Took Them Long Enough

Given the record of self-dealing, opaque investments, Byzantine contracts, and insanely high fees, an increasing number of public pension funds are backing off from their arrangements with private equity firms.

Some U.S. public pension and investment funds are pulling back on private equity after a decade of state and local retirement systems aggressively pursuing the expensive, risky and hard-to-trade asset class.

Maryland’s $65 billion retirement system is investing less new money in private equity. At Alaska’s $77 billion state fund, the investment chief wants to cancel a planned ramp-up. And the $615 million pension fund of Mendocino County, Calif., last month opted against introducing private equity to its investment mix. 

………

Over the past decade, state and local officials committed more money to private-equity managers. Those managers offered supercharged returns on portfolios of private companies that they bought, overhauled and then sold. But public funds had to lock up their money, often for more than a decade, with limited visibility and limited options in the case of losses.

 ………

U.S. pension and investment funds are part of a larger wave of institutional investors pulling back on private equity.

Even if PE firms generated the returns that they promise, the fees (and other gotchas) that they charge make their returns positively pedestrian.

I am not sure how PE managed to create the illusion that they had some sort of special sauce to the pension funds when there is none, I'm thinking various forms of bribery, both legal and illegal, figure prominently.

Tweet of the Day

#BREAKING Troubled, corrupt, sub-Scandinavian European nation of France descends deeper into anarchy with Emmanuel Macron regime instituting bloody clampdown on pro-democracy protests as the strongman battles for survival in country with gruesome history of elite beheadings.

— gathara (@gathara) March 24, 2023

This is an accurate description of going on in France, albeit in terms generally reserved for non-white nations.

IMNSHO, this is a well deserved characterization.

Twitter user Gathara has a whole series of these, and they are amusing and insightful.

After Studiously Ignoring the Story for 57 Years

The New York Times finally gets around to seriously reporting on the worst kept secret of the era, that Ronald Reagan colluded with the Iranian government against the best interests of the United States for electoral advantage.

This is not a surprise. Nixon used Anna Chennault to sabotage the Vietnam peace talks for the same reason in 1968.

I guess treason is OK if you are a Republican:

It has been more than four decades, but Ben Barnes said he remembers it vividly. His longtime political mentor invited him on a mission to the Middle East. What Mr. Barnes said he did not realize until later was the real purpose of the mission: to sabotage the re-election campaign of the president of the United States.

It was 1980 and Jimmy Carter was in the White House, bedeviled by a hostage crisis in Iran that had paralyzed his presidency and hampered his effort to win a second term. Mr. Carter’s best chance for victory was to free the 52 Americans held captive before Election Day. That was something that Mr. Barnes said his mentor was determined to prevent.

His mentor was John B. Connally Jr., a titan of American politics and former Texas governor who had served three presidents and just lost his own bid for the White House. A former Democrat, Mr. Connally had sought the Republican nomination in 1980 only to be swamped by former Gov. Ronald Reagan of California. Now Mr. Connally resolved to help Mr. Reagan beat Mr. Carter and in the process, Mr. Barnes said, make his own case for becoming secretary of state or defense in a new administration.

Lesson 1:  The people holding power in your organization will always f$#@ you to preserve that power, even if it might damage that organization.

What happened next Mr. Barnes has largely kept secret for nearly 43 years. Mr. Connally, he said, took him to one Middle Eastern capital after another that summer, meeting with a host of regional leaders to deliver a blunt message to be passed to Iran: Don’t release the hostages before the election. Mr. Reagan will win and give you a better deal.

Then shortly after returning home, Mr. Barnes said, Mr. Connally reported to William J. Casey, the chairman of Mr. Reagan’s campaign and later director of the Central Intelligence Agency, briefing him about the trip in an airport lounge.

………

Mr. Barnes is no shady foreign arms dealer with questionable credibility, like some of the characters who fueled previous iterations of the October surprise theory. He was once one of the most prominent figures in Texas, the youngest speaker of the Texas House of Representatives and later lieutenant governor. He was such an influential figure that he helped a young George W. Bush get into the Texas Air National Guard rather than be exposed to the draft and sent to Vietnam. Lyndon B. Johnson predicted that Mr. Barnes would become president someday.

Now I want more information on how George H.W. Bush (Papa, not fils) was involved, because there has been discussion of this for decades.

………

Mr. Barnes identified four living people he said he had confided in over the years: Mark K. Updegrove, president of the L.B.J. Foundation; Tom Johnson, a former aide to Lyndon Johnson (no relation) who later became publisher of the Los Angeles Times and president of CNN; Larry Temple, a former aide to Mr. Connally and Lyndon Johnson; and H.W. Brands, a University of Texas historian.

All four of them confirmed in recent days that Mr. Barnes shared the story with them years ago. “As far as I know, Ben never has lied to me,” Tom Johnson said, a sentiment the others echoed. Mr. Brands included three paragraphs about Mr. Barnes’s recollections in a 2015 biography of Mr. Reagan, but the account generated little public notice at the time.

Records at the Lyndon Baines Johnson Library and Museum confirm part of Mr. Barnes’s story. An itinerary found this past week in Mr. Connally’s files indicated that he did, in fact, leave Houston on July 18, 1980, for a trip that would take him to Jordan, Syria, Lebanon, Saudi Arabia, Egypt and Israel before returning to Houston on Aug. 11. Mr. Barnes was listed as accompanying him

………

Mr. Barnes recalled joining Mr. Connally in early September to sit down with Mr. Casey to report on their trip during a three-hour meeting in the American Airlines lounge at what was then called the Dallas/Fort Worth Regional Airport. An entry in Mr. Connally’s calendar found this past week showed that he traveled to Dallas on Sept. 10. A search of Mr. Casey’s archives at the Hoover Institution at Stanford University turned up no documents indicating whether he was in Dallas then or not.

Mr. Barnes said he was certain the point of Mr. Connally’s trip was to get a message to the Iranians to hold the hostages until after the election. “I’ll go to my grave believing that it was the purpose of the trip,” he said. “It wasn’t freelancing because Casey was so interested in hearing as soon as we got back to the United States.” Mr. Casey, he added, wanted to know whether “they were going to hold the hostages.”

………

Suspicions about the Reagan camp’s interactions with Iran circulated quietly for years until Gary Sick, a former national security aide to Mr. Carter, published a guest essay in The New York Times in April 1991 advancing the theory, followed by a book, “October Surprise,” published that November.

………

To forestall such a scenario, Mr. Casey was alleged to have met with representatives of Iran in July and August 1980 in Madrid leading to a deal supposedly finalized in Paris in October in which a future Reagan administration would ship arms to Tehran through Israel in exchange for the hostages being held until after the election.

………

Still, a White House memo produced in November 1991 by a lawyer for President George H.W. Bush reported the existence of “a cable from the Madrid embassy indicating that Bill Casey was in town, for purposes unknown.” That memo was not turned over to Mr. Hamilton’s task force and was discovered two decades later by Robert Parry, a journalist who helped produce a “Frontline” documentary on the October surprise.

Reached by telephone this past week, Mr. Sick said he never heard of any involvement by Mr. Connally but saw Mr. Barnes’s account as verifying the broad concerns he had raised. “This is really very interesting and it really does add significantly to the base level of information on this,” Mr. Sick said. “Just the fact that he was doing it and debriefed Casey when he got back means a lot.” The story goes “further than anything that I’ve seen thus far,” he added. “So this is really new.”

………

But as the years have passed, he said, he has often thought an injustice had been done to Mr. Carter. Discussing the trip now, he indicated, was his way of making amends. “I just want history to reflect that Carter got a little bit of a bad deal about the hostages,” he said. “He didn’t have a fighting chance with those hostages still in the embassy in Iran.”

