The Funniest Post You’ll Ever Read About Bank Failures And Yachts

Guest post from John Wilder – you can subscribe to him here

“A major one.” – Fight Club

What did Kim call his yacht?  His dictator ship.

Last March, Silicon Valley Bank® failed.  In a big way.  Because the people who deposited money in the bank own things like yachts and senators, well, they escaped with hardly a haircut.  The Federal Deposit Insurance Corporation® (FDIC™) normally ensures deposits for $250,000 per account holder.  In this case, they decided, nah, what the heck, we’ll make sure that Roku® and Oprah Winfrey and Prince Harry don’t lose a dime.

Ironically, today the Internal Revenue Service sued the FDIC© for $1.45 billion in back taxes they say that Silicon Valley Bank™ owed when the FDIC© took it over.  Sure, it sounds like on part of the government is suing another part of the government for play money made up by the (non-federal) Fed™ but the FDIC™ is supposedly independent and gets its money from the member banks.

Which are members of the Fed™.  Which prints the cash.

If this sounds as incestuous as a Hapsburg family stump, well, it is.  And of course I’m going to go with a fresh meme about the Hapsburgs, because that’s what all of the cool kids are doing today.

A Hapsburg walks into a bar, the bartender says, “Why the long face?”  The prince says, “Generations of inbreeding.”

The root cause of the Silicon Valley Bank™ failure is that they lent money for long periods at low interest rates.  When interest rates go up, those loans aren’t worth a lot, at least to the bank.  Right now, my mortgage has a lower interest rate than I’m getting in checking.

Silicon Valley Bank™ looked at all the crappy loans they had, and did the math, and found out that they were worth less than zero.  Even worse, their bigger depositors heard (because depositors who own senators seem to get advance notice) and started to pull their money out.

Since those folks had friends, they told them.  Soon enough, everyone wanted one thing – they wanted their money out of Silicon Valley Bank™.  Rational people realized that if this was a problem at Silicon Valley Bank©, it was a problem everywhere.

Silicone and silicon – electrical engineers know the difference – no one trusts them around silicone.

In a thought that gives central bankers and senators cold sweats (after the previous night’s booze wears off) is the idea that people lose faith in the banking system.  Oddly, this wouldn’t be a problem if we used money made out of gold and silver, but since ours is just as much a fantasy as thinking that diversity enriches us all.

So, there’s a problem that’s impacting literally every bank.  Some big ones have failed, but thankfully Duchess Markle still has her cash so she can get enough publicity to hide from commoners like me.  What’s the solution?

First, pay off everyone so no one is scared and Oprah doesn’t have to fly commercial with mere mortals.  Second, flood the system with money.  If a bank needs cash?  Wheelbarrows of it?

Give it to them.

Thankfully Congress took a break from sending your tax dollars to Ukraine to bail out Oprah.

Last year, banks were paying 0.10% or so for crappy checking accounts.  This summer, rates started shooting up, so I snuggled into some CDs that paid a lot more than my mortgage cost.  Then, last month, I got a call from my bank where I set up the CDs.

“Mr. Wilder?  You have money in other banks, right?  If you deposit (a few thousand) dollars from accounts outside of your accounts with us into savings, I can give you a 4.5% rate on checking and savings.”

What????

If there’s one thing I know about banking, is that bankers are not generous except to themselves, senators, and Oprah.

I check with him, drove to the nearest branch of Major Bank™ in Mt. Pilot, and tossed a few thousand in.  Could I take it out later?

Sure!

I am informed this is funny because horses often live in stables, so this would be a violation of California’s work safety laws.

I started wondering about this, but soon enough came up with the answer:  when I make a deposit in the bank, I’m making a loan to the bank.  And if they’re offering me nearly 5% for just parking cash at their place, that means . . .

I’m their best alternative for a loan.  Me.  John Wilder.  Enough so they paid a dude to call me and ask.

Yup, it’s just that simple.  And they called me to ask me to make a loan, and offered to pay me over four times what I was making on my cash to make that loan.  Reading a bit further, it turns out the way that the Fed™ shoved money down the collective throats of the banks was through the Bank Term Funding Program (BTFP).

BTFP loaned money to the banks, and the banks deposited the money at the Fed© to make a profit on the difference.

Yes, the Fed© created the BTFP, loaned the money to the banks who then deposited the money . . . at the Fed™.  I’m not making this up.  As of March 11, 2024, the Fed© will no longer be making more BTFP loans at those sweetheart rates.  All new loans would be made at the same rate the bank gets paid by the Fed©.  The gravy train, or at least this gravy train, is over.

That’s what the Fed© said in January, 2024.

When did I get the phone call wanting to borrow a few bucks from Major Bank?

January, 2024.

Since when do I believe in coincidences?  And it was weird, it wasn’t a lot of money that I needed to deposit, but I think they were looking to get bigger players than tiny John Wilder.

But at least they’re not insufferable idiots . . . oh, too soon.

And that’s the rub.  If banks are looking to borrow cash from me, how bad are their balance sheets?

Dang, I’m worried!  Will Prince Harry have enough money to travel the world for 45-minute meetings with his father?  Will Oprah be able to afford more caviar?

And, maybe I should take up loan sharking.  Maybe I can buy my own yacht, bigger than Prince Harry’s and I’ll sail past him, and look down on him, and try to give Harry that condescending look that appears to be his Resting Prince Face.

And I’ll write a rock song about it.

I’ll call it Smirk on the Water.

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