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Yellen’s Banking House of Cards

Posted on | March 16, 2023 | Comments Off on Yellen’s Banking House of Cards

Far be it from me to claim to be an expert in financial institutions. My knowledge of banking is no greater than the average SVB board member, which is to say I know nearly nothing about the subject. But judging from headlines in recent days, I have the distinct impression that Treasury Secretary Janet Yellen is basically shuffling around piles of money from one troubled bank to another in a desperate attempt to stave off a complete collapse of the international financial system.

Did I mention U.S. banks are bailing out the Chicoms?

Treasury Secretary Janet Yellen admitted during a Thursday Congressional hearing that Chinese Communist Party-linked businesses that had deposits in Silicon Valley Bank (SVB) will be made whole by the American banking system.
Senator James Lankford (R., Okla.) pressed Yellen on the matter during a Senate Finance Committee hearing held days after Silicon Valley Bank collapsed.
“It has been reported publicly that SVB had a large number of Chinese investors that are there including some companies that were directly connected to the Chinese Communist Party,” Senator Lankford (R., Okla.) asked Yellen during Thursday afternoon’s hearing. “So what I’m asking is: will my banks in Oklahoma pay a special assessment to be able to make Chinese investors whole in Silicon Valley Bank?”
Secretary Yellen confirmed that they would.

(Hat-tip: Ed Driscoll at Instapundit.) Meanwhile, in Switzerland:

Credit Suisse shares surged Thursday after the Swiss central bank agreed to loan the bank up to 50 billion francs ($54 billion) to bolster confidence in the country’s second-biggest lender following the collapse of two U.S. banks.
Credit Suisse announced the agreement before the Swiss stock market opened, sending shares up as much as 33% before they settled around a 17% gain, to 2 francs ($2.15), in late afternoon trading. That was a massive turnaround from a day earlier, when news that the bank’s biggest shareholder would not inject more money into Credit Suisse sent its shares tumbling 30%. The plunge in price dragged down other European banks and deepened concerns about the international financial system.

Prior to the intervention, there was an incipient panic emerging over Credit Suisse, and such financial brush fires keep popping up:

First Republic Bank, facing a crisis of confidence from investors and customers, is set to receive a $30 billion lifeline from a group of America’s largest banks.
“This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” the Treasury Department said in a statement Thursday.
The major banks include JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and Truist.
The $30 billion infusion will give the struggling San Francisco lender much-needed cash to meet customer withdrawals and buttress confidence in the US banking system during a tumultuous moment for lenders. . . .
Treasury Secretary Janet Yellen on Thursday met privately in Washington with JPMorgan CEO Jamie Dimon before 11 banks agreed to deposit $30 billion in First Republic Bank to stabilize the teetering lender, according to two people familiar with the matter.

So far, then, the system continues to function, but how much longer can this “crisis of confidence” situation continue, with one bank after another getting wobbly and crying out for Janet Yellen’s intervention?

Nothing to worry about, Secretary Yellen tells Congress:

Yellen touted the federal government’s “decisive and forceful” actions to shore up the banking sector while testifying before members of the Senate Finance Committee.
“I can reassure the members of the Committee that our banking system remains sound, and that Americans can feel confident that their deposits will be there when they need them,” Yellen said.
“This week’s actions demonstrate our resolute commitment to ensure that depositors’ savings remain safe,” she added.

Just like Joe Biden, repeatedly claiming that everything’s just hunky-dory thanks to his economic agenda, Yellen appears to believe that the banking crisis is basically a public-relations issue. As long as she can continue to convince everybody that there’s no underlying problem with the system, the crisis will be averted: “Americans can feel confident,” she says, as if feelings were the only thing that mattered, and never mind whether your bank has enough assets to meet its obligations.

Can she get away with this? Will her three-card monte game just keep rolling indefinitely? Chip Dillard could not be reached for comment.



 

 

Category: Economics

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