So, now we know that they did it, and we know that Bill Casey knew about it.  Now we need to what ever actions were taken, because it's clear that these accusations have some merit, and its equally clear that there would have been other avenues pursued as well.

While we are at it, how about taking Reagan's name off of the airport and the carrier.

Hoping for an Alien Abduction Right Now

The Onion writers seeing real life headlines like "Kanye West says he's no longer an anti-semite after watching Jonah Hill in 21 Jump Street" and knowing they could never come up with fake news satire half this absurd: pic.twitter.com/xzSgY5wf5R

— PolarJohan (@PolarJohan15) March 25, 2023

Yes, this story is real, and I no longer want to be on this planet.

Also, writers for The Onion are seriously considering retirement after this.

Kanye West is returning to social media to share an update on his feelings toward Jewish people.

The rapper and fashion mogul, who now goes by Ye, shared a post on Instagram Friday (March 24) claiming that actor Jonah Hill’s performance in 21 Jump Street helped change his views about antisemitism.

“Watching Jonah Hill in 21 Jump street made me like Jewish people again,” Ye wrote alongside a poster for the 2012 comedy, which also starred Channing Tatum. “No one should take anger against one or two individuals and transform that into hatred towards millions of innocent people.”

The rapper added, “No Christian can be labeled antisemite knowing Jesus is Jew. Thank you Jonah Hill I love you.”

As Anna Russel would say, "I'm not making this up, you know."

Just Jumped Out of a Floor 20 Window

And at floor 12, so far, so good.

A note to my reader(s) it was not me wot jumped out of a 20th floor window, it's the world's banking system.

Since Credit Suisse went tits up, we have not had any bank failures of note, though there are some rumblings about concerns with some European and US banks.

I really hope that there is an air bag on floor 1.

More Elections Have Consequence

While Joe Biden's economic team (renominating Jerome Powell, Janet Yellen, etc.) and the foreign relations team (Blinken, Austin, Nuland, etc.) have not been good, those in the areas of consumer protection and antitrust have been pretty good, and none have been better than  Federal Trade Commission Chair Lina Khan, who just proposed a rule that would require vendors to make canceling a service just as easy as signing up.

As it stands right now, you click, "Yes," on a website, and in order to terminate, you have to call an always busy phone line, to get an address to send a letter to request a meeting, and at that meeting they say, "If you don't mind leaving a blood-sample, and a piece of skin off the back of the scalp just here, it's just for identification, you can't be too careful."

Lina Khan wants people to be able to terminate service just as easily as they sign up:

Canceling a subscription should be just as easy as signing up for the service, the Federal Trade Commission said in a proposed "click-to-cancel" rule announced today. If approved, the plan "would put an end to companies requiring you to call customer service to cancel an account that you opened on their website," FTC commissioners said.

The FTC said the click-to-cancel rule would require sellers "to make it as easy for consumers to cancel their enrollment as it was to sign up," and "go a long way to rescuing consumers from seemingly never-ending struggles to cancel unwanted subscription payment plans for everything from cosmetics to newspapers to gym memberships."

………

"The proposal states that if consumers can sign up for subscriptions online, they should be able to cancel online, with the same number of steps. If consumers can open an account over the phone, they should be able to cancel it over the phone, without endless delays," FTC Chair Lina Khan wrote.

………

The proposed rule requires a simple cancellation mechanism for any medium in which a consumer signs up for a service, including Internet, telephone, mail, and in-person. It says:

On the Internet, this "Click to Cancel" provision requires sellers, at a minimum, to provide an accessible cancellation mechanism on the same website or web-based application used for sign-up. If the seller allows users to sign up using a phone, it must provide, at a minimum, a telephone number and ensure all calls to that number are answered during normal business hours. Further, to meet the requirement that the mechanism be at least as simple as the one used to initiate the recurring charge, any telephone call used for cancellation cannot be more expensive than the call used to enroll (e.g., if the sign-up call is toll-free, the cancellation call must also be toll-free). For a recurring charge initiated through an in-person transaction, the seller must offer the simple cancellation mechanism through the Internet or by telephone in addition to, where practical, the in-person method used to initiate the transaction.

The Republican on the FTC finds this necessarily burdensome, because the rights of businesses to screw their customers is a law handed down by the almighty himself, except of course for TikTok.

I am rather surprised that Biden chose so well with Ms. Khan.

Elections Have Consequences: Michigan

Following the adoption of impartial redistricting process, the Democrat Party in Michigan controls both houses of the legislature and the Governor's mansion.

Rather than spending their time trying to appeal to people who literally want to kidnap and execute them, the Dems got down to business in Lansing, and have now repealed the states right-to-work law.  They also repealed the decades old state abortion ban, passed gun control legislation, added LGBTQ to the list of classes protected from discrimination.

This is good policy and good politics, but all too often, "Moderates" in the party apparatus who want to suck up to the Chamber of Commerce and try to renege on these promises, with the inevitable electoral disaster to follow.

You win an election, you deliver what you promise, and if possible you engage in activities that secure the support of the electorate, things like this repeal:

For several decades now, a basic political dynamic has recurred in Washington. Afforded political power, Republicans push their agenda as fiercely and aggressively as possible, using every tool at their disposal. Among Democrats, something like the opposite is more typically the case. Awarded a sweeping mandate in 2008 and a governing trifecta in 2009, to take a recent example, Barack Obama and his administration refused to go to the mats for the public option for health care, refrained from overhauling America’s financial system, and backed away from promised reforms that would have made it easier for workers to organize unions.

. ………

Elected with their own governing trifecta last November — the first of its kind in forty years — state Democrats are now, refreshingly, pursuing a version of Snyder’s strategy in reverse. In a single day alone, ignoring the anguished cries of their Republican counterparts, Michigan’s Democrat-controlled legislature passed a new gun control law, voted to repeal the state’s unenforceable abortion ban, and enshrined protections for LGBTQ citizens. Significantly, legislation to end the state’s Snyder-era right-to-work law was just passed through the Michigan house and senate and is now on its way to Governor Gretchen Whitmer’s desk for approval.

.………

Elected Democrats winning political power and wielding it to expand basic rights while rolling back draconian legislation imposed by the Right. What a thought. 

Indeed.  People don't vote for the civility fairy, they want their elected officials to kick ass and take names, and will support those politicians who do so.

Support Your Local Police

Oh, the Poor Delicate Snowflakes

So, cops raided rapper Afroman's (Joseph Foreman) home with guns srawn, terrorized his wife and kids, broke his front door, vandalized his home security system so he would have no record of their search, possibly stole $400 in cash, and ATE THE LEMON POUND CAKE IN HIS KITCHEN, found nothing.  (As Anna Russel would say, "I'm not making this up, you know.")

No charges were ever filed

In response, Afroman used the footage from his home security system and his wife, and made a number of rap videos featuring the footage, so the delicate snowflakes at the Adams County Sheriff’s Office are suing, claiming that they have suffered mockery and emotional distress when the videos when viral.

F$#@ them with Cheney's Dick.

You raided his house, broke in his door, vandalized his home security system, and ate his cake, but their poor delicate feelings are hurt:

Seven Ohio cops who raided a rapper known as Afroman’s house last summer are now suing the rapper after Afroman made music videos using footage from the raid. The Adams County Sheriff’s Office police officers allege that the rapper is profiting off unauthorized use of their likenesses, not only in the music videos but also on merchandise created after Afroman’s social media posts and music videos went viral on platforms like TikTok and Instagram.

Cops suing say they’ve been subjected to death threats, ridicule, reputation loss, embarrassment, humiliation, emotional distress, and other alleged harms and will continue to suffer unless the court forces Afroman to destroy all the merchandise and posts bearing their likenesses.

