Category: Politics, Religion & Money

A fairly regular topic here is the crisis in rural healthcare. In the fifteen years I was traveling for my old job, I visited many small, regional hospitals. That part of my working life ended in the mid-90’s, and since then the difficulties in providing medical care in rural America, for both acute and chronic conditions, have gotten much worse. The PBS NewsHour has started a series on the difficulties facing administrators, clinicians, and patients.

Frontline has this timely report called ‘Age of Easy Money’.

My position is that the Fed needs to add a third mandate to its duty of maximizing employment while keeping inflation in check. It’s my contention that to meet those two goals, the “other inflation” — Wall Street — also needs to be kept in check. Otherwise, you end up with what we have now. Neel Kashkari has exactly the opposite opinion, as heard at this point in the documentary.

There’s an implicit threat in what Kashkari says, as if he’s speaking on behalf of investment bankers — Hurt the rich people on Wall Street, in any way at all, and regular people will suffer.

Comments on LinkedIn from Silicon Valley Bank ex-employees, reacting to the bank’s failure. They’ve been abruptly and unexpectedly forced into social networking searches for new jobs, and LinkedIn is the best place to do that. So you won’t see more than the very faintest hints of negativity.

https://www.linkedin.com/news/story/svb-employees-react-to-its-fall-6207514/

Planet Money provides its after-the-fact analysis of what happened:

Economist Paul Krugman has this comment:

Just a few years ago, S.V.B. was one of the midsize banks that lobbied successfully for the removal of regulations that might have prevented this disaster, and the tech sector is famously full of libertarians who like to denounce big government right up to the minute they themselves needed government aid.

https://www.nytimes.com/2023/03/14/opinion/silicon-valley-bank-bailout.html

Here’s something that should surprise absolutely no one:

Silicon Valley Bank CEO Greg Becker sold $3.6 million of company stock two weeks before the bank reported massive losses in the run up to the bank’s implosion, according to regulatory filings.

https://www.npr.org/2023/03/14/1163366706/justice-department-opens-probe-into-silicon-valley-bank-after-its-sudden-collaps

My American Madness post four days ago, about a movie depicting a run on a bank in 1932, turned out to be very prophetic, because of the run on Silicon Valley Bank in San Francisco, leading to its collapse yesterday.

A good friend who lived in San Francisco for many years sent this note:

The bank in the Bay Area failing made me nervous. Of course it was a special kind of bank, but the FDIC only bailing out people with less than 250K made me sit up. Knowing that and seeing people who are very worried are two different things.

This was my reply:

Yeah, I’ve been following news of the Silicon Valley Bank failure. Here we are, exactly 90 years after FDR became president during the worst of the Great Depression, and a run on a bank continues to be a very real and existential threat to depositors. Losing the private insurance on my IRA’s, which after the maturity dates will be covered only up to the FDIC limit of a quarter mil, was a concern before, but it’s certainly much more of a concern for me now.

SVB’s failure is being blamed by some pundits on the Fed’s “too rapid and overly aggressive” interest rate increases, but to me that’s political axe-grinding. There had to have been underlying problems caused by bad financial management at the bank. Its very mission, catering to tech startups and tying it into investment banking, made it much more susceptible to failure than a chartered commercial bank should be. A 5% federal funds interest rate being considered excessive is possible only because banks enjoyed a 0% rate, or close to it, for such a long time following the Great Recession.

As I have been saying here and elsewhere for years, the Fed should have started raising rates gradually a long time ago. My issue was primarily with artificially low interest rates putting too much money into Wall Street, but now it’s hitting commercial banking, albeit with close ties to shadow banking.

I met with my (very conservative mutual savings) bank last month to discuss renewing my IRA CD’s. My jaw dropped seeing what they would earn at 4.3%, compared to the 2.5% I’ve been getting for the past five years. It seems likely the rate will go up to 4.5%. I was initially delighted seeing the numbers, but now I’m worried that the bank could possibly run into trouble.