March 21, 2023

If you go by this Bailout Meter, from FRED courtesy of Breitbart Business, we are already in 2008 Meltdown Range.

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Back in 2008 the problem was Lehman Brothers and the financial system sitting around with 30-year real-estate liar loans as the real-estate market tanked. This year it’s just SVB caught with a bunch of long-term Treasuries after the fastest interest rate climb in U.S. history. But hey, it wasn’t their fault. They didn’t have a Chief Risk Officer through most of 2022. Coulda happened to anyone.

Back in 2008, the problem was that if you had borrowed to finance real-estate, then you really got wiped out when real-estate prices went down. For Lehman Brothers, according to La Wik, “a 3–4% decline in the value of its assets would entirely eliminate its book value of equity.”

Here in 2023 the problem is that if you have borrowed to buy long-term Treasuries, then you really get wiped out if the resale value of long-term Treasuries goes down because short-term interest rates have gone up.

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You know, back in the day, Warren Buffett said that he ought to hire a guy whose only job was to tell him not to buy airline stocks. Maybe we ought to have a law that every banker needs an assistant whose only job is to tell him how far its bonds have to fall to wipe out the bank. Although I would think this is not that hard.

Yet SVB operated without a Chief Risk Officer for most of 2022.

Of course, what’s the problem when you are playing with other peoples’ money, whether in finance or government or activism? But for people like you and me, it’s our money. Know what I mean?

But is it too much to ask our educated, evolved rulers to fix this recurring bank meltdown problem? Goldfinger talked about first time happenstance, second time coincidence, third time enemy action. But I think it’s more like: first time stupid, second time witless, third time delta-minus moron.

So let’s just put Janet Yellen and Jerome Powell in a room together for a couple of days, and tell them to come up with a solution to the bank meltdown problem. Or no ice-cream for dessert.

Perhaps the problem is also, as Joel Kotkin writes, “witless billionaires” funding the Left, with “climate-change apocalypticism, a belief in systemic racism and racial ‘equity,’ and radical gender ideology.” To say nothing of the witlessness of their widows and divorced wives, and their legacy children.