They are suffering from very well deserved, "Ridicule, reputation loss, embarrassment, humiliation, emotional distress, and other alleged harms".

Ars couldn’t immediately reach Afroman, whose real name is Joseph Foreman, for comment, but Vice talked to him in January. Afroman told Vice that after the raid, he suffered, too, losing gigs and feeling powerless. He decided to create music videos for songs called “Lemon Pound Cake,” “Why You Disconnecting My Video Camera,” and “Will You Help Me Repair My Door” to reclaim his good name.

The cops’ warrant shows that officers conducted the raid to seek evidence of “drug possession and trafficking, as well as kidnapping,” The Guardian reported, but no evidence was found, and no charges were issued against Afroman.

Afroman was not present during the raid, and his music videos relied on security camera footage and videos shot by his wife on her phone. The rapper claims that police destroyed his property and seized $400. “I felt powerless yet angry," he told Vice. "These guys can destroy my property and I literally couldn’t do nothing about it.”

He said that releasing the music videos was his only way to process these feelings and that he was shocked when the videos went viral. “The only thing I could do was take to my pen and sing about the injustice,” Afroman told Vice. “And to my surprise, it’s going over well!”

. ………

Now, it seems that officers have reached their breaking point after months of alleged public ridicule, with each demanding at least $25,000 in damages on five separate counts in their complaint against Afroman. Ohio law bans the use of an individual’s persona—such as Afroman's use of officers' faces in videos and on T-shirts—for commercial purposes without authorization.

“Personas of the plaintiffs were not used by defendants in connection with any news, public affairs, sports broadcast, or political campaign, and their unauthorized use of plaintiffs' personas for commercial purposes was not justified or excused,” their complaint said. It also alleged that Afroman violated officers’ right to privacy and made false statements.

According to the complaint, Afroman appeared in an interview on VLADTV, where he “admits to using images and clips from the search in videos and promotion.” Clips include officers asking for a piece of lemon pound cake and dismantling a security camera to prevent more footage. They’re asking a jury to award damages and require Afroman to stop using their likenesses in his videos and promotional materials. They also want him to delete “dozens of videos and images” posted on “various social media platforms, including Facebook, YouTube, Snapchat, TikTok, and Instagram.”

Among these social media posts that cops said would offend a reasonable person is an Instagram post showing one officer, Shawn Cooley, who is seen in the raid footage asking for a piece of pound cake. The post shows Afroman wearing a shirt with Shawn Cooley’s face next to Family Guy’s Peter Griffin with a caption that says, "Good Morning Ladies!!! What up Fellas??? Congratulations to Police Officer Poundcake. Thank you for getting me 5.4 MILLION hits on TikTok. I couldn't have done it without you obviously! Congratulations again; you're famous for all the wrong reasons.”

Afroman told Vice that he considered the raid harassment and that his music videos were meant to raise awareness of an alleged pattern of abuse, saying that “sheriff's officers in this county have been doing people dirty for a very long time and getting away with it.” 

First, there is no expectation of privacy when police engage in an official action, particularly when they are engaging in a swatting a house.

Also, this is newsworthy, and his rap videos are arguably news reporting, and so his use is probably protected under the first amendment.  Also, filming police in the execution of their duties is specifically protected under the first amendment as well, as has been decided multiple times across multiple courts.

The law that they are suing under has specific exemptions for news, and breaking down the door of a man whose songs had charted in the US and around the world is pretty explicitly newsworthy.

Also, it appears that the statute that they are suing under has an exemption for literary and musical work.

The above legal opion, along with the conclusion that their argument would have the effect of banning the use of home security cameras in Ohio, are not a product of my lack of legal expertise.  This came from lawyer Steve Lehto who did a YouTube about this.

Here is hoping for a summary judgement and sanctions against the cops and their lawyers.

Bye, Felicia!

Howard Schultz, long time head of Starbucks and a union busting son of a bitch, is stepping down as CEO of the coffee giant. (again)

He's leaving 2 weeks early, just before the annual meeting, and just before he testifies before Congress.

His behavior over the years has been appalling, and over the past few years, as the union organizing efforts at Starbucks has expanded, he has destroyed the company's reputation among its customers and his employees (sorry, "partners") almost as thoroughly as Carly Fiorina destroyed HP.

Here's hoping that his both as a corporate executive and as a political candidate, (he [sort of] ran for President in 2029) is over forever.

The man is a cancer on society:

On Monday, interim Starbucks CEO Howard Schultz stepped down from his position about two weeks ahead of his previously announced schedule — and three days before the company’s annual shareholder meeting. Schultz will be testifying under oath on the national stage next week about the company’s labor practices under him and his predecessors. The outgoing executive only agreed to testify under threat of a subpoena from Senator Bernie Sanders, who called Schultz out publicly in his position as head of the Senate Committee on Health, Education, Labor and Pensions.

My guess is that he was pushed, and he was told that if he were still CEO at the shareholders' meeting he would be subject to. [unfortunately only] metaphorical poo flinging, so it was best for him to exit early.

………

Schultz portrays himself as a working-class kid from the Brooklyn projects who grew up to found a $100-billion-plus company and become a billionaire himself. He lived the American dream, and he did it while supposedly maintaining progressive values at the company, like LGBTQ friendliness, health insurance for part-timers, fair treatment for people of color, and more. He even wants you to know that he cares deeply about his company’s workers.

………

But if that image reflected the reality for Starbucks baristas, large numbers of them wouldn’t be on Medicaid or without a living wage. And they wouldn’t be organizing unions in mass numbers, as they have been recently, and calling attention to Schultz’s own abuses and that of the company under his tenure.

In reality, Schultz is a CEO who fights unions and their first contract. He has opposed his workers’ attempts to secure their rights and well-being, with Starbucks illegally undermining its own workers’ rights hundreds of times for decades under his influence and leadership.

In the past year and a half alone, Starbucks has closed stores where workers were in the middle of union drives, closed stores that already had unionized, cut workers’ hours, offered benefits and raises to nonunion stores, held captive-audience meetings at which managers bully and intimidate workers with anti-union messages, and much more, creating a climate of retaliation.

………

Because of the work of SBWU and allies like other labor organizations and Senator Sanders, Schultz is now among the best known union-busters in the country. The idea of him heading the Department of Labor as a progressive choice wouldn’t pass the laugh test at this point. One hopes that other union-busting CEOs are similarly put through the ringer by the labor movement.

Howard, your coffee sucks.  It tastes like a charcoal briquette , and you suck even worse.

I hope Bernie Sanders flays you alive at the hearings.

And Now on to Credit Suisse

In response to years of mismanagement, with a side order of money laundering, Credit Suisse was subject to a forced sale to UBS with a backstop from the Swiss government to the tune of ₣12,500 ($13,00.00) for every man, woman, and child in Switzerland, a total of ₣109,000,000,000.00.

But it's not a bailout, because ……… The Aristocrats!

There is not a whole bunch that I can add to the immediate cause of all of this, that Credit Suisse was a corrupt and poorly run bank was a not particularly well kept secret for years.  (The same goes for Deutsche Bank, but it's not in crisis ……… so far ……… today)

It's been experiencing a slow-walked bank run for the past 2-3 years, and SVB's collapse turned that into a rout.

Adam Tooze has an interesting take on all this, which is that Switzerland, specifically Zurich, and he calls out the, Zurich based liberal elites, (Liberal in the 19th century hyper-capitalist sense) specifically,  their efforts, "To build corporate champions of global scale on the basis of the incestuous networked politics of Switzerland."

It is a rather interesting  take on all of this, but I am more inclined to believe that this, much like Silicon Valley Bank's failure, is more an artifact of our corrupt and risky international financial amusing.

