WEBVTT - American Oligarchy 0:00:11.840 --> 0:00:14.520 Good morning, peeps, and welcome to WIKA F Daily with 0:00:14.720 --> 0:00:19.680 Meet your Girl Danielle Moody, recording from the Home Bunker. Folks, 0:00:20.320 --> 0:00:22.200 you know, I got to tell you that all of 0:00:22.239 --> 0:00:27.960 the news surrounding the Silicon Valley Bank failure and seizure 0:00:28.080 --> 0:00:31.800 by the federal government as well as now Signature Bank 0:00:32.440 --> 0:00:37.160 and the FDIC stating that all of the depositors will 0:00:37.240 --> 0:00:40.879 be insured, even those that exceeded the two hundred and 0:00:40.880 --> 0:00:46.120 fifty thousand dollar insurer limit will be insured, I got 0:00:46.120 --> 0:00:51.800 to tell you that I'm so disgusted by this entire situation. 0:00:52.400 --> 0:00:57.640 I'm disgusted because people like my upcoming guest Jennifer Tobb, 0:00:57.840 --> 0:01:01.920 predicted that this would happen. I'm disgusted by the fact that, 0:01:02.240 --> 0:01:05.880 you know, during the Obama administration, as we were watching 0:01:06.360 --> 0:01:12.200 banks being greedy as fuck, which predicated the foreclosure crisis, 0:01:12.880 --> 0:01:17.399 and none of those executives being held accountable any which 0:01:17.440 --> 0:01:21.560 way for ruining the American dream and the lives of 0:01:21.640 --> 0:01:27.960 millions of people. Fast forward to Peter Thiel, an ultrawealthy 0:01:28.200 --> 0:01:33.960 white man who via tweet, is able to destabilize the 0:01:34.000 --> 0:01:39.640 banking industry, and I think to myself, why the fuck 0:01:39.959 --> 0:01:44.200 do these people have so much fucking power. And it's 0:01:44.280 --> 0:01:49.480 because we've allowed for the rich to become ultrawealthy and 0:01:49.560 --> 0:01:53.120 that we have the regulators right, those that are supposed 0:01:53.160 --> 0:01:59.920 to regulate our institutions received donations from the very people 0:02:00.080 --> 0:02:03.360 that they are responsible for regulating. And then we wonder 0:02:03.520 --> 0:02:08.000 why shit like this happens because they just buide their 0:02:08.080 --> 0:02:12.239 time until their friends and cronies come into office, they 0:02:12.280 --> 0:02:14.600 get their ways so that they can buy their fifth 0:02:14.600 --> 0:02:19.399 house or their fifth fucking plane. You should not have 0:02:19.800 --> 0:02:23.360 that type of excessive wealth when there are people that 0:02:23.400 --> 0:02:28.080 are going hungry, where the federal government is totally fine 0:02:28.200 --> 0:02:33.519 to step in and bail out right these fucking banks. 0:02:34.080 --> 0:02:37.720 But when it comes to those that are accessing trying 0:02:37.880 --> 0:02:41.080 their damned this to access the American dream via student 0:02:41.240 --> 0:02:45.920 loans to go to college, Oh no, you see fights 0:02:45.960 --> 0:02:49.760 and lawsuits being waged to make sure that the middle 0:02:49.800 --> 0:02:52.680 class and the working class remain exactly in the place 0:02:52.720 --> 0:02:57.200 that they are. There won't be any fucking lawsuits that 0:02:57.240 --> 0:03:00.440 are waged and political fights that are fought over this. 0:03:02.080 --> 0:03:05.040 I'm just so sick of the shit, you know, I'm 0:03:05.080 --> 0:03:07.400 so sick of the shit, and I'm so sick of 0:03:07.480 --> 0:03:13.919 being lied to. It's greed, folks, And unlike Gordon Geko 0:03:14.040 --> 0:03:16.959 said back on Wall Street, greed is not good. Greed 0:03:17.080 --> 0:03:23.560 is actually fucking catastrophic. So coming up next my conversation 0:03:23.919 --> 0:03:33.080 with my friend Jennifer Tobb, the author of Big Dirty Money, Folks. 