The banking collapse has begun … shush, don’t tell the kids
By Rusere Shoniwa
You can read more of Rusere’s work at https://plagueonbothhouses.com
Three US banks and Credit Suisse collapsed in March. At the centre of the US disaster scene was Silicon Valley Bank (SVB), the 16th largest US bank (out of a total of 4,746), making it the largest bank to fail since the Global Financial Crisis (GFC) of 2008. Here’s how the Bank of England’s (BoE) governor attempted to mollify a Treasury select committee:
“I don’t think we are at all in the place we were in in 2007 … but we have to be very vigilant”.
To be fair to the guvnor, he is disingenuously correct – we are not in the same place as the pre-2008 GFC, simply because things are in fact far worse now than they were back then. Having got off to a fairly good start in the art of diplomacy – the skill of being more or less dishonest without making a provably false statement – he proceeded to blow it by saying that he didn’t “think there’s a problem going forward”. Hence the title of this piece.
Without labelling the guvnor an out-and-out liar, I shall attempt to explain why his statement is patently not true.
What just happened?
Back in August 2022, based on a tip from William Engdahl of Global Research, I explained why I thought that the bond market could be the touchpaper for the $303 trillion post-2008 debt bonfire. In quiet times, bonds are a safe investment for banks, but their market trading value is inversely proportional to the prevailing interest rates. The effect of Central Bank rate hikes has been to seriously deflate the bond market, which is the heart of the financial system. Wind the clock forward to March 2023 and it turns out it was the bonds wot done it for SVB. But there could have been other, murkier factors at play, more of which later.
SVB was heavily invested in Treasury Bonds, but as interest rates rose, the bonds declined in value. SVB was thus sitting on paper that was worth far less than the bank had paid for it. If forced to sell that paper, it would realise heavy losses. And that’s exactly what happened when its customers, many of whom are in the technology industry, began making large withdrawals from their accounts. SVB was forced to sell their depressed bonds to meet the sharp and unexpected increase in customer withdrawals, but in the end couldn’t keep up because of the losses it was making on liquidating its bonds. The sudden withdrawals that precipitated its demise are discussed further below, under the heading: Do these US bank failures mark the beginning of the Fed’s war on crypto?
Where things get really interesting is why and how SVB was saved. The US Federal Deposit Insurance Corporation (FDIC) insures bank deposits up to $250,000. However, most of SVB’s customers had deposits over $250,000, which immediately tells you that these were not ordinary customers. Fearing the contagion effect of so many high-value depositors going under, the FDIC decided to step in and save them all even though most of the deposits were uninsured. I will discuss the significance of this later.
The FDIC then oversaw the sale of SVB’s good assets to First Citizens Bank while retaining in receivership a mere $90 billion of risky assets rejected by the buyer and which were responsible for sinking SVB in the first place. To be sure, not all of that $90 billion is worthless, but it was too risky for First Citizens Bank to touch, and when these assets are eventually liquidated, an estimated loss of $20 billion will be borne by the FDIC. As a result, this cost will effectively be spread out across the banking sector in the form of increased premiums, which banks will recover by charging customers more interest and/or giving them less interest on savings. So, rich venture capitalists who forgot to take precautions in limiting their deposits to the insured value have just got a free get-out-of-jail card, but there will be no free lunch for you, Joe Public.
First Citizens Bank has acquired some $110 billion in assets and $72 billion in loans for $0.5 billion – a fraction of the price SVB was worth before it went bust. HSBC Holdings Plc announced on March 13 that it would buy the UK arm of the company, Silicon Valley Bank UK Limited, for £1.
In anticipation of more bank runs in the near term, the US Fed has also sanctioned a loan fund program that financial institutions can draw on in the event of sudden unexpected depositor demands. It is set to run for a year to March 2024.
Let’s review some of these facts to understand the bigger picture behind this curious bank failure that morphed into a bank heist.