There is a bit of Shadenfreude in all of this though,

The Swiss Bank's failure looks to be turning one of the constants in bankruptcy on its head.

Typically, the shareholders are at the very end of the line as debtors, but in the case of Credit Suisse, Contingent Convertibles (CoCo) bond holders are behind the shareholders, which is creating outrage from people who neglected to read the specific terms of those bonds, which means that as opposed to getting a major haircut, they are getting nothing:

One of the elements in the takeunder by UBS of Credit Suisse was that CHF 16 billion (about $17.3 billion) in CoCo bonds got wiped out totally, while shareholders got wiped out only almost totally. Swiss regulator FINMA, when announcing the deal on Sunday, said that CoCo bonds would be written down to zero, in a sense subordinating bondholders to shareholders, which is like a total no-no very-bad-boy thing to do, because normally, shareholders would get totally wiped out first, and then bond holders would start taking their turn.

Turns out, there were some clauses in the documents of the CoCo bonds, issued in Switzerland, that allowed this under certain conditions and triggers. But no one ever reads any clauses, and so it came as a surprise, shaking up the $275 billion market for these creatures that came out of the swamp of the Financial Crisis.

What are Additional Tier 1 CoCo bonds?

CoCos – short for “contingent convertible capital instruments,” also known as Additional Tier 1 (AT1) bonds – were created in Europe in response to the financial crisis as a way to boost bank capital without diluting existing shareholders. Before, a bank would have to sell shares to raise capital, thereby diluting existing shareholders. With this instrument, they could weasel their way around selling shares and still raise capital for regulatory purposes. 

………

Credit Swiss has been teetering on the brink for years. It has been hobbling from scandal to scandal, each time losing billions of francs along the way, and each time, its shares got beaten to a new record low. And all along the way, new investors were bamboozled into investing billions of dollars in this thing to boost its capital and keep it alive. And the money just vanished. The culture of risk-taking and doing shady deals was something that could apparently not be changed by the CEOs that came and went. Or they didn’t want to change it – despite rhetoric to the contrary – because they were focused on boosting the share price or whatever. The SNB wouldn’t let it collapse, and regulators didn’t force it to straighten out. But a lot of losses to the Swiss public and investors could have been avoided if this creature had been taken out the back and shot years ago.

Please, won't someone think of the investment bankers? 

They have a mistress, a rent boy, and cocaine habit to support.

The idea that they should have to find honest work shocks the conscience.

Oh the hu……… Well, you know.

Thursday Jobless Report

Initial claims were basically unchanged, dropping to 191,000 from last week's 192,000, seasonally adjusted.

Worker filings for unemployment benefits held nearly steady last week, showing that the broader labor market remains robust despite large companies announcing layoffs.

Initial jobless claims, a proxy for layoffs, decreased slightly by 1,000 to a seasonally adjusted 191,000 last week, the Labor Department said Thursday.

The level of claims fluctuated earlier this month, in part because of school closures, but broadly remains historically low. The four-week average of weekly claims, which smooths out volatility in the weekly numbers, edged lower last week to 196,250.

………

Continuing claims, a proxy for the total number of ongoing unemployment-benefits payments, increased by 14,000 to 1.69 million in the week ended March 11. Continuing claims are reported with a one-week lag.

The level of insured unemployment is somewhat elevated from a low point of about 1.3 million last spring. Modestly elevated continuing claims could be a sign some beneficiaries are taking longer to find new jobs.

So, notwithstanding the tech layoffs, which I think are more herd mentality juicing executives stock options than anything else, we are not seeing an uptick in job losses.

Also, as I have noted before, I think that the Covid-19 pandemic has screwed up the seasonal adjustments, so we may be seeing some effects from that.

¯\_(ツ)_/¯

Nae True Scotsman*

In Australia, the Select Committee on Foreign Interference (Talk about setting something up with a preordained conclusion) commissioned a study which concluded that (surprise) TikTok is not really a privately owned firm, but rather an arm of the government of China.

Of course, this means that the app can be banned, or its domestic assets expropriated, through legislative or executive action without any involvement of the courts, despite the general consensus amongst the powers that be in the West† we continue to maintain that our economic system depends not only depends on the rule of law to private businesses, but that it relies on giving private businesses extra-legal rights through trade deals and secret kangaroo courts.

The hypocrisy here is stunning:

ByteDance, the Chinese developer of TikTok, "can no longer be accurately described as a private enterprise" and is instead intertwined with China's government, according to a report [PDF] submitted to Australia's Select Committee on Foreign Interference through Social Media.

The report, by a quartet of researchers, was hailed as "the most comprehensive exploration yet of the CCP's ties to TikTok" by Brendan Carr, commissioner of the United States' Federal Communications Commission. India's IT minister Rajeev Chandrasekhar retweeted Carr's remarks.

The report alleges that China's government noticed as Douyin – the Chinese version of TikTok – boomed. Beijing then commenced a campaign employing its "legal and extra-legal mechanisms for influencing, coercing and controlling China's nominally privately-owned technology companies."

ByteDance has since become a publisher of state propaganda and built surveillance and analytics capabilities that make both Douyin and TikTok a tool China could use to profile individuals. In the words of the report's authors, this leaves ByteDance as "a 'hybrid' state-private entity."

How remarkably convenient.

How remarkably self-serving.

You would have to be an idiot to trust that Bytedance/TikTok would keep your personal information safe, just as you would for Twitter, or Instagram, or Google/Youtube, or WhatsApp,, or the criminal enterprise formerly known as Facebook™.

Honestly, I'm not sure who I trust less, the Chinese Communist Party, or domestic social media apps that have been shown repeatedly to lie about your privacy for a few bucks.

^*There is a concept in philosophy called the, "No True Scotsman," fallacy. Basically, you redefine reality to fit the facts. So if I say, "No Scotsman puts sugar on their porridge," and you say, "My Uncle Angus McTavish puts sugar on his porridge," I respond, "He's no true Scotsman."

^†Yes, I know, Australia is actually pretty far east to be called the west, but culturally and economically, it is the west, and buys into the Neoliberal sanctity of private property at all cost bullsh$#.

Speaking of Rich Poxes on Humanity

Jack Dorsey, under whose leadership Twitter turned into a cesspool of hate and bigotry, (now being made even worse by Elon), is is now being targeted by notorious short seller Hindenburg over the allegedly fraudulent practices of his company Block, the mobile payments processor formerly known as Square.

Allegedly, the company has been evading anti-money laundering statutes, over-reporting the number of users that it has, and predatory lending.

Not a huge fan of short sellers, but here's hoping that they take Dorsey to the cleaners:

Shares of the payments company formerly known as Square fell about 15% on Thursday after a short seller questioned the company’s user numbers and accused it of predatory tactics.

Hindenburg Research said a two-year investigation into Block Inc. found the company “obfuscates” its Cash App service’s true user numbers by reporting misleading metrics “filled with fake and duplicate accounts.” It also accused the company of taking advantage of the demographics it claims to serve—lower-income people and minorities—with “predatory loans and fees.”

Hindenburg’s report is “factually inaccurate and misleading” and “designed to deceive and confuse investors,” Block said in a statement. The company also said it was exploring legal action against the short seller.

Short sellers profit when a stock falls. They do this by borrowing stocks that they believe are overvalued, selling them, and buying them back later at a lower price.

………

Block is best known for its signature white credit-card readers that let businesses accept payments with a smartphone or tablet, though its Cash App peer-to-peer payment service has been a key driver of the company’s growth in recent years. The ease with which Block made it possible for people to accept stimulus checks and unemployment benefits in Cash App during the Covid-19 pandemic helped turbocharge its usage.