0:03:33.120 --> 0:03:36.080 I am always so thrilled when a friend of the 0:03:36.080 --> 0:03:39.040 show and friend of mine, the author of the Big 0:03:39.200 --> 0:03:43.000 Dirty Money, Jennifer Tobb, makes the time to join us 0:03:43.040 --> 0:03:47.520 on woke a f Because, folks, when there is capitalism 0:03:47.600 --> 0:03:52.400 and greed and finances a myths in this country, there's 0:03:52.400 --> 0:03:55.080 only one person that I go to to make sense 0:03:55.640 --> 0:03:59.040 of the nonsense, and that is you, Jen Tobb. So 0:03:59.440 --> 0:04:02.320 let's jump right in. All of the news. All the 0:04:02.400 --> 0:04:07.080 rage right now is a brown Silicon Valley Bank and 0:04:07.240 --> 0:04:10.720 the fact that the federal government has seized Silicon Valley 0:04:10.720 --> 0:04:16.280 Bank as well as I believe Signature Bank, another regional bank, 0:04:16.560 --> 0:04:21.880 that essentially there has been a run on these banks 0:04:21.960 --> 0:04:27.120 with depositors feeling uncertain that their deposits of over two 0:04:27.240 --> 0:04:30.520 hundred and fifty thousand dollars will be covered. When the 0:04:30.760 --> 0:04:33.200 federal government says we got you and we're not going 0:04:33.240 --> 0:04:38.640 to use taxpayer dollars in order to ensure your deposits. 0:04:38.720 --> 0:04:42.279 But we're going to use this quote unquote pot that 0:04:42.400 --> 0:04:46.159 all banks pay into when things like this happen. Jen, 0:04:46.680 --> 0:04:51.560 you give us your fifty thousand foot view of what 0:04:52.240 --> 0:04:56.840 happened with Silicon Valley Bank and Signature Bank and what 0:04:57.080 --> 0:05:03.640 is happening in banking right now. Well, I'm so glad 0:05:03.680 --> 0:05:08.800 you asked me, because I just finished working on a 0:05:08.839 --> 0:05:11.200 piece that when I have it, i'll share it. I'm 0:05:11.200 --> 0:05:15.000 writing an opinion piece for MSNBC, so it's fresh in 0:05:15.080 --> 0:05:19.000 my mind. So one thing before I kind of go 0:05:19.120 --> 0:05:21.919 through the really key details that I think are easy 0:05:21.920 --> 0:05:26.039 to understand if you actually pay attention, are not just 0:05:26.160 --> 0:05:30.320 spinning people for a living. You mentioned that there's this 0:05:30.400 --> 0:05:35.239 promise that taxpayers will never pay for these bailouts because 0:05:35.279 --> 0:05:38.960 it's going to come out of some fund banks pay into, well, 0:05:39.560 --> 0:05:42.880 the deposit Insurance fund that the FDIC has. If it 0:05:42.960 --> 0:05:46.640 runs dry, it gets refilled. But in these situations, yes, 0:05:46.720 --> 0:05:50.680 there will be a future assessment on banks. That's the promise. 0:05:51.120 --> 0:05:54.000 The problem is back during the Dodd Frank era, right 0:05:54.000 --> 0:05:55.960 after the two thousand and eight financial crisis, I was 0:05:55.960 --> 0:06:00.960 one of the people helping work and encourage stronger legislation 0:06:01.000 --> 0:06:03.880 than we actually got. And one thing we were arguing 0:06:03.960 --> 0:06:10.800 for was to pre fund that rescue fund. We were 0:06:11.839 --> 0:06:15.880 we were looking, we were actually looking for a special 0:06:15.920 --> 0:06:21.480 assessment of one hundred and fifty billion dollars to prefund, 0:06:22.560 --> 0:06:26.080 and that got shot down. People said it would encourage 0:06:26.600 --> 0:06:29.320 banks to fail. Not really. No one wanted to pay 0:06:29.320 --> 0:06:32.360 into the prefund. So that's one thing. But let's let's 0:06:32.360 --> 0:06:35.799 talk about what happened. And before I get the details, 0:06:36.160 --> 0:06:38.200 I want to make clear a couple of things. One, 0:06:38.360 --> 0:06:41.560 this is not the same thing as the global financial 0:06:41.560 --> 0:06:44.240 meltdown of two thousand and eight. There is going to 0:06:44.279 --> 0:06:47.719 be contagion, but it's not going to be as bad. 0:06:48.000 --> 0:06:53.919 That's one thing too, It's not no big deal. And three, 0:06:54.520 --> 0:06:58.000 I blame not just Congress, but I also blame the 0:06:58.040 --> 0:07:02.880 FED who made who took advantage of a giant rollback 0:07:03.279 --> 0:07:06.599 of the Dodd Frank Law in twenty eighteen and made 0:07:06.600 --> 0:07:09.800 it worse. And I don't want to be here saying 0:07:09.840 --> 0:07:11.440 I told you so, but I flip and a half 0:07:11.520 --> 0:07:13.040 to say, you know what I wrote about this in 0:07:13.080 --> 0:07:15.680 two thousand and eight, I told you so. You know, 0:07:15.760 --> 0:07:18.080 so whatever I mean, why wasn't