Bank of America and JP Morgan”) and https://www.dailymail.co.uk/news/article-11855573/100BN-wiped-banking-market-SINGLE-DAY-bloodbath-Wall-Street.html (“$100BN wiped off US banking market in SINGLE DAY as former White House adviser calls it ‘tip of the iceberg’: Bloodbath on Wall Street saw regional banks fall by up to 60% and the Big Four drawn into SVB’s collapse contagion”) and https://www.dailymail.co.uk/news/article-11855147/How-Bidens-4TRILLION-COVID-stimulus-package-helped-create-tech-investment-bubble.html (“Biden’s $4TRILLION COVID stimulus package helped create a tech investment bubble – that was punctured by interest rate rises, leaving banks with multibillion dollar shortfalls (but CEO of SVB sold $4M in shares BEFORE the crash)”) and https://www.dailymail.co.uk/news/article-11855765/Concerned-Republic-customers-arrive-troubled-bank-stock-falls-50.html (“‘If everybody keeps cool we’ll be right’: Americans rush to bank branches to withdraw their life savings or demand answers amid fears of financial contagion after SVB collapse”) and https://www.dailymail.co.uk/news/article-11857123/Wall-Street-expert-predicts-Credit-Suisse-bank-fold.html (“Credit Suisse shares fall to all-time low as bank announces it has found ‘material weakness’ – just hours after Wall Street expert predicted that it would be the next to fall after SVB”)
LikeLike
Surprise, Surprise . . .
https://www.dailymail.co.uk/news/article-11854493/Taxpayers-hook-bank-bailout-following-Silicon-Valley-Bank-collapse.html (“Taxpayers ARE on hook for bank bailout – and could even fund bankers’ bonuses: Fed’s new $25BN loan scheme for troubled institutions risks huge losses for the government after SVB collapse – despite Biden’s claims it’s not a bailout”)
LikeLike
Truly Bizarre . . .
See https://www.dailymail.co.uk/news/article-11856847/Silicon-Valley-Bank-appoint-new-CEO-staff-aim-previous-bank-chief.html (“Silicon Valley Bank’s new CEO says ‘it’s business as usual’ in email to clients – as furious staff slam former boss Greg Becker’s ‘absolutely idiotic’ move which triggered mass withdrawals”)
In other words, no one has paid a price for this disaster except (1) those who were fired — who may have benefited already — and (2) American taxpayers who will pay for this and other fiascos like it.
LikeLike
Will Joe Biden Become The Most Hated President In American History?
Few Americans are alive today who remember how hated Lyndon Johnson was. While John F. Kennedy began the tragic Vietnam War, Johnson and his Secretary of Defense Robert McNamara escalated it beyond belief. Friends of mine were killed there.
Johnson was so hated that he could not run for reelection. Indeed, cars in the Washington, D.C. area bore bumper stickers that asked: “Where’s Lee Harvey Oswald when you need him?” — a reference to JFK’s assassin.
See, e.g., https://www.amazon.com/Wheres-Harvey-Oswald-Bumper-Sticker/dp/B071F9WRPM (“Where’s LEE Harvey Oswald When You Need HIM? Bumper Sticker”)
Is a climate of pure hate emerging with respect to Biden?
LikeLike
Woke Bailout
See https://www.dailymail.co.uk/news/article-11859379/Only-ONE-member-failed-SVBs-board-experience-investment-banking.html (“REVEALED: Only ONE member of failed SVB’s board had a career in investment banking – and the rest were Obama, Clinton mega-donors who ‘grieved’ when Trump won including one who went to Shinto shrine ‘to pray'”) and https://www.dailymail.co.uk/news/article-11860445/Signature-Bank-boss-hosted-company-seminar-gender-neutral-pronouns-prior-bank-failure.html (“Signature Bank boss hosted a company seminar on gender-neutral pronouns ‘ze’ and ‘hir’ five months before becoming the third largest bank failure in US history”)
From top-to-bottom in the corrupt Biden administration, ALL who participated should be imprisoned — without trials, like the so-called “January 6 protestors.”
See also https://www.dailymail.co.uk/news/article-11859149/Assets-banks-worth-2TRILLION-accounts-report-Study.html (“Assets of US banks are worth massive $2TRILLION less than their accounts report and 200 banks could be at risk if customers rush to withdraw, leading academics warn”)
LikeLike