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MINH NGUYEN/WIKIMEDIA COMMONS
News-Press columnist Brent E. Zepke writes Silicon Valley Bank was a victim when excessive government spending ultimately led to a rapid succession of interest rate increases.
The venture capitalist, who tended to be very bright, saw that making money in the Biden economy would not happen, so they put all the money they made under the previous president into Silicon Valley Bank. How much money? Estimates are that their deposits
grew from $60 billion to $200 billion almost overnight. Prudent rules provided that Silicon Valley Bank invest in U.S. treasury bonds. The bank did so at that period’s interest rate of 1.7%. In September 2021, the Biden team had spent so much that there were indications that the head
of the Federal Reserve, Jerome Powell, should raise interest rates. But President Biden threatened to not reappoint him if he did. So he did not. The Fed took no action until after President Biden re-appointed Chairman Powell in January 2022. The Fed’s rates action have
such a huge impact on financial markets that they rarely are raised more that 0.25 of one percentage point, which to avoid fractions is expressed in “basis” points, so 0.25 is 25 basis points. The Feds traditionally wait six months before another change as this is generally how long it takes for the effects of rate changes to travel throughout the financial market. Waiting is a great idea, but as the president — living up to my nickname of the president who “walks softly and carries a big checkbook” — eliminated the benefit of waiting until the impact of a rate change works its way through the financial system. He spent money so fast that there became a serious risk of a market crash as rates were raised from the 1.4% under Trump to higher than 8%. Chairman Powell could have afforded to wait the six months in-between, but took the unprecedented steps of raising rates eight times by 25, 50, 75, 75, 75, 75, 50, 25 basis points in 2022. Did it stop inflation? No, raising interest rates cannot stop inflation unless the president also slows his spending. Did it slow down? No, the rate increases had a similar effect as shooting a charging grizzly bear with a pistol. It stimulated him to increase his actions. As 2022 closed, Pelosi-Schumer “exited left,” to use a term befitting their acts, after repeatedly gifting the president with more money. The situation was that Chairman Powell’s goal for inflation was 2%. Inflation was 6.5%. As 2023 began, the Biden team tried to explain away inflation still increasing in a variety of ways while spending more. March arrived, and Biden proposed a budget to spend even more, which caused venture capitalists to withdraw their money from banks in order to invest it elsewhere for a greater return. Their money was in Silicon Valley Bank. SLVB, to raise the cash for the withdrawals, had to sell the treasuries that were paying 1.7% into a market, where newer Please see ZEPKE on C4
SVB board, executives became greedy
ait! More bank closures and failures? My wife Terre told me this morning (March 14) that the bank of Montecito was closing today because of the storm and possible floods heading our way. We both said: “Oh, no! Are they insolvent too?” But — whew — just an atmospheric river event, not insolvency! However, the creepy news is that the Silicon Valley Bank and other banks just crashed because of a “liquidity crisis.” But wait! Didn’t we just have the big Crash of 2008? But wait! Didn’t we have a big crash in 1929, followed by the Great Depression? But wait. Didn’t we solve the banking crisis situation with the Dodd-Frank bill passed after the 2008 crash? That law would have prevented this crash. However, mysteriously, that law was repealed. Before I get to why, I also want to mention that the bank board and executives of Silicon Valley Bank also gave themselves a
fecal-matter-load of bonuses This is not an article to trash when they knew the bank had Republicans. It is meant, however, crashed, but just before the adults to question the people who own in the government took over and banks and the executives who run guaranteed the depositors’ money. them — and, specifically, those Just like what happened who got the bonuses. in 2008. Those owners, executives I am getting to the and other rich people will part about why all this always fund and vote for happened, but first we those who will protect their have to discuss why money. They fund elections some people say they of those who run on “hate “hate big government.” big government” and I am sure some of the “tax breaks for the rich” Frank depositors in those platforms. But they are Sanitate banks “hated big those who, when elected, government,” but they clearly love the part of “big The author will have no problem lives in Santa government” that gives accepting the deposits them their salary, status, Barbara that the government and capacity to pass laws protected for them! that serve the rich. Many politicians ran on the Does all this connect? If not, “hate big government” campaign what is your explanation of the slogan — to get elected to that repeal and this crash? government! This leads to a deeper level of So, now to the question of why question: Why does it seem that these crashes keep happening and people with a lot of money are so will keep happening. The Doddinterested in protecting it and Frank bill, made law in 2010, getting more? The only thing I can was repealed in 2018 because figure is that — bluntly — they the Republican president and don’t have a life. They don’t see Congress decided to repeal it. any purpose to life other than: “If