All depositors are equal but some are more equal than others
The SVB depositor profile had many tech start-up businesses with venture capital backing –hence most deposits being more than the insured threshold of $250,000. The rescue under a Biden Administration of depositors perceived as allied to the Democratic Party is a sore point for pundits to the right of the political spectrum who feel they should have been hung out to dry. With no real evidence that this particular bank run would have caused a systemic failure, some pundits have argued that this was really about saving Big Tech venture capitalists who should have hedged their risks but chose not to. This in turn raises valid questions about whether the depositors’ financial backers who stood to lose might have unduly influenced the FDIC’s decision to step in and save them.
No problem going forward?
Recall the BoE governor’s assurance that we should all just keep on moving because there’s nothing to see here? Well, I beg to differ based on an analysis of the parlous state of US banks that was done by John Titus roughly four weeks before SVB, Signature Bank and Silvergate Capital went to the wall in early to mid-March. As Titus astutely points out, the US banking system is going into “cardiac arrest” and yet the World Economic Forum, the global oligarchy’s club that touts itself as the leader in providing solutions to all of humanity’s social and economic problems, issued a 100-page report on global risks which doesn’t even hint at any sort of banking or monetary crisis. This from an institution with the word ‘economic’ in it.
As Titus points out, the reason why the looming US banking crisis does not appear on the WEF’s list of ‘risks’ is because it’s not a list of risks. It’s a list of signposts about where the psychopathic controllers intend to meddle next and the cover stories that will be trotted out when very real risks like the debt crisis end up “blow[ing] everyone’s face off”, as Titus graphically expresses it. Hence the World Economic Forum is concerned about climate change and cyber insecurity but has no views whatsoever about the potential impact of rising interest rates on the debt Ponzi scheme it has effectively sponsored for the past 30 years.
It is therefore somewhat remiss of a forum with the descriptors ‘world’ and ‘economic’ not to devote even a passing mention to the state of US banking when US dollar denominated assets account for 60% of the global total, and US banks are the biggest source of US dollar liquidity in the world. The FDIC’s latest (Q3/2022) Quarterly Banking Profile that was available when Titus shared his analysis was for September 2022 (released 1st December). It’s a succinct summary of the state of US banks, and what it lacks in timeliness is more than made up for in quality. The economic fundamentals driving his analysis will not have changed, and in fact the March bank runs confirmed things got worse.
The starting point of Titus’ analysis reinforces the point that SVB is by no means unique – US banks collectively are in the same precarious situation. The composite unrealised losses reported by 4,746 US banks on the type of investment grade securities that sank SVB amount to $690 billion. The comparative losses reported immediately prior to the 2008 US bank bailout were less than $100 billion, so we are talking about current losses of an order of magnitude of seven times the 2008 situation.
But this isn’t the whole story. Once we factor in other hidden losses and discount “fairy dust assets”, a reported net positive composite banking balance sheet turns into an insolvent one. Here’s how it works:
- The reported net cushion of all 4,746 US banks –assets minus liabilities – is $2.165 trillion. That’s alright then … but is it?
- Whoops, remember we need to knock off $0.69 trillion for those unrealised losses on bonds and mortgage-backed securities not booked by the banks but which will be incurred should they need to sell them to meet a liquidity demand. So now the cushion is $1.48 trillion.
- Let’s knock that down further with a best-case scenario for losses on another category of assets that no-one is talking about – loans and leases of $12 trillion. Titus applies the same discount (11.7%) to that category as the banks themselves had applied to the stressed bond securities in the bullet point above to arrive at a further unrealised loss of $1.4 trillion. Now the cushion is $0.08 trillion, or $80 billion.
- Included in the starting net cushion of $2.165 trillion is an asset described as goodwill and valued by the banks at $0.425 trillion. As its name suggests, it is not an asset you can take to the bank and, as an accountant by training, I can confirm Titus’s assessment of it as “fairy dust”. After subtracting the fairy dust, the cushion has been wiped out. It’s now negative $0.35 trillion or $350 billion in the red.