the only one? It's 0:07:18.080 --> 0:07:20.600 not about that I did. What makes me the most 0:07:20.680 --> 0:07:23.560 angry about this situation is this would not have happened 0:07:24.240 --> 0:07:27.600 if Congress had not under roll back. Dodd Frank and 0:07:27.720 --> 0:07:30.400 Trump signed that law. But the problem is in this case, Daniel, 0:07:30.400 --> 0:07:32.720 are going to be perfectly Frank. It wasn't just the 0:07:32.760 --> 0:07:37.880 Republicans in Congress. There were big chunk of supporters at 0:07:37.920 --> 0:07:44.240 that time. The House was in Democratic control, and though 0:07:44.240 --> 0:07:47.600 the Senate wasn't. Mitch McConnell needed at least he needed 0:07:47.640 --> 0:07:50.320 sixty votes to get this through, and he didn't have them, 0:07:50.320 --> 0:07:55.880 but he got the votes he needed from Democrats. It's infuriating. Okay. 0:07:56.160 --> 0:07:58.640 One last thing is Silicon Valley Bank, which I'm sure 0:07:58.640 --> 0:08:00.880 you've heard this in the news. Silicon Valley Bank was 0:08:00.920 --> 0:08:04.640 one of the bank's lobbying for the rollback yep, okay, 0:08:04.640 --> 0:08:07.960 and in fact, they thought it was laughable that the 0:08:08.240 --> 0:08:14.320 kinds of restrictions and oversight on them should be should exist. 0:08:14.400 --> 0:08:16.960 They called them, you know, they called themselves a mid 0:08:17.000 --> 0:08:22.000 size bank, which at the time they were. And then 0:08:22.040 --> 0:08:25.680 once the ceiling for this special special heightened scrutiny, and 0:08:25.800 --> 0:08:29.240 stress tests and stuff was fifty billion dollars. As soon 0:08:29.240 --> 0:08:32.319 as that was lifted to two fifty low and behold, 0:08:32.600 --> 0:08:35.640 they did rapid growth. And they grew from a bank 0:08:35.760 --> 0:08:40.120 just at that level well above it until they failed 0:08:40.120 --> 0:08:43.760 two hundred billion. That never would have happened without this rollback. 0:08:44.559 --> 0:08:46.319 I'm glad that you brought that up, because I was 0:08:46.360 --> 0:08:49.360 going to ask for an explanation for people to understand 0:08:50.320 --> 0:08:52.760 what the threshold was, what they had to have in 0:08:52.880 --> 0:08:57.480 holding when they needed to begin stress testing, and how 0:08:57.679 --> 0:09:02.400 that number was d billion. And at the time that 0:09:02.559 --> 0:09:05.880 Silicon Valley Bank was seized by the FEDS, they had 0:09:05.920 --> 0:09:09.480 a holding of two hundred and nine billion dollars. Right 0:09:09.880 --> 0:09:12.120 on paper, they're well with the wa wait wait wait 0:09:12.120 --> 0:09:15.800 wait on paper on paper, on paper, yeah, they're well 0:09:15.840 --> 0:09:20.280 within though. Right there, they were well within the new 0:09:21.200 --> 0:09:27.120 deregulation that Donald Trump signed into twenty eighteen because they 0:09:27.120 --> 0:09:30.319 didn't make it to two fifty. They got to two 0:09:30.440 --> 0:09:34.480 hundred and then their whole ship started to crumble. Explain 0:09:34.679 --> 0:09:41.679 to us what exactly happened jen with the they got 0:09:41.720 --> 0:09:44.280 to t hold, like, what exactly was happening? And also 0:09:46.240 --> 0:09:53.000 what do we think the executives were doing when they 0:09:53.040 --> 0:09:57.840 started to sell off their shares about a week or 0:09:57.880 --> 0:10:04.120 so before the actual lapse of the bank. Okay, so 0:10:04.160 --> 0:10:06.920 two things. One for those folks who are interested sort 0:10:06.920 --> 0:10:11.680 of generally in what is banking about and how banks fail, 0:10:12.040 --> 0:10:14.760 I have a new substack called Follow the Money, and 0:10:14.760 --> 0:10:17.120 I just put something up. My Monday column is always 0:10:17.160 --> 0:10:19.280 called on the Money, and I put an excerpt from 0:10:19.360 --> 0:10:23.080 testimony of mind before the Senate Banking Committee in twenty sixteen, 0:10:23.640 --> 0:10:27.040 and that testimony was about how these things called capital 0:10:27.040 --> 0:10:31.520 and liquidity should not be loosened up for banks. I'm 0:10:31.559 --> 0:10:33.920 