Mobile Money And Social Media Made The Bank Runs Unmanageable

bloomberg  |  Citigroup Inc. Chief Executive Officer Jane Fraser said mobile apps and consumers’ ability to move millions of dollars with a few clicks of a button mark a sea change for how bankers manage and regulators respond to the risk of bank runs. 

Fraser said the fast demise of Silicon Valley Bank also made it difficult for banks to assess and prepare bids for its assets. Speaking just two weeks after the California-based lender collapsed under the weight of tens of billions of withdrawals by its venture capital clients, Fraser said her firm hopes a buyer will emerge in the coming days.

“It’s a complete game changer from what we’ve seen before,” Fraser said Wednesday in an interview with Carlyle Group Inc. co-founder David Rubenstein at an Economic Club of Washington event. “There were a couple of Tweets and then this thing went down much faster than has happened in history. And frankly I think the regulators did a good job in responding very quickly because normally you have longer to respond to this.”

In the space of just 11 days this month, four banks collapsed, including three regional US lenders and the Swiss financial giant Credit Suisse Group AG. A fifth firm — First Republic Bank — is teetering. Amid the turmoil in global financial markets, stocks have careened wildly and investors have lost billions of dollars.

Citigroup was among 11 banks that joined to provide $30 billion in deposits last week to First Republic, in an effort to shore up the San Francisco-based lender beset by client withdrawals and credit-rating downgrades. Wall Street leaders and US officials are searching for a rescue plan, and are exploring the possibility of government backing to make the firm more attractive to investors or a buyer.

Citigroup isn’t interested in making a bid for First Republic, Fraser said. She declined to comment on the lender’s current state, though she said the company is “actively working through the challenges that they’re facing right now.”

Fraser stressed that the string of bank failures was isolated, noting the biggest US banks remain well capitalized. 

Uninsured Bank Depositor Bailouts Make A Mockery Of "Too Big To Fail"

 nationalreview |  The 2008 financial collapse and resulting Wall Street bailout popularized the concept of “too big to fail” — the idea that certain institutions were so massive, and so intertwined with the rest of the financial system, that their failure could trigger a complete meltdown of the economy. 

Kinda insane that this entire debacle was potentially caused by @ByrneHobart's newsletter. Here's how the butterfly effect happened.

1) Byrne posts this article/Tweet calling out SVB's risk.
2) Pretty much every VC I know reads this newsletter
3) They all start to pay very,… https://t.co/zUSKF1ZW4J

— Evan Armstrong 📧 (@itsurboyevan) March 11, 2023

While I opposed that bailout on ideological grounds, I at least recognized the tremendous risk that the implosion of the nation’s major investment banks would pose for the broader financial system. But Sunday’s decision by regulators to bail out uninsured depositors of the failed Silicon Valley Bank would dramatically lower the threshold for federal intervention in financial markets. 

To be sure, there are reasons to believe the collapse of SVB carries broader consequences. While the FDIC guarantees deposits up to $250,000, the overwhelming majority of SVB deposits exceeded that amount. It was the bank of choice for many tech start-ups. Without access to their cash, those companies would have difficulty meeting payroll. Additionally, the sudden collapse of SVB could lead companies and individuals who have deposits in other similar financial institutions to withdraw their money starting on Monday, triggering more bank runs, and more bank collapses. 

While regulators are not stepping in to rescue SVB as an institution, the Treasury Department, Federal Reserve, and FDIC have announced that they will make sure that all depositors at SVB as well as another failed institution, Signature Bank, will have access to their money on Monday even if those deposits exceed the $250,000 threshold. In a statement, regulators promise, “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”  

Defenders of this decision will try to make it seem as if it’s an extraordinary, one-off decision by regulators, but in practice, it has created a huge moral hazard by signaling that the $250,000 FDIC limit on deposit insurance does not exist in practice. The clear signal it sends is that when financial institutions make poor decisions, the government will swoop in to clean up the mess. There are plenty of ways in which poor decisions made by financial institutions could have larger implications. But in 2008, the justification for intervention was systemic risk. 