I hesitate to call the BoE governor a liar for saying that he doesn’t “think there’s a problem going forward”, so I will be diplomatic and just say that he may be correct provided that chronic US bank insolvency is defined in economic textbooks as “not a problem going forward”.
Why is the Fed provoking a financial crisis?
Having proven that US banks are collectively insolvent, Titus goes on to address a 350-billion-dollar question – why is the Fed provoking a financial crisis by driving up and holding interest rates at levels guaranteed to stress core bank assets and create a liquidity crisis? He demonstrates that in every single banking liquidity crisis that has preceded this one, the Fed has stepped in to increase the value of the banks’ assets and ease liquidity by driving interest rates down. When that hasn’t worked, it has resorted to printing money out of nothing and injecting cash into the banking system by buying up the banks’ assets. That makes things worse in the long run by merely delaying the inevitable reckoning, but until now, they seemed to want to avoid immediate calamity. Titus does not provide a direct answer to the big question, but let’s read between the lines.
The casino phase of banking, which began in the early 1990s and correlated with the death of manufacturing in the West, is now over, and they know it. What we are now seeing is an attempt by the Central Bank mafia at a controlled demolition of the debt Ponzi scheme and a transition into a new system of Central Bank Digital Currency (CBDC). The Central Bank mafia has controlled economies through the monetary system for well over 100 years and they aren’t about to give up that control just because the current system is dying. CBDC is a fiat currency system just like the one that’s in flames right now, but Central Banks want a shinier replacement fiat system because fiat currencies offer corrupt banksters the control they crave.
The CBDC fiat currency is the perfect adjunct to the Fourth Industrial Revolution of a digital world powered by data, delivering a level of hyper-centralised control that will make us monetary slaves. With CBDCs, Central Banks could exponentially increase their control over the money supply because they will be able to control how, when and where it is spent, in real time and at the flick of a switch.
A crisis is being provoked because there is no longer any choice and, if a crisis is inevitable, it may as well be used to bring about the desired end state – CBDCs. Increasing interest rates was never going to be effective in controlling inflation because the root cause of inflation is primarily rampant money printing combined with artificially jacked up energy prices. There is plenty of oil and gas to go around but the West has decided to use the Ukraine war as an excuse to impose energy sanctions on itself. It even took the precaution of blowing up the Nord Stream pipelines to pre-empt the possibility of Germany getting the shakes for some of that cheap Russian gas and throwing in the towel on NATO’s proxy war with Russia.
Applying the interest rate lever to inflation at this juncture is like walking into a burning building with a bottle of water. It merely provides the pretext for fighting inflation but has the desired effect of flushing out the worst banking zombies or turning softer targets into easy prey for the cartel to swoop in on. So rather than saving banks, the aim now is to collapse the junk debt balloon with as little pain as possible to the giants who already control banking while consolidating the remaining banks into a hyper monopoly represented by the titans in charge – the banks that are too big to fail.
A tiny number of banks who are already part of the Central Bank cartel is a prerequisite for administration of the desired hyper-centralised CBDC system. The SVB collapse provides a microcosm of how this controlled demolition and consolidation might work to bring about the new economic and social slavery system of CBDCs.
The three Cs – Controlled demolition, Consolidation and CBDCs
There are strong arguments for and against why SVB should have been hung out to dry. On the one hand, there is obviously a strong case for rich venture capitalists bearing the risk that goes with their job description. On the other hand, there is something to be said for avoiding the unpredictability and potential chaos that could ensue from letting the 16th largest US bank fail. But the arguments either for or against are in fact irrelevant for the purposes of understanding how things will work during The Collapse because what SVB teaches us is that Central Banks will use their power to pick and choose which zombies live and which ones die.
