So the Biden administration has just guaranteed all depositors of the SVB bank. Now that he has taken this step, this has effectively nationalized all of the deposits of all banks in the country. Now banks are free to take all of the risks that they want, because they aren’t risking their own, or even their depositors’ money. It’s more free money from Uncle Sugar’s printing press.
The thing is, those who owned stock in the bank are getting screwed out of their money. The bank has declared bankruptcy, and anyone who owned stock in the bank can’t even sell it. In fact, those who were selling the bank short have also lost all of their money. The billionaire depositors are being bailed out, but the bank’s stockholders are not.
The government has removed risk from the banking sector, now it doesn’t matter if you are a good bank manager or not, you are gonna get paid by the taxpayers. There are those calling this a failure of capitalism, but they are wrong. In a free market system, well run businesses are rewarded, poorly run businesses fail. That is how the market stays healthy- the poorly run businesses are eliminated.
Not so in our system. In this system, poorly run businesses that are favored by government are continually bailed out, thus avoiding all consequences of their poor decision making. This is the government picking winners and losers. So let’s look ahead and see the consequences:
Stocks in small banks just became a whole lot riskier, while keeping huge balances in them are now without risk. Banks will have gigantic pools of money that they are now able to use to make risky loans and investments. If the risks don’t pan out, the depositors will be made whole, and the stockholders left holding the bag. A larger bank will then buy out those risky investments for pennies on the dollar. It’s a system begging for abuse and fraud. The ultimate consequence is the destruction of small banks, concentrating all banking in the realm of banks that the government has deemed “too big to fail.”
I wonder who paid one of the Biden clan to make this happen, and how much did it cost?
6 Comments
Elrod · March 20, 2023 at 10:25 am
It will be interesting to watch the market over the next several months; I suspect individual investors will begin quietly removing their money from the banking category. Watching where those dollars go will be useful.
Institutional investors, probably not so much, because a move by multiple large houses could sink a bank by dumping its stock, unless there’s a “fed grift with Biden Bucks” in place to temper it.
EN2 SS · March 20, 2023 at 1:18 pm
How much did it cost? A phrase my dad used was ‘two bit whore’, which I think fits the Buydem clan.
Jester · March 20, 2023 at 9:28 pm
Lets be clear, if the board of this bank was not well known Democratic politics doners and they were not advancing those agendas, coupled with the fact so many massive democratic doners were the “Bailed outs” this never would have even been a bail out at all. But because the right people lost their asses who happened to donate to the political critters they get covered by tax payers expense… Oh wonder who they will continue to donate to? The grift is institutional at this point and its out in the open, not even being hidden.
Steve · March 20, 2023 at 11:26 pm
That’s how bankruptcy is supposed to work, though.
First in line are the customer accounts. Then creditors. Then bondholders, starting from the top grades. Then those holding preferred stocks, and lastly, holders of common stock. In most bankruptcies, the holders of common stock take a haircut, but sometimes the loss is greater, and they are wiped out entirely, and it starts cutting into some grades of bondholders.
Point is, the FDIC is basically useless. Absent political intervention (which to the best of my knowledge, started under the f-ing kenyan musloid) unless we are talking tiny banks, depositors will almost always be made whole, as they get first bite at the apple of whatever assets remain. Above a small village bank, FDIC is just a way to steal money from account holders.
It is true that stocks in banks just became more risky, and that’s a good thing. Banks are inherently insolvent. The less money is drawn to their common stock, the fewer shenanigans they can pull.
Steve · March 20, 2023 at 11:35 pm
What makes this situation horrible is precisely THAT Poopy Joe and the Gang Who Couldn’t Be Straight are bailing out their friends holding common stocks. They are deliberately moving their wealthy friends up in the line, taking money that WOULD have gone to depositors and forced FDIC to cough up whatever Poopy Joe et al. gave out to their cronies. Which is what is costing us all more in bank fees.
Vlad the non-Impaler · March 21, 2023 at 1:43 am
“The billionaire depositors are being bailed out, but the bank’s stockholders are not.“
The BIG stockholders dumped a bunch before the SHTF. Seems they might have had a heads up before anyone else.
Musta had Ouiji board…yeah thats it!
Everyone else —> SOL
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