not going to get into what that is, but if 0:10:33.920 --> 0:10:37.080 you read that, I think it will become clear. But 0:10:37.280 --> 0:10:40.000 the fundamentals there which are kind of necessary for talking 0:10:40.040 --> 0:10:44.199 about this is that, as everyone probably knows, banks take 0:10:44.240 --> 0:10:49.480 deposits and banks make loans. People know that, but banks 0:10:49.520 --> 0:10:55.240 don't just take deposits and make loans. They also they 0:10:55.280 --> 0:11:00.320 also take that deposit money and invest it in other 0:11:00.400 --> 0:11:04.320 things like treasury securities and mortgage backed securities and so on. Right. 0:11:05.520 --> 0:11:08.120 People also don't think if you have a deposits in 0:11:08.120 --> 0:11:10.400 a bank, you know, Daniel, you just mentioned that it's 0:11:10.400 --> 0:11:12.160 insured up to two hundred and fifty thousand. It used 0:11:12.160 --> 0:11:14.920 to be one hundred thousand. But you are essentially a 0:11:15.040 --> 0:11:19.720 lender to the bank right when you're a depository. At anytime, 0:11:19.760 --> 0:11:25.120 you can ask for your money back. Similarly, the loans. 0:11:25.160 --> 0:11:27.440 If the bank makes a loan, a mortgage loan, or 0:11:27.480 --> 0:11:30.640 a commercial loan to a business, those loans are the 0:11:30.679 --> 0:11:34.120 bank's assets. They make money because they pay an interest, 0:11:34.800 --> 0:11:37.400 and hopefully when you sell them, you sell them for 0:11:37.400 --> 0:11:39.400 a profit or at least break even, so you can 0:11:39.520 --> 0:11:42.160 sort of think of it that way. In traditional banking, 0:11:42.160 --> 0:11:44.800 the way the bank makes money is the amount of 0:11:44.840 --> 0:11:47.959 interest it's bringing in on its loans. Let's say it's 0:11:48.000 --> 0:11:50.240 bringing in you know, six This would be a dream, 0:11:50.280 --> 0:11:53.199 but this is the example people give. Historically, bank bank 0:11:53.800 --> 0:11:58.440 has loans at pay six percent. It pays depositors three percent, 0:11:59.080 --> 0:12:01.200 and it makes a difference the money on the spread. 0:12:01.400 --> 0:12:03.920 That's kind of the general idea of banking. Let's think 0:12:03.960 --> 0:12:06.040 of something a little bit different when you think about 0:12:06.120 --> 0:12:08.679 banking in reality, though, too. Have you ever noticed that 0:12:08.720 --> 0:12:09.959 if you want to get let's say you want to 0:12:09.960 --> 0:12:15.520 get a bank loan for a mortgage to buy a house, 0:12:15.600 --> 0:12:17.120 often the bank will say you know, we'll give you 0:12:17.160 --> 0:12:21.360 a cheaper rate if you if you bank with us, 0:12:21.559 --> 0:12:25.040 right if you keep them. Similarly, here, let's say you 0:12:25.080 --> 0:12:27.199 went to something like Silicon Valley Bank and you were 0:12:27.600 --> 0:12:29.439 a business that wanted to get a loan from them, 0:12:29.600 --> 0:12:32.480 and let's say they gave you a million you needed, 0:12:32.559 --> 0:12:34.679 like five million dollars or whatever. They want you to 0:12:34.760 --> 0:12:36.320 keep that money in their bank. So though on the 0:12:36.360 --> 0:12:38.800 one hand, the five million is showing up is a 0:12:38.840 --> 0:12:41.120 loan as an asset of theirs, on the other hand, 0:12:41.160 --> 0:12:44.319 you've now got five million on deposit with them. Well, 0:12:44.320 --> 0:12:46.560 some of it you're going to be using to buy stuff, 0:12:46.760 --> 0:12:48.800 but you're also going to be whenever you bring in 0:12:48.840 --> 0:12:51.120 money from customers, you're going to be depositing with them. 0:12:51.200 --> 0:12:53.839 So there's a little bit of an overlap relationship. Okay, 0:12:53.960 --> 0:12:56.400 so let's let's let's leave that. Let's leave that be 0:12:56.559 --> 0:12:58.640 so you understand how this works. Now, one of the 0:12:58.640 --> 0:13:03.880 biggest risk bank face is that this maturity transformation deposits 0:13:03.880 --> 0:13:06.080 can be taken out on demand. But the loan, that 0:13:06.120 --> 0:13:09.960 mortgage loan, it's thirty years, or that corporate loan it's 0:13:10.000 --> 0:13:14.679 ten years. So only if you get too many depositors 0:13:14.720 --> 0:13:17.240 saying I want my money. Now, how does the bank 0:13:17.760 --> 0:13:21.240 pay the depositors? They have to sell the loans. That's fine, 0:13:21.280 --> 0:13:24.280 you would think, except in a rising interest rate environment. 