We’ve just witnessed the controlled demolition of three banks whose assets were acquired for a song by favoured survivors. The end of this game of banking musical chairs, if it goes according to plan, will be a consolidated last-bank-standing cartel that rules over everything, making the roll-out and administration of CBDCs much easier while providing a tighter noose for consumers.
Tellingly, nobody (or at least nobody the banking cartel cares about) really got hurt in the SVB collapse. The venture capital depositors were saved by the FDIC despite holding sums well in excess of the insured amount. But what about the owners of SVB? They must be in pain right? Well no. Who owns SVB? The largest shareholders are institutional investors – Vanguard Group, SSgA Funds Management, BlackRock, Alecta Pension Insurance Mutual, JPMorgan Investment Management. The bank that acquired SVB’s good assets for a fraction of the cost, First Citizens Bank, is owned 67.85% by the same institutional investors that owned SVB. The incestuous ownership of banks by the same asset managers and institutional investors who own 60-80% of nearly all listed shares means that these collapses and acquisitions amount to a wealthy man transferring money from his left pocket to his right pocket. The $20 billion loss suffered on the depressed $90 billion bond portfolio is offset by the gains made on buying the good assets for nothing.
Furthermore, rinsing that $20 billion loss through the FDIC will translate into higher interest rates on loans for the consumer (or even lower/negative rates of interest on deposits) and, should such losses get too big for the FDIC to handle, it’s a safe bet that they’ll be passed on to the taxpayer via the Federal Reserve.
Provoking bank collapses to catalyse consolidations carries the risk of unpredictable chaos, and we should not fall into the trap of believing that the psychopaths in the financial mafia aren’t capable of miscalculation. There is as much stupidity as there is cunning in all of this because if they really knew what they were doing, we wouldn’t be in this mess in the first place. That said, it’s easy to see how a series of bank runs followed by bail-ins would “frighten the pants off everyone”, which is the name of the game in politics today, according to the former UK Health secretary. The most secure prison is one that people are begging to be locked up in, and this can be achieved by leveraging maximum fear to convince them that their money would be safe in a CBDC digital wallet, lovingly watched over by Big Brother.
At what point could this be achieved? As Ed Dowd puts it, at the “bottom of the crisis”. This is when sufficient consolidation has been achieved, when the CBDC infrastructure is ready to roll out, when sufficient pain has been inflicted, and when people have had enough and will agree to whatever solution is put in front of them, however little sense it makes.
A chronic prolonged period of immiseration will act as an economic deflationary lid on both debt and inflation and a steroidal shot for wealth concentration, more of which below. The endgame is CBDCs because, while the current fiat monetary system has failed, as they all do in the end, the banking cartel will lose all of its power unless it can monopolise control over a new fiat currency.
To understand why a new fiat currency would not solve the problems of the old one, let’s try to get clear about the similarity and difference between the current system and the new CBDC system that central banks want to move to. The similarity is that they’re both fiat currency – central bank-issued and not backed by a commodity like gold. Printing money became standard operating procedure, with the result that the West is hurtling towards the same demise as a country it has spent the better part of twenty years laughing at – Zimbabwe. The mafia that controls the Central Banks hasn’t suggested that they’ll fix a lock on fiat v2 that will jam the money-printing button should a rogue BoE guvnor develop a twitchy finger and try to click away at the mouse to create extra trillions in response to the latest bank liquidity crisis. So, you would be completely justified in concluding that jumping from fiat 1 to fiat 2 is hardly a remedy for the money printing woes we are in now. Funnily enough, that’s exactly what a Parliamentary Committee that looked into CBDCs thought too. Its report, cleverly titled “Central bank digital currencies: a solution in search of a problem?” (they must have had help from the Sun on that one), concluded:
“There is no convincing case for why the UK needs a central bank digital currency (CBDC). The committee found that while a CBDC may provide some advantages, it could present significant challenges for financial stability and the protection of privacy.” [emphasis added]
Job done then? Not quite. Central banks are not in the habit of listening to parliaments, even on the rare occasions such as this one when the latter actually do their job, so don’t think for one moment that the BoE guvnor has shelved his plans to roll out CBDCs.