………

Hindenburg said much of Cash App’s pandemic-induced growth came from facilitating suspect payments. Public records Hindenburg requested from states including Massachusetts and Ohio showed that a bank that partners with Cash App had a disproportionate number of suspect payments for unemployment benefits. Former Cash App employees that Hindenburg interviewed estimated that a large portion of Cash App accounts were potentially fake, raised red flags for fraud or were connected to a single real person.

Cash App’s compliance controls were another target for Hindenburg. The short seller cited court documents in which law-enforcement agencies said criminals used Cash App to move drug money or pay for sex trafficking. A Baltimore gang even named itself Cash App, Hindenburg said. Members of the gang pleaded guilty to drug charges.

………

“Block has misled investors on key metrics, and embraced predatory offerings and compliance worst-practices in order to fuel growth and profit,” Hindenburg said in its report.

Hindenburg called attention to investigations from the Consumer Financial Protection Bureau and many state attorneys general into Cash App’s business practices, including its handling of customer complaints and disputes. Block disclosed those matters in securities filings and said the CFPB’s investigative requests were “overly burdensome” in court documents.

Nathan Anderson’s Hindenburg has previously targeted companies including Nikola Corp., the electric truck maker whose founder was later convicted of securities fraud, and Indian conglomerate Adani Group.

There really is a culture of criminality at the core of America's tech sector.  It started small, things like Jobs and Woz phone phreaking, and now you crap like Tharanos, false claims of self driving cars, counterfeit users, and dubious claims of profitability.

If a prosecutor were to get medieval on the sector, particularly the VCs who promulgate the frauds and get out before they collapse, perhaps our allocation of capital, and our society, would be more productive.

Trying to Catch a Falling Knife, and Failing

The beatings will continue until the morale improves

So, the Federal Reserve only raised its benchmark Federal Funds rate by 25 basis points (¼%) today.

They are attempting to forestall a wage price spiral, one which is not remotely close to actually happening, given that inflation is was at 6%, while wage growth was only 3.6% year over year.  (Lower wage workers are doing better than that, so there has been some compression in wages [a good thing] but that is irrelevant to the inflation argument)

The Fed is in a tough position, because they have to choose between overreacting to inflation, which is what they get praised for, and not torpedoing the banks, who are their real "customers", who stand to suffer major losses and potential liquidity crises from their portfolios of hold to maturity bonds:

The Federal Reserve approved another quarter-percentage-point interest-rate increase but signaled that banking-system turmoil might end its rate-rise campaign sooner than seemed likely two weeks ago.

The decision Wednesday marked the Fed’s ninth consecutive rate increase aimed at battling inflation over the past year. It will bring its benchmark federal-funds rate to a range between 4.75% and 5%, the highest level since September 2007.\

Fed Chair Jerome Powell said officials had considered skipping a rate hike after banking stress intensified last week. And he hinted that Wednesday’s increase could be their last one for now depending on the extent of any lending pullback that follows a bank run earlier this month. Regulators shuttered Silicon Valley Bank and a second institution, Signature Bank, two weeks ago, and bailed out uninsured depositors to stave off a panic. 

History rhyming

While all this is going, we are seeing home prices falling YoY for the first time in 11 years, and if that does not bring back memories of the great recession, you were probably pretty f$#@ing young, or in a coma, at the time.

The first year-over-year drop in home prices in more than a decade and a dip in mortgage rates snapped a yearlong streak of declining monthly home sales, showing the effects of the Federal Reserve’s campaign to raise interest rates.

Sales of previously owned homes, which make up most of the housing market, rose 14.5% in February from the prior month, but were down 22.6% from a year earlier, the National Association of Realtors said Tuesday. Sales had decreased for 12 consecutive months through January.

………

Buyers benefited from a slight improvement in affordability as home prices ticked lower and mortgage rates eased from a 20-year high touched last fall.

The national median existing-home sale price fell 0.2% in February from a year earlier to $363,000, the first year-over-year decline since February 2012. Median prices, which aren’t seasonally adjusted, were down 12.3% from a record high in June.

Mortgage rates topped 7% in November, but fell to near 6% in early February, before fluctuating in recent weeks.

Note that this was all before Silvergate, and Silicon Valley Bank, and Signature Bank all struck an iceberg and sank.

In related news, it appears that a lot of money, something north of ½ trillion dollars has been sucked from banks over the past few years though a facility that the Federal Reserve has offered called reverse repo. 

Basically, instead of offering financial instruments for quick cash, banks and money market funds (the high fiance type, not the savings accounts at your bank that offer an additional ½% interest and require you to maintain a high balance)

This facility was intended by the Fed to help wind down their quantitative easing (printing money and giving it to Wall Street criminals) in a relatively orderly manner.

Instead, deposits in banks are down 3% as a result, meaning that banks have less, not more cash in reserve.

This one we can blame Ben Bernanke for, he initiated the program, not Jerome Powell.

Linkage

• We’ve won our lawsuit over Matt Hancock’s £23m NHS data deal with Palantir (openDemocracy) I'd sooner give my personal medical data to Dick Cheney than I would to Peter Thiel's spy machine.
  
• Noam Chomsky: The False Promise of ChatGPT (New York Times) While better known of his radical politics, Chomsky's day job is as one of the world's foremost linguist and cognitive scientist.  He understands what ChatGPT is, and it ain't language any more than a parrot has language.
  
• Growing Banking Crisis Caused by Contagion from Silicon Valley Bank Failure Going to Get Worse, Inevitable Due to Federal Reserve Policies (Better Markets) An explanation of how the Fed's aggressive rate increases are threatening to create a plethora of bank failures. (What I mentioned earlier, only better written)
• Nord Stream Mystery: Tanker Minerva Julie Spent 7 Days Near Attack Site (Business Insider) Drip, drip, drip.  I don't know where Sy Hersh's scoop is going to lead, but it's definitely leading somewhere.
  
• What’s In a Full English Breakfast? Don’t Ask the English (Wall Street Journal) This is the most wholesome provocation to fisticuffs I have heard from in a while.
  
• ‘Orchestrated PR campaign’: how skinny jab drug firm sought to shape obesity debate (The Guardian) When drug companies say tat they need their obscene profits to invest in the future, this is what they invest in.
  
• When cats go goblin mode, these owners take pet-proofing to extremes (Washington Post) I, for one, welcome out feline overlords.
  
• Users, advertisers – we are all trapped in the ‘enshittification’ of the internet | John Naughton | The Guardian Cory Doctorow's neologism has made it to the mainstream, or at least the Grauniad.
• 10 Bizarre Moments From a Real Wedding in a Taco Bell Metaverse (Gizmodo) I no longer want to live on this planet.

An unlimited source of energy:

I Can Haz Prosecushuns?

After being told to preserve records by the US Department of Justice, Google continued to have its chats auto-delete in direct contravention of those instructions.

At this point, it's not enough to make them pay a few bucks, that is just a cost of doing business.  You need to frog-march executives out of their offices in handcuffs:

Google defended its use of "history-off chats" for many internal communications, denying the US government's allegation that it intentionally destroyed evidence needed in an antitrust case. The history-off setting causes messages to be automatically deleted within 24 hours.

The US government and 21 states last month asked a court to sanction Google for allegedly using the auto-delete function on chats to destroy evidence and accused Google of falsely telling the government that it suspended its auto-deletion practices on chats subject to a legal hold. Google opposed the motion for sanctions on Friday in a filing in US District Court for the District of Columbia.

Google said it uses a "tiered approach" for preserving chats. "When there is litigation, Google instructs employees on legal hold not to use messaging apps like Google Chat to discuss the subjects at issue in the litigation and, if they must, to switch their settings to 'history on' for chats regarding the subjects at issue in the litigation, so that any such messages are preserved," the Google filing said.