I can only double my money, then I will be happy!” Maybe more accurately for some, the attitude is: “Don’t touch my money, and then maybe I will think about a world that works for everyone. If not, maybe my kids will do it with the money and values I will have left them.” If all of this sounds naïve to you, please tell me your thoughts. To what end or purpose do we accumulate? Why is “more” often the only answer to life? I wrote an article recently about the man who died with 2.3 billion screwdrivers. Why would somebody want to accumulate that many screwdrivers? Or more to the point, why do people who are going to die want to accumulate more and more money? I can’t think of any reason other than this: We want to avoid death and the thought of death. The game we invented in order to avoid the reality of death is called: Accumulation. Games are made up, invented. They are based on a pretense, for example, that getting a ball through a hoop more times than the other team does, is very
important. It is! Or so it seems at the moment — not only to the team playing but to millions of “supporters”! Those who are good at hoops, by the way, make a lot of money as well! The pretense that money is what is important in the big game of life-and-death is why big money flows to the election campaigns of politicians who protect the game. Some politicians also like to accumulate a lot of it themselves! To summarize: We play the game of doubling “our” money as many times as we can, to avoid realizing that we are not going to be here forever. We pretend that life is about: “more.” Money is the scorecard. That’s my simple explanation of why we will continue to have bank crashes. What’s yours? What’s in your personal, deep-pocket wallet? Frank Sanitate taught high school English for five years over a halfcentury ago! He has published three books and had a successful seminar business for 40 years. You can reach Mr. Sanitate through voices@newspress.com.
The nuclear genie and averting Armageddon
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WIKIMEDIA COMMONS
President Dwight D. Eisenhower
isarmament … on inspections were suddenly is a continuing suspended. Russia has announced imperative.” the treaty is now in jeopardy. In That public January, Russia’s Deputy Foreign statement is not Minister Sergei Rablov denounced from an ideologue on U.S. efforts to impose the left, but rather “strategic defeat” on Moscow President Dwight D. in Ukraine. Eisenhower in his The Trump administration farewell address. He experienced frustrations delivered the address in arms control. Initial to the nation early in emphasis on ending North 1961, while preparing to Korea’s nuclear weapons leave office. program was unsuccessful. Arthur I, Cyr President Joe Biden In August 2019, the raised arms control to administration withdrew a top policy priority, but from the Intermediate that is now unraveling. Range Nuclear Forces Treaty, In January 2021, the New START complaining of violations by Treaty with Russia was extended Russia. for five years. The agreement, The Obama administration which was about to expire, limits emphasized nuclear arms summits nuclear warheads on each side to involving large numbers of nations 1550, plus limitations on missiles and international organizations. and bombers. The 2016 summit in Washington, However, last November, talks D.C., concluded with a formal
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Silicon Valley Bank’s problems begin with government spending
he words “Silicon Valley Bank” has been thrust at the start of stories by pundits on virtually all news outlets since March 10. While that is interesting, the words that follow rang the bell at the top of a “fascination” scale. Here is how I see the events. Based in Santa Clara, Silicon Valley Bank popped up on my radar under the symbol it trades under on the stock market, SLVB, a couple of years ago as I searched for a great bank in which to “takea-position” for investment purposes. I liked that as a regional Brent E. bank, it was not Zepke subject to the strict restrictions The author imposed by the lives in Santa Dodd-Frank law Barbara. passed under the Obama-Biden term. I liked that it served the best growth area I had ever seen: Silicon Valley, or as my manager at Smith Barney used to say, “the peninsula.” It’s not a peninsula, but no one corrects someone from Chicago. I invested, SLVB performed, and we both flourished. After the 2020 election escorted in what would become the “Biden economy,” the new theme of “runaway inflation” entered my investment model, and I “bid my adieu” to SLVB. To quote Satchel Paige: “Don’t look back; someone may be gaining.” Until March 9 when it imploded. In summer 2021, I had watched the potential problems begin building when it became obvious that inflation was building by the Pelosi-Schumer team, sending trillions of dollars to the Biden team through legislation. That increased inflation, which is too much money chasing too few goods. The obvious remedy was for the Pelosi-Schumer team to reduce the money they were sending to the Biden team, and for the latter team to spend less. But politically this was unpopular, so it did not happen.