It’s the difference that should really concern us, and the difference is fundamentally that CBDCs move money from a medium of exchange to a medium of control. It’s that simple. And that’s why they want to do it. There is no other reason. And if money stops being a medium of exchange and becomes a medium of control, then I would suggest we completely abandon our now pathetic pretence at democracy – shut parliament down, rule by decree and instruct the opposition party to agree with the government of the day on everything that really matters. Oh, we’ve already done that for a virus, have we?
Well, we could go a step further by making sure any rogue MPs in the new pretend parliament are properly censored. For instance, should a rogue MP make a speech that really embarrasses the de facto one-party state, then one of the other 649 stooges could simply instruct his fellow stooges to leave the august House before the speech begins and then make sure YouTube blocks the speech so the general public cannot witness the descent into fascism. Oh, that’s actually happened, has it? Well then, I guess the end of the pretence of democracy would explain why they’re wrapping the whole sordid farce up with CBDCs, a foolproof system of financial slavery, to formalise the totalitarian system that was introduced during covid!
Central banks want a digitally modified fiat system which they believe will be failsafe owing to the enhanced control it offers over the money supply and the economy. But that means failsafe controls over you and how you are allowed to spend. That’s all a CBDC is – hyper-digitalised control of the banking system and of you. This hyper-digitalised control will be packaged as a selling point, and it will sound appealing to many because everyone wants control, order and discipline, especially when it comes to money. But what people will not realise is that the control applies as much to them as to the money supply.
And make no mistake – this centralised digital control will allow a tiered system in which the rules-for-thee-but-not-for-me principle will apply. As your CBDC rewards you with a bonus earthworm for performing your civic duty of munching 35 bugs this month, rest assured that WEF acolytes will not have their dining at premium steak houses curbed and nor will they know what bugs even taste like. You, on the other hand, will start to look like a bug, walk like a bug and smell like a bug.
The WEF acolytes shall fight climate change on the golden beaches of Southern Europe, they shall fight it with every take-off and landing of their private jets, they shall fight in daffodil laden fields and in expensive city cafes, they shall fight in the hills; they shall never surrender their right to eat organic grass-fed beef, probably reared on a farm owned by Bill Gates. They want you to fight climate change holed up in a 15-minute smart city, buying carbon credits to visit a dying relative, waiting for instructions from your cretinous mayor to get your Spring covid jab. Because that is how we will celebrate Spring in 2030. No dancing around the Maypole for you! It’s Russian roulette with mRNA injections.
Do these US bank failures mark the beginning of the Fed’s war on crypto?
SVB was one of the few major financial institutions offering services to crypto companies as other banks have shied away from this sector, fearing risk and imminent regulatory crackdown. In an almost instant replay of the SVB collapse, days later Signature Bank was put into FDIC receivership, ostensibly to avoid contagion from a bank run. As the 29th largest US commercial bank, this was the third largest bank failure in US history after SVB and, like SVB, the vast bulk of Signature’s deposits (90%) were uninsured. Like SVB, the FDIC stepped in and rescued all depositors and then brokered a deal that saw its good assets picked up for a bargain by one of the largest regional banks in the US – a subsidiary of New York Community Bancorp, Flagstar Bank.
Like SVB, Signature Bank was also a major crypto currency services platform. Former Congressman Barney Frank, who was a director of Signature Bank, saw the closure as an anti-crypto message by regulators. He told multiple media outlets that the bank was not insolvent, and he thought regulators took it over to serve as a warning for US banks to avoid cryptocurrency dealings. Tellingly, Signature’s crypto deposits were not included in the sale of assets to Flagstar Bank.
Silvergate Capital, along with Signature Bank, was one of the two main banks for the crypto sector. It too shut down in March following a bank run that forced it to sell assets at a loss.