So, they f$#@ing pinky swear not to use the self-destructing chats.  Bullsh$#.

There is a requirement when such a request is made to actively preserve documents, not send out a quiet memo saying, "If you are using chat, and your discussion involves what we are being sued about, please try to remember to turn off the auto-delete function."

………

Google's filing came in response to the US arguing that Google should have disabled auto-delete by default instead of "abdicat[ing] its burden to individual custodians to preserve potentially relevant chat."

"Google consciously failed to preserve relevant evidence. The daily destruction of relevant evidence was inevitable when Google set a company-wide default to delete history-off chat messages every 24 hours, and then elected to maintain that auto-delete setting for custodians subject to a litigation hold," US Justice Department of Justice antitrust lawyers told the court on February 23.

The US and states' lawsuit against Google was filed in October 2020 and alleges that Google illegally maintains monopolies in the markets for search and search advertising through anticompetitive and exclusionary practices. The US said Google "had a duty to preserve employee chat messages" starting in 2019 when it became clear that litigation was imminent.

They could have literally just flipped one switch, and the chats would have been preserved for a total cost measured in pennies.

Also, Google lied about it:

The Justice Department's motion last month said things happened very differently. "Google systematically destroyed an entire category of written communications every 24 hours" for nearly four years, the government motion said, continuing:

All this time, Google falsely told the United States that Google had "put a legal hold in place" that "suspends auto-deletion." Indeed, during the United States' investigation and the discovery phase of this litigation, Google repeatedly misrepresented its document preservation policies, which conveyed the false impression that the company was preserving all custodial chats. Not only did Google unequivocally assert during the investigation that its legal hold suspended auto-deletion, but Google continually failed to disclose—both to the United States and to the Court—its 24-hour auto-deletion policy. Instead, at every turn, Google reaffirmed that it was preserving and searching all potentially relevant written communications.

The history-off chats are also a subject of dispute in a separate lawsuit filed by Epic Games, which alleged that Google illegally monopolized the market for distribution of mobile apps and mobile app payment processing on Android. Epic filed a motion to sanction Google for alleged spoliation of evidence in October.

It's clear that Google has been setting its internal chats to auto-destruct by default after 24 hours specifically to obstruct any investigation or lawsuit.

Setting the chats up to do so destroys a significant amount of the utility to their use, because you have no record on Wednesday regarding what you were told on Monday.

Lock them up.

 

Lab Leak, My Flabby White Ass

We just got some more genetic background on the origins of Covid-19, and it appears that the a precursor to human infection was in a fox-like canid known as a raccoon-dog:

For three years now, the debate over the origins of the coronavirus pandemic has ping-ponged between two big ideas: that SARS-CoV-2 spilled into human populations directly from a wild-animal source, and that the pathogen leaked from a lab. Through a swirl of data obfuscation by Chinese authorities and politicalization within the United States, and rampant speculation from all corners of the world, many scientists have stood by the notion that this outbreak—like most others—had purely natural roots. But that hypothesis has been missing a key piece of proof: genetic evidence from the Huanan Seafood Wholesale Market in Wuhan, China, showing that the virus had infected creatures for sale there.

Now, an international team of virologists, genomicists, and evolutionary biologists may have finally found crucial data to help fill that knowledge gap. A new analysis of genetic sequences collected from the market shows that raccoon dogs being illegally sold at the venue could have been carrying and possibly shedding the virus at the end of 2019. It’s some of the strongest support yet, experts told me, that the pandemic began when SARS-CoV-2 hopped from animals into humans, rather than in an accident among scientists experimenting with viruses.

“This really strengthens the case for a natural origin,” says Seema Lakdawala, a virologist at Emory University who wasn’t involved in the research. Angela Rasmussen, a virologist involved in the research, told me, “This is a really strong indication that animals at the market were infected. There’s really no other explanation that makes any sense.”

 So, they were eating these raccoon-dogs?  Eww.

………

The samples were already known to be positive for the coronavirus, and had been scrutinized before by the same group of Chinese researchers who uploaded the data to GISAID. But that prior analysis, released as a preprint publication in February 2022, asserted that “no animal host of SARS-CoV-2 can be deduced.” Any motes of coronavirus at the market, the study suggested, had most likely been chauffeured in by infected humans, rather than wild creatures for sale.

The new analysis, led by Kristian Andersen, Edward Holmes, and Michael Worobey—three prominent researchers who have been looking into the virus’s roots—shows that that may not be the case. Within about half a day of downloading the data from GISAID, the trio and their collaborators discovered that several market samples that tested positive for SARS-CoV-2 were also coming back chock-full of animal genetic material—much of which was a match for the common raccoon dog, a small animal related to foxes that has a raccoon-like face. Because of how the samples were gathered, and because viruses can’t persist by themselves in the environment, the scientists think that their findings could indicate the presence of a coronavirus-infected raccoon dog in the spots where the swabs were taken. Unlike many of the other points of discussion that have been volleyed about in the origins debate, the genetic data are “tangible,” Alex Crits-Christoph, a computational biologist and one of the scientists who worked on the new analysis, told me. “And this is the species that everyone has been talking about.”

Finding the genetic material of virus and mammal so closely co-mingled—enough to be extracted out of a single swab—isn’t perfect proof, Lakdawala told me. “It’s an important step; I’m not going to diminish that,” she said. Still, the evidence falls short of, say, isolating SARS-CoV-2 from a free-ranging raccoon dog or, even better, uncovering a viral sample swabbed from a mammal for sale at Huanan from the time of the outbreak’s onset. That would be the virological equivalent of catching a culprit red-handed. But “you can never go back in time and capture those animals,” says Gigi Gronvall, a senior scholar at the Johns Hopkins Center for Health Security. And to researchers’ knowledge, “raccoon dogs were not tested at the market and had likely been removed prior to the authorities coming in,” Andersen wrote to me in an email. He underscored that the findings, although an important addition, are not “direct evidence of infected raccoon dogs at the market.” 

This is really not a surprise.  The Wuhan Institute of Virology is over 15 km from the wet market, and the evidence now is that there were multiple outbreaks at the wet market before the disease, "Took."

The allegations that this is the product of some sort of bio-weapons lab, or of some sort of gain-of-function research is laughable.

The idea that the virus miraculously jumped 15km ……… at least twice, and skipped the intervening distance, or that it jumped 4km from the China CDC lab (which does not do gain-of-function research) ……… at least twice, and skipped the intervening distance, is absurd.

It's black helicopter sh$#.

Well, Here's A Surprise

Nothing to see here, move along

As Silicon Valley Bank was circling the drain, it was engaging in an orgy of loans to insiders.

Looting much? 

The executives at this bank need to have their lives and their finances investigated with an eye toward criminal prosecutions.

I would suggest that they also add a proctologist to the team:

As Silicon Valley Bank deteriorated late last year and regulators began internally flagging flaws in its risk management, the lender opened up the credit spigot to one group: insiders.

Loans to officers, directors and principal shareholders, and their related interests, more than tripled from the third quarter last year to $219 million in the final three months of 2022, according to government data.

That’s a record dollar amount of loans issued to insiders, going back at least two decades.

The surge in loans to high-up figures may draw scrutiny as the Federal Reserve and Congress investigate the breakdown of Silicon Valley Bank, the biggest US bank collapse in more than a decade. The firm — one of three US lenders to fall this month — collapsed after investors and depositors tried to pull $42 billion in a single day and it failed to raise capital to shore up its finances.

May draw scrutiny?  How about "Should"?