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statement underscoring nuclear weapons control. Unfortunately, Russia did not participate. That reflected strained relations with the U.S. and other nations following annexation of Crimea. Nonetheless, the major conference reinforced the important, tangible U.N. framework to coordinate national efforts. The first nuclear arms summit took place in 2010 in Washington,D.C. In 1986, during a summit meeting in Iceland, Soviet General Secretary Mikhail Gorbachev and President Ronald Reagan surprised their staffs as well as the world by pledging the abolition of all nuclear weapons. That utopian vision fostered a practical result: the INF Treaty sign in 1987. Reductions are desirable, but efforts to outlaw all nuclear weapons are fundamentally
flawed. Destroying all known nuclear weapons would provide a decisive advantage to any power that decided — openly or secretly — to hold back even a few. Verification remains vexing. Another benchmark in the history of nuclear weapons, arms control and the Cold War occurred in 1972 when the Strategic Arms Limitation Talks led to treaties between the U.S. and the Soviet Union limiting missile systems. A second round of negotiations resulted in a follow-on agreement in 1979, but the U.S. Senate did not ratify the treaty, in reaction to the Soviet invasion of Afghanistan that year. After the Cuban Missile Crisis of October 1962 concluded when the Soviet Union withdrew nuclear weapons from the island, President John F. Kennedy’s political Please see CYR on C4
John Stossel
Better flying
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our flight is delayed? Blame your government. OK, it’s not always the government’s fault. Sometimes it’s weather or mechanical problems. But often we suffer horrible flight delays because politicians won’t relinquish power. In January, flights were grounded when the government’s “Notice to Air Missions” system broke down. That was just the latest incident. America rightly prides itself on being on the cutting edge of innovation. But it’s the private sector that innovates. Government rarely does. Asked if America’s air traffic control system is out of date, Transportation Secretary Pete Buttigieg paused a long time before answering, “The system is continuously being upgraded.” But the government’s been “upgrading” air traffic control for decades, promising to switch to a “NextGen” system that uses satellite navigation. Implementation keeps being postponed. Now the Federal Aviation Administration won’t even say when NextGen might be done. Air traffic control is still a lot like it was in the 1960s. Controllers use paper strips to track flights. Instead of using computers, they move paper around manually. “This is your government at work,” says Diana FurchtgottRoth in my latest video. Ms. Furchtgott-Roth worked for the Transportation Department during the Trump administration. I yell at her. “Air traffic control was in your department. You could have fixed it. You should have fixed it!” She smiles and explains that although she had control of $1 billion, she wasn’t allowed to move those funds to where they were needed. Government managers must fund projects pushed by politicians, like “Justice40,” meant to fix “underinvestment in disadvantaged communities.” “Sounds like they mean well,” I say. “It sounds a lot better to talk about social justice,” answers Ms. Furchtgott-Roth. “Nuts and bolts like computer hardware for air traffic control get left Please see STOSSEL on C4
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