Crypto was not the underlying cause of any of these bank failures, but it’s an odd common denominator given that not many banks offer crypto currency services. Barney Frank’s speculation is reasonable – as the US Fed moves closer to rolling out its CBDC, is it taking a hostile stance towards any competition from decentralised crypto currencies?
Adding to the murkiness of the US bank failures is the speculation surrounding conservative billionaire Peter Thiel’s possible role in precipitating the run on SVB. Tech industry insiders allege that a venture capital fund founded by Thiel drained all of its SVB accounts while making calls to other investors to get their cash out of SVB and into bigger, safer banks. They allege that this sparked a bank run that ultimately led to $42 billion in withdrawals – a sum too large for SVB to cope with.
Banking consolidation promotes the wider wealth consolidation agenda
It should go without saying that this is not just a banking consolidation. Bank runs and consolidations will sow fear, causing credit to tighten and putting small and medium size businesses under more financial stress. As recession deepens, those businesses will go bust, just as they were forced to in the covid heist. Mortgage defaults will trigger a collapse in property prices. Banks will swoop in, seize the properties from defaulting borrowers. The plan seems to be for banks to morph into landlords who will then rent back the properties they seize. The broader wealth consolidation agenda will be served in the same way it was during the covid shakedown which underwrote the transfer of $5.1 trillion into the pockets of 2,755 billionaires, taking their total net worth from $8 trillion to $13.1 trillion, a 64% increase.
Taxpayer money will continue to be siphoned into the coffers of the banks, Big Pharma and the climate industry to fund the banking crisis, the pandemic industry and the ‘climate crisis’. The net zero swindle is being used as a pretext for many things, one of which is an audacious global land grab. In the Netherlands, the second largest agricultural exporter in the world, the government is forcing farmers off the land under the pretext of reducing nitrogen emissions.
In the US, the Biden administration under the climate change agenda has committed to private farmland grabs under their “30 by 30” policy to “conserve” 30% of US land and coastal seas by 2030. How do the 21st century neo-fascists justify tripling land under government ownership? With the well-worn slogan that was used to justify covid fascism – it’s “backed by scientists”. 289 million acres in the US are currently “protected for biodiversity” but, under the “30 by 30” plan, an additional 440 million acres need to be “set aside” – grabbed in plain talk. The fly in the ointment is that “around 70 percent of land in the U.S. is owned by individuals or companies.” The oligarchy has not been slow off the starting block in the race to acquire land, with Bill Gates leading the way as the single largest landowner in the US.
There are at least three things to note when the head of JPMorgan, the largest US bank, calls for seizure of private property to build wind and solar farms which, it is no longer controversial to say, are not viable replacements for fossil fuel energy.
First, while this might be dressed up as a government seizure, it’s a good bet that the banks will end up somehow owning large tracts of land under the emerging fascist public-private partnership. Why else would the gatekeepers of 21st century Western capitalism be furtively thumbing through newly acquired copies of Mao’s Little Red Book and calling for land nationalisation?
Second, substituting windmills for food production is even barmier and will be more destructive than Mao’s infamous great leap forward.
Third, twenty years ago, even if you had locked up the best comedy writers in a room and supplied them with copious amounts of cocaine and Jack Daniels, there is no way they could have come up with bullshit as whacky as this. And yet today, the New Normal capitalists are telling us, with a straight face and apparently not under the influence of drugs, that a necessary revolution is underway in which everything of any value, no matter what the societal and economic cost, will be transferred into the hands of a public-private partnership led by the corporate oligarchy, while governments handle the paperwork and pass legislation to make it happen.
There is only one spectacle that beats the surreal quality of this insanity – watching the ‘progressive’ left cheering it on, not because they think it makes any sense but simply because too many on the right are opposing it. They are fully signed up to jumping into a burning building because some conservatives on the right would prefer to stay cool in the shade.
You can read more of Rusere’s work at https://plagueonbothhouses.com