………

The Fed takes enforcement action, or refers violations to other regulators, if it finds problems with these loans, said a spokesperson for the central bank, which oversaw SVB before its collapse. A representative for the Federal Deposit Insurance Corp., the receiver for the bank, didn’t respond to a request for comment.

Before regulators seized Silicon Valley Bank on March 10, it had a reputation as the go-to lender for tech companies and the venture capital firms that seeded them. The Fed’s interest-rate hikes last year took a toll on the lender, whose liquidity was tied up in longer-term government bonds that lost value in that environment. 

………

In its most-recent proxy statement, SVB Financial Group, the parent company of Silicon Valley Bank before its collapse, said it made loans last year to related parties including “companies in which certain of our directors or their affiliated venture funds are beneficial owners of 10% or more of the equity securities of such companies.”

The bank issued the loans in the normal course of business, and with similar interest rates and collateral as other customers received around the same time, according to the filing. Still, loans in other categories such as real estate and commercial grew at a much slower rate — just over 3% — than those issued to insiders, according to data in separate government reports.

I want to see some prosecutions.  

In fact, I think that this should be a jumping off point to a REALLY a deep dive into the finances of all of Silicon Valley.

There is a lot of slime under a lot of rocks there.

Tweet of the Day

At this point I really welcome Aliens pic.twitter.com/Ge66zMU8DI

— Tired (@EndemicPrepared) February 13, 2023

.I so want this as a T-Shirt.

Capitalism, You Gotta Love It

As a result of sanctions against Russia that prohibit overflights from Russian airlines, US, Canadian, and many European airlines are prohibited from overflying Russia, with the inevitable result that other airlines, particularly from China and India, are eating US carrier's lunch on long haul flights to Asia and the Middle East.

In response, US airlines are looking for legislation or regulation to ban airlines that do not have these restrictions from flying to the United States.

Seriously, where are the airlines sense of patriotism? 

They're just looking for another bailout, and they will probably misuse this one just as much as they did the Covid bailout.

This is a Betrayal

Joe Biden has signed the bill overturning Washington, DC's update to its criminal code, all while claiming that he really supports DC sovereignty.

If you only support the rights of the citizens of Washington, DC when it is politically expedient, you do not support the rights of the citizens of Washington, DC.

A The Bank Clusterf$# So Far

This is truly incredible.

Here is an exchange with Senator James Lankford & Yellen.

He asks, "Will every community bank ... get the same treatment as SVB?"

Yellen: "Banks only get the treatment if ... the failure to protected uninsured depositors would create systemic risk." pic.twitter.com/JvAX3Hhb6F

— unusual_whales (@unusual_whales) March 17, 2023

Yellen trying to obfuscate.

NYT buries this $2 trillion stunner 7 paragraphs down, they really have the art of the buried lede down like no one https://t.co/kx0bakBJat

— Mark Ames (@MarkAmesExiled) March 16, 2023

$2,000,000,000,000.00? Pretty soon are talking about real money!

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Memes be here

Meet Joe Gentile.
He worked at Arthur Andersen when that firm co-conspired in Enron & WorldCom scams (whoops).
Then CFO at Lehman (whoops again)
Now a big wig at SVB (c'mon... GTFOH).

In Banking, criminality is a resume' enhancer. #capitalism pic.twitter.com/B54Zj9vRYa

— The Other Son (@KeithRuscitti) March 13, 2023

Talk about failing up.

This is wild. Particularly the part where he says "my friends and I coordinated a bank run" followed by "so then I bought shares of the bank thinking I could profit off the run". pic.twitter.com/67iwCrE6yj

— @chimeracoder@mastodon.social🦦 🏳️‍🌈 (@chimeracoder) March 12, 2023

And here we have the ghouls speculating

Where can I order this shirt ? pic.twitter.com/EqBroqiND7

— Luke Hubbard (@LukeInTH) March 13, 2023

I want this shirt too, so much!

SVB isn't the first time Peter Thiel got his billions out before the bottom collapsed w/ @Acosta pic.twitter.com/d1Ws3uw44m

— Jon “Night🧢” Sarlin (@jonsarlin) March 12, 2023

Thiel again?

pic.twitter.com/hjwW0EMkNv

— Freezing Cold Finance Takes (@FreezingFinTake) March 13, 2023

The prophecies of Nostra Dumb-Ass

Note that I will not be discussing Credit Suisse here, I will break that out separately, because, wowzers, this is a long post.

First, I would note that the right hand column will be graphs and videos that provide information, and then there will be a divider, and it will be memes and other weird sh$#.

Next, and you can see the video up top, Senator James Lankford (R-OK) opens up a well deserved can of whup ass, when he notes that the response of Treasury, the FDIC, and the Federal Reserve, was to raise insurance premiums on ALL banks in order to subsidize bigger banks, which will have the effect of pressuring large depositers in those banks to leave the smaller banks.

It's a bailout, and what's more, it's a bailout of the big banks at the expense of the smaller local and regional institutions.

Also, in case you are wondering, SVB's and Signature Bank's auditor, KMPG, gave both banks a clean financial bill of health just weeks before their respective collapses, and just before the collapse SVB issued large bonuses just before the bank's collapse.

Also, SVB's did not have a chief risk officer from April of last year until January of this year, which might explain 

Corruption much?

Next, and this one is perhaps the most worrisome, as the New York Times buries on 'graph 7, unrealized losses for the banking system is about $1.75 Trillion, which is about 80% of all existing bank equity. (2nd item to the right)

On to Signature Bank, and it's failure, it appears that much like Silicon Valley Bank (SVB), Signature Bank esperienced a bank run, only from real estate investors that were the bank's bread and butter, not tech bros.

What is interesting here is that this does have a tech angle, because it appears that their clientel were fleeing from the banks dive into cryptocurrency: (Money quote follows)

………

Real-estate investor Marx Realty was among the many New York firms to cash out, withdrawing several million dollars early last week from Signature accounts tied to an office building, said chief executive Craig Deitelzweig. The bank’s crypto exposure and plummeting stock price worried him.

“We just thought ‘Why have that risk?’” Mr. Deitelzweig said.

Yeah, crypto, what could possibly to wrong. (I'm beginning to think that Satoshi Nakamoto was a secret communist whose goal was to bring down the modern banking system)

An interesting data point on this is the fact that Signature Bank was the Trump Organization's domestic bank of choice.

Now, on to the Federal Reserve.  Did you know that the President can fire the Chairman of the Federal Reserve for cause, like, oh, I don't know green-lighting the merger between SVB and Boston Private Bank and Trust, saying that there would be no risk to banking from the merger, and that SVB was too well managed to be a risk anyway.  In fact, SVB was known to be dicey by the Federal Reserve for at least  years.

Rank incompetence is a reason for firing for cause:

………

Less than two years before Federal Reserve Chairman Jerome Powell cited systemic risk as a justification to rescue Silicon Valley Bank’s depositors, Powell approved the same bank’s merger application, insisting that the new, larger institution would present no significant danger to the wider financial system, according to documents reviewed by The Lever.

“SVB Group’s management has the experience and resources to ensure that the combined organization would operate in a safe and sound manner,” wrote Federal Reserve officials in June 2021, as they approved the company’s $900 million acquisition of Boston Private Bank and Trust. “The organization would not be a critical services provider or so interconnected with other firms or markets that it would pose significant risk to the financial system in the event of financial distress.”

BTW, it appears that the whole "Not a Bailout" bailout ignored the normal way of winding down a bank, which cost the federal government a not insignificant chunk of change:

………

The odd thing about this rescue is that the Dodd-Frank Act prescribed an entirely different method for resolving a failing systemically important bank without using taxpayer funds. The Dodd-Frank solution is to protect the failing bank’s depositors by taking over the failing bank’s parent holding company using a special resolution power called OLA.