0:13:25.400 --> 0:13:27.480 We are in a rising interest rate environment. And here's why. 0:13:27.440 --> 0:13:28.760 I remember how I told you, Okay, what if you 0:13:28.800 --> 0:13:30.640 have some loans on the books. Let's say your loans 0:13:30.640 --> 0:13:33.440 in the books are only paying two percent interest. But 0:13:33.520 --> 0:13:35.520 let's say the Fed is raised rates and now it's 0:13:35.559 --> 0:13:38.240 four percent. That means no one wants to buy your 0:13:38.320 --> 0:13:41.520 dumb two percent paying loan. If you're trying to sell 0:13:41.559 --> 0:13:43.720 that loan and you keep it on the books at 0:13:43.760 --> 0:13:45.200 the price you bought it at, Let's say that you 0:13:45.240 --> 0:13:47.880 bought the loan for one hundred thousand dollars, it's not 0:13:47.920 --> 0:13:50.040 worth as much anymore because someone can go out there 0:13:50.040 --> 0:13:52.160 and buy another bank could buy a loan from someone 0:13:52.160 --> 0:13:55.560 else that's paying in four percent interest. This is a 0:13:56.080 --> 0:14:00.440 lower yielding loan. So the problem here is this banks 0:14:00.480 --> 0:14:02.920 like SVB when it grew, remember I told you it 0:14:02.960 --> 0:14:06.680 was below fifty billion, yep, it grew super fast, and 0:14:06.800 --> 0:14:09.800 the way it grew super fast between twenty eighteen and 0:14:09.960 --> 0:14:14.000 twenty twenty one, like huge, huge, growth is it bought 0:14:14.040 --> 0:14:17.600 a lot of treasury bonds and mortgage backed securities in 0:14:17.600 --> 0:14:21.040 that era, but those were very very low interest rates. 0:14:21.560 --> 0:14:24.560 They didn't manage their interest rate risk and they didn't 0:14:24.560 --> 0:14:27.200 have to write down those loans. So those loans that 0:14:27.280 --> 0:14:30.160 they had, you know, you know, let's say you have 0:14:30.200 --> 0:14:33.360 one hundred billion dollars worth of loans that are not 0:14:33.880 --> 0:14:36.160 worth one hundred billion anymore because the interest rates are 0:14:36.160 --> 0:14:38.400 so low and people want to buy higher yielding loans. 0:14:38.600 --> 0:14:40.840 The way the county rules work is the Fed doesn't 0:14:40.840 --> 0:14:44.200 require the bank even as the interest rates up go 0:14:44.400 --> 0:14:47.760 up to realize Those are called unrealized losses. So it's 0:14:47.760 --> 0:14:51.280 a big it's a big landmine on the balance sheet. 0:14:51.920 --> 0:14:55.440 Everything is fine until depositors want their money out. And 0:14:55.520 --> 0:14:57.360 if they want their money out and you go to 0:14:57.400 --> 0:15:00.600 sell it a firesale those loans, you're to have a loss. 0:15:00.640 --> 0:15:04.200 That's exactly what happened to SVB last week. So SVB, 0:15:04.360 --> 0:15:07.200 which grew really rapidly, didn't manage its interest rate risk 0:15:07.280 --> 0:15:10.560 over the years, didn't hedge it properly, and frankly didn't 0:15:10.640 --> 0:15:14.720 have to GM right because in terms of what is 0:15:14.800 --> 0:15:18.640 required right, they didn't break the law yes, right, No, 0:15:18.760 --> 0:15:21.000 they didn't break the law. And what's even worse about this, 0:15:21.040 --> 0:15:23.520 I remember, I'm talking about these these assets that they have. 0:15:23.960 --> 0:15:27.000 What I didn't mention that's really important that you alluded 0:15:27.000 --> 0:15:30.160 to at the beginning, is it has all these depositors. Right, 0:15:30.200 --> 0:15:32.800 so it had two hundred nine billion in assets, it 0:15:32.880 --> 0:15:35.880 only had one hundred and seventy five billion in customer deposits. 