This was not a case in which the whole economy would be threatened if an intervention were not taken. There would be disruption to a number of companies in the tech sector and their employees, as well as potential problems for similarly situated financial institutions. But the vast majority of banks are well capitalized right now, and there is no credible risk of this causing a complete financial meltdown. 

In fact, it isn’t even clear that depositors were going to be wiped out, absent federal intervention. When SVB was shut down, it still had real assets that were worth money, which can be sold to pay back investors. Due to poor risk management, what they were not able to do is avoid a panic in which a large number of depositors tried to withdraw their money at the same time, which is what happened last week. Under one estimate from a Jefferies analyst, when liquidated, SVB has the assets to pay off 95 percent of deposits. This is no doubt one reason why regulators are stating so confidently that they don’t expect this to cost taxpayers money. Another reason is that they claim any losses incurred would be repaid by “a special assessment on banks” which will inevitably end up being passed on to their customers. 

Anybody who considers themselves a free-market conservative should be especially concerned about this action. Regardless of the particulars, it will just add to the talking point that when Wall Street or well-connected tech companies are in trouble, the government swoops in to the rescue. And yet lawmakers won’t eliminate student debt, give away free health care, pay for child care, guarantee affordable housing . . . and insert whatever cause you like. If you support socialism for tech companies, don’t be surprised when you get it for everything else.

Gleichschaltung: The System Of Totalitarian Control And Coordination Of All Aspects Of Western Society

wikipedia |  The Nazis used the word Gleichschaltung for the process of successively establishing a system of totalitarian control and coordination over all aspects of German society and societies occupied by Nazi Germany. It has been variously translated as "co-ordination",^[2][3][4] "Nazification of state and society",^[5] "synchronization'", and "bringing into line",^[5] but English texts often use the untranslated German word to convey its unique historical meaning. In their seminal work on National Socialist vernacular, Nazi-Deutsch/Nazi-German: An English Lexicon of the Language of the Third Reich, historians Robert Michael and Karin Doerr define Gleichschaltung as: "Consolidation. All of the German Volk’s social, political, and cultural organizations to be controlled and run according to Nazi ideology and policy. All opposition to be eliminated."^[6]

The Nazis were able to put Gleichschaltung into effect due to the legal measures taken by the government during the 20 months following 30 January 1933, when Adolf Hitler became Chancellor of Germany.^[7]

One day after the Reichstag fire on 27 February 1933, President of Germany Paul von Hindenburg, acting at Hitler's request and on the basis of the emergency powers in article 48 of the Weimar Constitution, issued the Reichstag Fire Decree. This decree suspended most citizen rights provided for by the constitution and thus allowed for the arrest of political adversaries, mostly Communists, and for terrorizing of other electors by the Sturmabteilung (SA) (Nazi paramilitary branch) before the upcoming election.^[8]

In this atmosphere the general election of the Reichstag took place on 5 March 1933.^[9] The Nazis had hoped to win an outright majority and push aside their coalition partners, the German National People's Party. However, the Nazis won only 43.9 percent of the vote, well short of a majority.^[10] Nevertheless, though the Party did not receive enough votes to amend the federal constitution, the disaffection with the Weimar government's attempt at democracy was palpable and violence followed. SA units stormed the Social Democrats' headquarters in Königsberg, destroying the premises, even beating Communist Reichstag deputy Walter Schütz to death.^[11] Other non-Nazi party officials were attacked by the SA in Wuppertal, Cologne, Braunschweig, Chemnitz, and elsewhere throughout Germany, in a series of violent acts that continued to escalate through the summer of 1933; meanwhile the SA's membership grew to some two-million members.^[12]

One of the most important steps towards Gleichschaltung of German society was the introduction of the "Ministry of Public Enlightenment and Propaganda" under Joseph Goebbels in March 1933 and the subsequent steps taken by the Propaganda Ministry to assume full control of the press and all means of social communication. This included oversight of newspapers, magazines, films, books, public meetings and ceremonies, foreign press relations, theater, art and music, radio, and television.^[23] To this end, Goebbels said:

