What Did The Fed Supervisors Do Before SVB Collapsed?

Pressure has mounted on the Federal Reserve since Silicon Valley Bank collapsed last week.

This is a companion discussion topic for the original entry at https://talkingpointsmemo.com/?p=1451403

Ever notice that whenever there is a problem, be it the water in Flint or Jacksonville, a train derailment or bank failure the first thing those who call for federal deregulation and do everything they can to weaken regulation and the federal government’s agencies responsible for enforcing regulation do is blame the federal government for not enforcing regulations.

One last comment about Republican explanation about SVB’s failure.

“For what it’s worth, no, S.V.B. didn’t stand out from other banks in its concern for diversity, the environment and so on. And banks have been going bust for centuries, since long before H.R. departments began including boilerplate language about social responsibility in their mission statements. So the talk about wokeness tells us nothing about bank failures — but a lot about the intellectual and moral bankruptcy of the modern American right.” Paul Krugman


So, if it hadn’t been regulated at all, the industry would have done so much better if left to its own devices, eh?


Invisible hand donchaknow?


Of course they fucking do. And the mindless media morons then chase down the “he said/she said” story their manufactured outrage has created and we never ever talk about the fucking deregulation or who rammed it through in the first fucking place. It’s like the government and the media are run by fucking golden retrievers who chase after every squirrel and shiny hubcap.

We are fucked because we choose to be stupid. period.


I believe that invisible hand is much like the emperor’s clothes.


We’re in this ‘stew’, because the majority didn’t vote and they don’t remind those in charge of the consequences.

The minority don’t seem to have that problem.


Invisibly fapping, I guess.

(As always.)


They are the same people who block access to sex ed, contraception, & abortion then complain folks should not have kids if they cannot afford them.


:heart_eyes: Back in the day, that would have made a great sig!

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What Did The Fed Supervisors Do Before SVB Collapsed?

They raised interest rates, REGULARLY! And if this mess distracts them from all this, all the better.


OK, I’ll bite, what comes after an ignored MRIA? Could it be a HFSCYG, i.e. HFS, C’mon You Guys!!


You bring up the one real fear in the SVB collapse and that fear is it will slow the Federal Reserves actions to slow inflation by raising interest rates and that would be really bad.

Or, as Paul Krugman put it in his column today:

"we’re seeing an outflow of funds from smaller banks to more tightly regulated large banks. You may not like this — whatever else you may say about big financial institutions, they aren’t lovable. But on balance we seem to be seeing the financial system move toward reduced, not increased, risk taking.

Which brings me to the criticism I take seriously, although I think it’s probably wrong: claims that the bank failures will undermine efforts to control inflation.

It’s true that the bank blowups have caused investors to rethink the future course of Federal Reserve policy: a rate hike at the next Fed meeting, which seemed to be a done deal, now looks uncertain, with markets now pricing in the possibility of a rate cut and two-year interest rates (a good indicator of expected Fed policy over the near future) plunging. And some sensible people I talk to are now warning about financial dominance, in which the Fed puts a higher priority on protecting Wall Street than on stabilizing inflation.

But given the way the banking system is reacting to the S.V.B. affair, there are actually good reasons for the Fed to limit rate hikes, at least for a while. The Fed has been trying to cool off the economy; well, banks’ increased sensitivity to risk and the shift of deposits to more tightly regulated banks will probably cool the economy even if the Fed doesn’t raise rates. Some financial newsletters are even predicting a recession. And market expectations of inflation have, if anything, declined.

The fallout from banking problems has made a murky economic situation even murkier, and it will be a while — maybe forever — before we know whether policymakers made the right call. But I’m hearing a lot of apocalyptic rhetoric right now, none of which seems justified by the available facts."


More words don’t change the basic idea. But thanks for playing our game.

In what world does ‘y’all sheep’ equate to a great motivator?

I guess the Fed supervisors are in the clear as long as they didn’t short SVB.

Can’t say I’m an expert but my guess is the usual motivator which is greed.

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Your original post is a wannabe Edward Everett tribute.

VSWL - a Very Strongly Worded Letter. A bit like a Susan Collins “concerned” tweet

More seriously, there must be a “do this, or else” order, but I don’t know what it’s called.

For something that could lead to a run, the fed is likely in a particularly catch-22 situation. If they make their concerns public, that could plausibly sink a bank right there (especially one with lots of really big, really mobile depositors). If they restrict access to credit facilities to punish the bank, ditto.

What would be ideal would be a Federal Reserve Special Team, with people in suits waking all the bank officers in their bedrooms at home (or elsewhere) at 2AM and gently explaining that they needed to put in place a resolution plan by opening of business, but that probably wouldn’t fly. (OK, also probably wouldn’t actually be ideal, but so tempting.)