0:15:35.920 --> 0:15:38.880 The problem was these were not normal customer deposits. It 0:15:39.040 --> 0:15:41.280 is very unusual if you look at a chart of 0:15:41.440 --> 0:15:45.240 these the nature of these deposits. Over ninety percent of 0:15:45.280 --> 0:15:50.200 those deposits were uninsured businesses who put their money there 0:15:50.600 --> 0:15:53.120 above the two hundred and fifty thousand dollars per account. 0:15:54.440 --> 0:15:57.920 Some of those businesses were businesses that were startups or 0:15:57.960 --> 0:16:02.920 in the crypto space. Those these are very runnable assets 0:16:02.920 --> 0:16:07.240 which specialized in runnable liabilities. Remember, and I think what 0:16:07.480 --> 0:16:09.480 SVB often did as they said, if you want to 0:16:10.280 --> 0:16:11.680 us to give you a loan, you have to put 0:16:11.680 --> 0:16:13.440 your deposits with us. I'm not sure if they always 0:16:13.440 --> 0:16:14.880 said that, but I get the sense that that might 0:16:14.880 --> 0:16:19.240 have been a goodie that they wanted or they asked for. Okay, 0:16:19.240 --> 0:16:22.960 so these are highly runnable deposits. We call this hot money, 0:16:23.640 --> 0:16:27.840 so hotter than most because it's it's businesses that are 0:16:27.880 --> 0:16:29.960 more likely to take their money in and out for payroll. 0:16:30.160 --> 0:16:32.080 But also in this case, whenever they had the money 0:16:32.120 --> 0:16:34.400 over two hundred and fifty thousand, they knew if this 0:16:34.440 --> 0:16:37.480 bank failed, they didn't want to be last in line, 0:16:37.560 --> 0:16:39.600 and they knew that the FDIC didn't ensure this. They 0:16:39.640 --> 0:16:41.640 could have had to take haircuts or lost a good 0:16:41.680 --> 0:16:45.560 chunk of their deposit. So what happens is like a 0:16:45.600 --> 0:16:49.760 few days before the run fda C Chairman Martin Gruenberg, 0:16:49.800 --> 0:16:51.880 and the FDAC is the one that runs this deposit 0:16:51.920 --> 0:16:56.280 insurance fund. He mentioned that across the banking sector there 0:16:56.280 --> 0:16:59.160 were substantial unrealized losses. These are the holes in the 0:16:59.200 --> 0:17:01.280 balance sheet where almost like you've got two set of books. 0:17:01.400 --> 0:17:04.240 The official set of books are holding them at purchase value, 0:17:04.520 --> 0:17:06.760 but the actual reality is they're really not worth that 0:17:06.840 --> 0:17:08.879 if they had to be sold. He said, the banking 0:17:08.920 --> 0:17:12.359 system has over six hundred and twenty billion dollars and 0:17:12.440 --> 0:17:17.919 unrealized losses. He says this there are folks that are 0:17:17.960 --> 0:17:21.200 sniffing around like Peter Teal and other people in Silicon Valley, 0:17:21.240 --> 0:17:23.440 and they put out the bat signal. First Peter Teal 0:17:23.520 --> 0:17:28.800 sells all of his cells, He withdraws all of his 0:17:30.320 --> 0:17:34.760 money he has on deposit. He has something called a 0:17:34.800 --> 0:17:37.320 founder's fund. He said, he put withdraws all of his 0:17:37.400 --> 0:17:41.080 money with SVB. And then someone else puts out a 0:17:41.119 --> 0:17:43.240 bad signal and they said get your money out. I 0:17:43.320 --> 0:17:45.320 mean think he did too. And so there's a run. 0:17:45.400 --> 0:17:49.119 Everyone wants their money. So what does the CEO of 0:17:49.800 --> 0:17:52.440 SVB have to do. They have to sell. And when 0:17:52.440 --> 0:17:55.280 they went and sold around twenty billion dollars of securities, 0:17:55.280 --> 0:17:58.400 they had a loss of one point eight billion. So 0:17:58.920 --> 0:18:00.959 you know when we're talking about yeah, in theory, they 0:18:00.960 --> 0:18:03.719 had a capital cushion in there. You know, they had 0:18:03.880 --> 0:18:06.080 two hundred and nine in assets in one hundred and 0:18:06.119 --> 0:18:08.720 seventy five in deposits. And really, really that two hundred 0:18:08.720 --> 0:18:11.320 and nine wasn't We're gonna bear that out. So this 0:18:11.440 --> 0:18:15.920 run continues. This is on Wednesday. On Thursday, they said 0:18:15.920 --> 0:18:17.760 they had to raise they want to raise capital, No one, 0:18:17.960 --> 0:18:21.280 They couldn't find many takers to raise capital. Um you know, 0:18:21.320 --> 0:18:24.080 there was new new stock in new preferred stock, and 0:18:24.160 --> 0:18:28.440 so basically the stock price plummets on Thursday, literally the 0:18:28.520 --> 0:18:31.080 day after they announced they need to raise more money 0:18:31.119 --> 0:18:34.359 because of that, you know, fire sale, and then fear 0:18:34.400 --> 0:18:37.920 spreads and the regulators in California sees the bank put 0:18:37.920 --> 0:18:42.000 it under FDIC control. This is on on Thursday. On Friday, 0:18:42.760 --> 0:18:48.399 UM on Friday the then I think I'm getting to Friday. 