[T]he secret of propaganda [is to] permeate the person it aims to grasp, without his even noticing that he is being permeated. Of course propaganda has a purpose, but the purpose must be concealed with such cleverness and virtuosity that the person on whom this purpose is to be carried out doesn't notice it at all.^[24]

This was also the purpose of "co-ordination": to ensure that every aspect of the lives of German citizens was permeated with the ideas and prejudices of the Nazis. From March to July 1933 and continuing afterwards, the Nazi Party systematically eliminated or co-opted non-Nazi organizations that could potentially influence people. Those critical of Hitler and the Nazis were suppressed, intimidated or murdered.^[7]

Every national voluntary association, and every local club, was brought under Nazi control, from industrial and agricultural pressure groups to sports associations, football clubs, male voice choirs, women's organizations—in short, the whole fabric of associational life was Nazified. Rival, politically oriented clubs or societies were merged into a single Nazi body. Existing leaders of voluntary associations were either unceremoniously ousted, or knuckled under of their own accord. Many organizations expelled leftish or liberal members and declared their allegiance to the new state and its institutions. The whole process ... went on all over Germany. ... By the end, virtually the only non-Nazi associations left were the army and the Churches with their lay organizations.^[25]

For example, in 1934, the government founded the Deutscher Reichsbund für Leibesübungen, later the Nationalsozialistischer Reichsbund für Leibesübungen, as the official sports governing body. All other German sport associations gradually lost their freedom and were coopted into it.^[26] Besides sports, another more important part of the "co-ordination" effort was the purging of the civil service, both at the Federal and state level. Top Federal civil servants—the State Secretaries—were largely replaced if they weren't sympathetic to the Nazi program, as were the equivalent bureaucrats in the states, but Nazification took place at every level. Civil servants rushed to join the Nazi Party, fearing that if they did not they would lose their jobs. At the local level, mayors and councils were terrorized by Nazi stormtroopers of the SA and SS into resigning or following orders to replace officials and workers at local public institutions who were Jewish or belonged to other political parties.^[27]

 

Scott Ritter Permanently Banished From Twitter

consortiumnews |  One of my reasons for joining Twitter was to contribute to the overall process of engaging in responsible debate, dialogue, and discussion about issues of importance in my life and the lives of others, in order to empower people with knowledge and information they might not otherwise have access to, so that those who participate in such interaction, myself included, could hold those whom we elect to higher office accountable for what they do in our name.

Land of the free pic.twitter.com/3bzYAW7h6R

— Wyatt Reed (@wyattreed13) April 13, 2022

To me, such an exercise is the essence of democracy and, for better or for worse, Twitter had become the primary social media platform I used to engage in this activity.

From my perspective, credibility is the key to a good Twitter relationship. I follow experts on a variety of topics because I view them as genuine specialists in their respective fields (I also follow several dog and cat accounts because, frankly speaking, dogs and cats make me laugh.) People follow me, I assume, for similar reasons. Often I find myself in in-depth exchanges with people who follow me, or people I follow, where reasoned fact-based discourse proves beneficial to both parties, as well as to those who are following the dialogue.

Before my Twitter account was suspended, I had close to 95,000 “followers.” I’d like to believe that the majority of these followed me because of the integrity and expertise I brought to the discussion.

Having someone hijack my identity and seek to resurrect my suspended account by appealing to those who had previously followed me can only be damaging to whatever “brand” I had possessed that managed to attract a following that was pushing 100,000. When one speaks of injury, one cannot ignore the fact that reputations can be injured just as much as the physical body.

Indeed, while a body can heal itself, reputations cannot. The fact that Twitter has facilitated the wrongful impersonation of me and my Twitter account makes it a party to whatever damage has been accrued due to this activity.

It is not as though Twitter can, or ever will, be held accountable for such actions. Section 230 of the Communications Act of 1934, enacted as part of the Communications Decency Act of 1996 (CDA), holds that internet platforms that host third-party content — think of tweets on Twitter—are not (with few exceptions) liable for what those third parties post or do.

