Inflation was only ‘transitory’ they said
First off: These collapses did not occur in two days. The problems have compounded over time and should have been very easy to spot by regulators and “experts” on Wall Street. The collapses were not caused by too few regulations.
For years, the Federal Reserve kept interest rates artificially low. Those low rates caused investors to chase up the value of stocks, houses, commercial real estate, crypto currencies, and other things. But those low rates did not punish the poor and middle class with rapidly rising prices on food, energy and other necessities.
Trump kept inflation low with energy independence, fewer regulations, and lower taxes. Energy prices affect almost everything we use and do.
In 2020 when we were hit with COVID, we flooded the economy with money to help businesses the government forcibly closed and individuals who had lost their jobs. We had supply chain problems. But we still didn’t have high inflation because we still had low energy prices thanks to Trump’s policies of domestic energy production.
From April 2020 to the end of 2020, jobs grew 16 million (much faster than under Biden); still, no high inflation.
GDP growth in the 3rd quarter of 2020 was 33.4%. In the 4th quarter of 2020 it was 4.1%. But inflation was low. Biden continually lies that he inherited a disaster and his policies turned it around. The Federal Reserve Bank of Dallas noted that the annual inflation rate for January 2021 was 1.7%; oil was around $40 a barrel the day Biden took office.
But the good news on inflation ended the day Biden got in, because he decided to keep his campaign promise to destroy industries that produce reasonably priced energy. The price of gasoline, utilities, food, and most products skyrocketed.
For months, Jerome Powell, Janet Yellen and others just watched. Then we were told by these bureaucrats that the inflation was transitory. Biden also said his economic policies caused growth and we caused the hikes. By the time Jerome Powell and others recognized the economic disaster and destruction they were way behind the curve, and they had to start raising rates rapidly.
Not once did Powell, Yellen, or any other Democrat tell the public the truth that inflation didn’t skyrocket until Biden implemented his energy policies to destroy an industry. Instead the public was fed disinformation that the inflation was caused by COVID, Russia, supply chain problems, or because the economy was too good. Most of the media just spread this misinformation as they cheer for how great Biden’s economic policies are.
The Fed was always going to raise rates but if prices had remained under control, they would have raised rates slowly.
The rapid rate increases decimated the value of bond portfolios at banks that had invested long-term.
The main job of bank regulators is to monitor the safety and soundness of banks to protect depositors and taxpayers.
SVB was growing rapidly for years without raising or earning enough capital to support that growth. This was very visible to the regulators. They should have put the bank on restrictions. They were taking in massive amounts of hot, uninsured money and investing in longer term bonds. A recipe for disaster in a rising interest rate environment. These losses were very visible.
The bank had a very high concentration of high-risk customers. Startups that lose massive amounts of money. Does anyone believe SVB soundly underwrote their loans or the regulators monitored the risk closely?
Could it be that the regulators were enamored by SVB’s loans to support industries related to green energy?
It appears that Janet Yellen and other bureaucrats have been much more interested in climate change, equity, and diversity than safety and soundness. Take a look at this example below:
SVB is excited to share this success story for Sunrun Inc., one of the nation’s leading home solar, battery storage and energy services company [sic]. Sunrun’s innovative solar services and home battery solution, Brightbox, bring families affordable, resilient and reliable energy.
As Breitbart reported, Home Depot founder Bernie Marcus said that SVB was “more concerned about global warming than shareholder returns.”
A board of directors at all companies, but especially banks, is to provide oversight. It appears this board did little to monitor risk, but they raked in massive salaries; see below:
Average Silicon Valley Bank Managing Director yearly pay in the United States is approximately $241,727, which is 84% above the national average.
The “solution” to prevent bank runs is a huge bailout to uninsured depositors. Now depositors throughout the country have the right to believe that they should be bailed out also. The risk to taxpayers appears to be unlimited. They say the losses would be paid by other banks, but that money will soon run out.
Essentially the Biden Administration wants unlimited funds for uninsured depositors, just like they want an unlimited debt ceiling. How about having the rich investors in those startups, instead of the taxpayers, fork over the money to keep the bank solvent, and learn to watch their investments more closely?
What didn’t cause the losses at SVB was a lack of regulations any more than the border crisis is because of a lack of laws.
The Biden administration always has another way to screw businesses or people. When banks and uninsured depositors screw up, they want other banks, and then taxpayers, to foot the bill. When colleges raised their prices too high because they knew the taxpayer was paying, Biden promised a bailout to the irresponsible students who took on massive debt they couldn’t pay back.
What we never see is bureaucrats who don’t do their job get fired. Instead, they always rally for more bureaucrats and regulations…as do most of the campaigns for the incompetents who destroy America.
Image: Free image, Pixabay license, no attribution required.