0:18:48.400 --> 0:18:51.200 But anyway, at some point we have the FDIC announcing 0:18:51.720 --> 0:18:56.359 that anyone who was insured will be be fine. We covered, 0:18:56.400 --> 0:18:59.600 but not that people who were uninsure might get less. 0:19:00.040 --> 0:19:03.439 And then then you know, everyone goes whining. You know, 0:19:03.480 --> 0:19:06.840 all these uninsured depositors, which are largely businesses who knew 0:19:06.880 --> 0:19:09.240 the risk, who knew they should have spread that money 0:19:09.280 --> 0:19:15.960 across many banks and bank accounts. They complained enough that 0:19:15.960 --> 0:19:21.120 that the regulators decided on Sunday. This is the FED, 0:19:21.200 --> 0:19:25.359 the FDIC and Treasury, they decided that they would cover 0:19:25.520 --> 0:19:29.879 all depositors, including including the uninsured. So they said that 0:19:29.920 --> 0:19:31.480 on Sunday. And that's at the same time they did 0:19:31.480 --> 0:19:35.439 the same thing for Signature Bank. In addition to this, 0:19:35.480 --> 0:19:39.480 though besides that, showing that it's not just these two banks, 0:19:39.760 --> 0:19:42.400 the FED announced us I knew what they call it 0:19:42.400 --> 0:19:45.359 it's like a bailout facility. It's basically a fund to 0:19:45.480 --> 0:19:47.480 bail out any other banks. And this reminds me the 0:19:47.560 --> 0:19:50.280 Financial Crisis two thousand and eight because they basically said, 0:19:50.800 --> 0:19:56.040 we will buy at par value, at face value, any securities, 0:19:56.160 --> 0:19:58.480 like any of these low interest rate securities at other 0:19:58.560 --> 0:20:03.080 banks have on their books, will pay the fake value 0:20:03.080 --> 0:20:05.680 for them so that you don't have to experience these 0:20:05.760 --> 0:20:10.919 unrealized losses. So, Jim, I know you're gonna lose your 0:20:10.920 --> 0:20:13.840 mind right now. And are you thinking about student loans 0:20:13.920 --> 0:20:17.240 right now? Because I know I'm thinking. I'm thinking about 0:20:17.320 --> 0:20:19.680 a couple of things. And so I want to start 0:20:19.760 --> 0:20:22.880 with Peter Deal. I want to start with him because 0:20:23.359 --> 0:20:31.800 this goes to my belief in the fact that the 0:20:31.880 --> 0:20:38.600 American all a dark system is out of fucking control. 0:20:39.680 --> 0:20:42.760 That I want people to understand and all of the 0:20:42.880 --> 0:20:46.240 rundown and economics one oh one and one oh two 0:20:46.320 --> 0:20:51.280 that you gave us that it was one person that 0:20:51.520 --> 0:20:58.520 started via tweet a run on Silicon Valley Bank, right, 0:20:58.640 --> 0:21:00.560 this is and it was not the resident of the 0:21:00.640 --> 0:21:04.240 United States, It was not the head of the Federal Reserve. 0:21:05.280 --> 0:21:10.920 One ulture wealthy white man via tweet started a run 0:21:10.960 --> 0:21:19.960 on this back. Yeah. Yeah, so here we are in 0:21:20.000 --> 0:21:23.760 this to by the way, please it makes sense for him, 0:21:23.840 --> 0:21:27.280 right because he apparently he I think he's that's the 0:21:27.280 --> 0:21:29.240 bank aware to start us bank at and he's told 0:21:29.240 --> 0:21:30.800 people to do it, and I think he has people 0:21:30.840 --> 0:21:33.800 in My understanding is you know, his people investing his 0:21:33.880 --> 0:21:37.320 funds go there. His doing that and getting the bad 0:21:37.359 --> 0:21:41.959 signal out resulted in everyone organizing doing this run. And 0:21:42.000 --> 0:21:47.679 then it resulted in these uninsured depositors being