Like the issue of Freedom of Speech, the concept of holding Twitter accountable for facilitating the fraudulent misappropriation of a Twitter user’s online identity is a legal bridge too far. Twitter, it seems, is a law unto itself.

My Twitter War came to an end today when I received an email from Twitter Support proclaiming that “Your account has been suspended and will not be restored because it was found to be violating the Twitter Terms of Service, specifically the Twitter Rules against participating in targeted abuse,” adding that “In order to ensure that people feel safe expressing diverse opinions and beliefs on our platform, we do not tolerate abusive behavior. This includes inciting other people to engage in the targeted harassment of someone.”

This ruling, it seems, is not appealable.

At some point in time, the U.S. people, and those they  elect to higher office to represent their interests, need to bring Twitter in line with the ideals and values Americans collectively espouse when it comes to issues like free speech and online identity protection.

If Twitter is to be absolved of any responsibility for the content of ideas expressed on its platform, then it should be treated as a free speech empowerment zone and prohibited from interfering with speech that otherwise would be protected by law.

The U.S. Constitution assumes that society will govern itself when deciding the weight that should be put behind the words expressed by its citizens. Thus, in a nation that has outlawed slavery and racial discrimination, organizations like the Klu Klux Klan are allowed to demonstrate and give voice to their odious ideology.

America is a literal battlefield of ideas, and society is better for it. Giving voice to hateful thought allows society to rally against it and ultimately defeat it by confronting it and destroying it through the power of informed debate, discussion, and dialogue; censoring hateful speech does not defeat it, but rather drives it underground, where it can fester and grow in the alternative universe created because of censorship.

In many ways, my Twitter Wars represent a struggle for the future of America. If Twitter and other social media platforms are permitted to operate in a manner that does not reflect the ideals and values of the nation, and yet is permitted to mainstream itself so that the platform controls the manner in which the American people interact when it comes to consuming information and ideas, then the nation will lose touch with what it stands for, including the basic precepts of freedom of speech that define us as a people.

Mainstreaming censorship is never a good idea, and yet by giving Twitter a free hand to do just that, the American people are sowing the seeds of their own demise.

Prescient Huxley-ian Projections About A Contentedly Enslaved Karenwaffen...,

americanthinker |   In 1949, sometime after the publication of George Orwell's Nineteen Eighty-Four, Aldous Huxley, the author of Brave New World (1931), who was then living in California, wrote to Orwell.  Huxley had briefly taught French to Orwell as a student in high school at Eton.

Huxley generally praises Orwell's novel, which to many seemed very similar to Brave New World in its dystopian view of a possible future.  Huxley politely voices his opinion that his own version of what might come to pass would be truer than Orwell's.  Huxley observed that the philosophy of the ruling minority in Nineteen Eighty-Four is sadism, whereas his own version is more likely, that controlling an ignorant and unsuspecting public would be less arduous, less wasteful by other means.  Huxley's masses are seduced by a mind-numbing drug, Orwell's with sadism and fear. 

The most powerful quote In Huxley's letter to Orwell is this: 

Within the next generation I believe that the world's rulers will discover that infant conditioning and narco-hypnosis are more efficient, as instruments of government, than clubs and prisons, and that the lust for power can be just as completely satisfied by suggesting people into loving their servitude as by flogging and kicking them into obedience.

Could Huxley have more prescient?  What do we see around us?  Masses of people dependent upon drugs, legal and illegal.  The majority of advertisements that air on television seem to be for prescription drugs, some of them miraculous but most of them unnecessary.  Then comes COVID, a quite possibly weaponized virus from the Fauci-funded-with-taxpayer-dollars lab in Wuhan, China.  The powers that be tragically deferred to the malevolent Fauci who had long been hoping for just such an opportunity.  Suddenly, there was an opportunity to test the mRNA vaccines that had been in the works for nearly twenty years.  They could be authorized as an emergency measure but were still highly experimental.  These jabs are not really vaccines at all, but a form of gene therapy.  There are potential disastrous consequences down the road.  Government experiments on the public are nothing new.