Nothing ends a presidency quicker than a nasty recession.
For months all the warning signs were there.
And this bank meltdown just sent Joe Biden into panic mode.
The Federal Reserve’s continually hiked interest rates to curb the runaway inflation Joe Biden’s socialist spending initiated.
No sector of the economy got hit harder than tech where rising costs led to mass layoffs at Facebook, Amazon and other companies.
The rising interest rates also led to calamity at Silicon Valley Bank.
The bank poured massive amounts of its $198 billion into Treasury bonds which declined in value as interest rate hikes persisted.
Tech startups began yanking their money out of Silicon Valley Bank faster than new deposits came in to cover the losses.
Moody’s then downgraded the bank’s credit rating as it scrambled to line up investment giants to execute a stock sale to raise new capital to cover the losses.
But that did not stop account holders attempting to withdraw tens of billions of dollars in deposits which led to the bank’s collapse within 24 hours which one tech CEO called an “extinction-level event.”
The Wall Street Journal reports:
Customers tried to withdraw $42 billion—about a quarter of the bank’s total deposits—on Thursday alone, the California regulator said in a filing Friday. The flood of withdrawals destroyed the bank’s finances; at close of business Thursday, it had a negative cash balance of nearly $1 billion and couldn’t cover its outgoing payments at the Fed, according to the filing.
The bank was in sound financial condition on Wednesday, the regulator said. A day later, it was insolvent.
“This is an extinction-level event for startups,” Y Combinator CEO Garry Tan said. “I literally have been hearing from hundreds of our founders asking for help on how they can get through this. They are asking, ‘Do I have to furlough my workers?’”
One day later the federal government took over the bank and renamed it.
And while the FDIC guarantees deposits of up to $250,000, 93 percent of the deposits in Silicon Valley Bank were above that amount.
PayPal founding COO David Sacks slammed Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell for sitting on their hands and potentially causing a nationwide run on the banks.
“Where is Powell? Where is Yellen? Stop this crisis NOW. Announce that all depositors will be safe. Place SVB with a Top 4 bank. Do this before Monday open or there will be contagion and the crisis will spread,” Sacks noted.
Sacks also ripped Yellen for traveling to Ukraine to assure Ukrainians that U.S. taxpayer money would continue to flow into the country, but refused to reassure tens of thousands of American small business owners that the government would protect their money.
Silicon Valley Bank’s collapse is the largest bank failure since Washington Mutual Inc. in 2008 during the Great Recession.
Democrats and members of the corporate media continue to believe there will be no recession because of the strong jobs numbers.
But runaway inflation and rising interest rates present another threat to the economy in the form of a banking collapse because of how banks invest their customers’ money.
Black Eye Politics will keep you up to date on any new developments in this ongoing story and the rest of the breaking news in politics, please bookmark our site, consider making us your homepage and forward our content with your friends on social media and email.