covered, I understand, 0:21:48.000 --> 0:21:50.639 and covered because they organized. You should say, right, so 0:21:50.680 --> 0:21:52.560 you're saying is this broken? Oh no, it's functioning how 0:21:52.600 --> 0:21:55.479 they want it to function. No, it's functioning how they 0:21:55.520 --> 0:21:57.920 want it to function. And when you say, oh, are 0:21:57.920 --> 0:22:00.800 you thinking about student loans? Of course I am right, 0:22:00.840 --> 0:22:06.520 of course I am, because again we are functioning inside 0:22:06.520 --> 0:22:09.200 of a system that is built to make sure that 0:22:09.320 --> 0:22:13.320 wealthy people remain whole. I mean where this is. You know, 0:22:13.440 --> 0:22:15.520 when I listened to the oral argument at the Supreme 0:22:15.520 --> 0:22:17.760 Court on the student loans and I wrote about this 0:22:17.880 --> 0:22:21.080 for my substackt. The key thing, as you know, is 0:22:22.920 --> 0:22:25.159 not the key reason why this is being attacked, but 0:22:25.160 --> 0:22:28.720 the legal arguments are that the Department, that the Secretary 0:22:28.720 --> 0:22:31.840 of Education didn't have the authority even though Congress gave 0:22:31.920 --> 0:22:35.080 him emergency authority, including to cancel old student loans. They 0:22:35.080 --> 0:22:36.919 didn't have the authority to do this even though he 0:22:36.960 --> 0:22:40.400 did it, and that the Supreme Courts is second cast them. 0:22:40.440 --> 0:22:44.240 Here we have the FED creating one of these facilities 0:22:44.240 --> 0:22:47.360 to bail out the entire banking system using their authority 0:22:47.560 --> 0:22:50.480 under thirteen three of the Federal Reserve Act, which is 0:22:50.600 --> 0:22:55.760 less flip in clear than the Department of Educations authority was. 0:22:56.160 --> 0:22:57.840 And you're not going to see I'll tell you, I 0:22:58.080 --> 0:23:00.640 don't think we're going to see a challenge win at 0:23:00.640 --> 0:23:02.760 the Supreme Court on this. I'm trying to remember, because 0:23:02.760 --> 0:23:05.439 why would wealthy people challenge themselves? Well, there might have. 0:23:05.440 --> 0:23:08.359 People are only going to challenge the poor, right that, 0:23:08.560 --> 0:23:11.080 and challenge the less advantaged. What I need to go 0:23:11.119 --> 0:23:13.120 back and look is I'm trying. I'm remembering that there 0:23:13.200 --> 0:23:17.120 might have been back in twenty fifteen or sixteen, some 0:23:17.240 --> 0:23:19.960 kind of challenge to this. I need to go back 0:23:19.960 --> 0:23:22.280 and look. But I know it all the bailouts held up. 0:23:22.960 --> 0:23:24.840 Maybe there's a challenge. I can't I actually go back 0:23:24.880 --> 0:23:27.000 and look and see how it was treated at the time. 0:23:27.400 --> 0:23:33.800 But fundamentally, um, you know, fundamentally, this is it's it's 0:23:34.320 --> 0:23:37.880 it's not even about the law. It's a deeply unfair way. 0:23:37.880 --> 0:23:40.560 These narratives are spies. You see all these people saying, oh, 0:23:40.640 --> 0:23:44.200 don't think of it as these stupid bankers, think about 0:23:44.200 --> 0:23:46.320 these poor depositors who are no better. And no, it's 0:23:46.320 --> 0:23:49.840 not all Silicon Valley chieftains. This little lady you know who, 0:23:49.960 --> 0:23:52.520 from wherever she's from. I saw this thing. I started 0:23:52.600 --> 0:23:55.000 my own startup, and it's not just the big businesses. 0:23:55.040 --> 0:23:57.760 It's me and you know, it's me and my five people. 0:23:57.800 --> 0:24:00.320 And like their American dream, well, you know what, a 0:24:00.359 --> 0:24:02.080 lot of us have an American dream. A lot of 0:24:02.119 --> 0:24:06.720 students have American dreams, and they are just the I 0:24:06.760 --> 0:24:09.600 even see there's some good people on the news talking 0:24:09.600 --> 0:24:12.399 about this, but there's some people that I have seen, 0:24:12.600 --> 0:24:18.320 some talking heads who keep emphasizing that, you know, it's 0:24:18.359 --> 0:24:21.040 not just big businesses. You know what, Listen, anyone who 0:24:21.119 --> 0:24:22.919