OLA permits the FDIC to seize the resources of the failing bank’s parent holding company and use them to support the failing bank’s operations. OLA empowers the FDIC to keep the failing bank open and operating without any depositor losses and ideally without the use of any deposit insurance funds.

The FDIC has developed and publicly published its plan for exercising OLA. The plan is called the Single Point of Entry resolution strategy or SPOE.

………

OLA removes the parent holding company’s limited liability protection and forces holding company investors to absorb losses that exceed their equity investment in the failing bank. When the secretary of the Treasury invokes OLA, it triggers a change in parent company investor property rights in a way that will protect the failing bank and other subsidiaries from loss or require them to engage in asset “fire sales” to meet depositor liquidity demands.

SVB has a holding company, SVB Capital, that is still open and operating. It has a market capitalization recently reported to be over $2.3 billion and long-term debt of about $5.4 billion — balances that potentially could be utilized to support depositors in the failing SVB bank. SVB Capital’s annual report suggests that it owns several businesses besides SVB, and these businesses apparently still have significant value given reports that JPMorgan is interested in purchasing SBV Capital.

BTW, as an aside, it turns out that the bail out of all depositorss has the effect of paying billions of dollars to parent company SBV Capital:

When President Biden announced the rescue of Silicon Valley Bank depositors, he emphasized that "investors in the banks will not be protected. They knowingly took a risk and when the risk didn’t pay off, investors lose their money. That’s how capitalism works." Unfortunately, that's not how US law works.

There seems to be a gap in the Federal Deposit Insurance Act that is going to protect some investors in Silicon Valley Bank’s holding company, SVB Financial Group. The holdco’s equity in the bank will be wiped out in the FDIC receivership, but the FDIC doesn’t have any automatic claim on the holdco. This is basic structural priority/limited liability: creditors of a subsidiary have no claim on the assets of a parent.

What's worse is that the holdco, which filed for bankruptcy today, has substantial assets including around $2 billion on deposit with SVB. Almost all of that $2 billion deposit at SVB would have been uninsured, but by guarantying all the deposits, FDIC accidentally ensured that the holdco’s bondholders would be able to recover that from that full $2 billion deposit.

I do not think that this is an accident. 

Also, the  feds coordinated a $30,000,000,000.00 bailout of Republic Bank from the big banks:

First Republic Bank is beefing up its adviser ranks as the troubled lender seeks to stay afloat and plan for a postcrisis future amid a trans-Atlantic crisis of confidence in the banking system. 

The California bank this week tapped Lazard Ltd.  to help with a review of strategic options that could include a sale, a capital infusion or asset trimming, according to people familiar with the matter. It also hired consulting firm McKinsey & Co. to help map out a postcrisis structure for the bank, the people said. 

Lazard and McKinsey have been brought in alongside JPMorgan Chase & Co., which had already been hired by First Republic to advise on moves the bank could make to regain its footing after the failure of two other lenders caused its depositors to flee. 

They have hired McKinsey.  They are doomed.

………

JPMorgan and other big banks agreed last week to deposit $30 billion in First Republic to try to shore up the bank. Some of those banks’ CEOs, led by JPMorgan’s Jamie Dimon, have continued discussing ways to help First Republic after the move failed to sufficiently bolster confidence in the lender, The Wall Street Journal reported Monday. Options include putting those deposits to work in a different form.

The talks started after 11 big banks banded together last week to essentially return deposits that had fled First Republic, which was swept up in the contagion that followed the March 10 failure of Silicon Valley Bank and the subsequent seizure of Signature Bank. The crisis boiled over this weekend, when UBS Group AG was forced to purchase its beleaguered Swiss rival Credit Suisse Group AG.

I'll talk about Credit Suisse in another post this is getting long. .

BTW, is anyone surprised that the, "Great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money," ended up found a way to profit from the bank collapse:

As an adviser to Silicon Valley Bank, Goldman Sachs last week tried to pull off a last-minute capital raise to save the firm from collapse. But the Wall Street giant also had another role in the bank’s final days, for which it’s expected to collect a massive fee: It bought a cache of the bank’s debt in a deal that ultimately led to concerns about the bank’s viability.

Goldman’s payday: In exchange for buying $21.4 billion of debt from Silicon Valley Bank — which the failed lender booked at a loss of $1.8 billion — Goldman is likely to make more than $100 million, DealBook has learned.

………

Will the fees be thrown into the clawback debate? After the government introduced extraordinary measures to protect the bank’s depositors, there is expected to be heightened regulatory scrutiny. Senator Elizabeth Warren, Democrat of Massachusetts, and others are demanding a clawback of the bonuses the bank paid to its executives and the profits they made from selling stock. The Justice Department, which is investigating the bank’s collapse, recently rolled out a pilot program for clawing back incentives (more on that below).

If the Ukraine war escalates to a nuclear exchange, all that will be left is cockroaches and Goldman Sachs profits.

In news that will surprise no one who has followed his career, but it turns out that Larry Summers aggressive advocacy for the SVB bailout was influenced by his own financial interests.

Larry Summers "expert" opinions have always been directed by his, and his friends, financial interests, see the whole tawdry matter of his covering up for his protege Andrei Shleifer.

BTW, there are 186 other banks at risk of impairment, which is banker speak for, "We're looking at the possibility a f$#@ tonne of more failed banks." 

There is an investigation by the Department of Justice into the SVB failure, but I won't hold my breath for any criminal filings.

Onto weirdness and random memes:

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Did you know that one senior executive at SVB, CFO Joseph Gentile, worked at Arthur Anderson, which was destroyed by the Enron scandal, and then at Lehman, whose collapse started the 2008 meltdown, and another, recently hired Chief Risk Officer Kim Oleson, worked at Deutsche Bank when it was hawking dubious mortgage backed securities.  (Deutsche Bank paid a fine)

In related news, former head of the Congressional Banking Committee Barney Frank, was very well paid as a board member for the now closed Signature bank. (This article is from 2018, and his  remuneration was not chump change)

It's not the crimes that shock the conscience, it's what is technically legal:

As Senate Democrats successfully pushed into law a plan that rolls back post-financial-crisis banking rules, Barney Frank was a go-to figure.

Frank, a former House Democrat from Massachusetts and author the 2010 “Dodd-Frank” banking rules that the new law scales back, said the plan left his rules largely in place. And though he said he would vote against the measure, Frank said it would not help the biggest Wall Street banks and denied it would increase the risks of another financial crisis.

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But the proponents of the law rarely, if ever, mentioned that Frank is not just the author of the 2010 law, but also sits on the board of New York-based Signature Bank, a financial firm in position to benefit from the new legislation.

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In an interview, Frank acknowledged that Signature stood to benefit, but he said his role on the bank's board did not influence his thinking.

Yeah, sure.  We believe this.

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Critics say raising the threshold will encourage dangerous bets that could leave taxpayers on the hook. The 25 banks with between $50 billion and $250 billion in assets account for one-sixth of the banking sector, and they received $47 billion in government bailouts after the 2008 financial crisis, according to Gregg Gelzinis, a banking expert at the Center for American Progress, a left-leaning think tank.

That seems positively prophetic.

On to more generic hypocrisy from the masters of the universe, you can see here, here, and in a way that invokes the (non) quote from Tallyrand* when the headline reads, "'They will learn nothing from this': Tech leaders remain staggeringly oblivious to the true lessons of Silicon Valley Bank."

The quote, in case you are wondering, was made about the Bourbon Restoration monarchs, "They have forgotten nothing, and they have learned nothing."

In a rather sublime bit of irony, it appears that the failure of SVB is likely to trigger the collapse of at least one stablecoin, a form or cryptocurrency.

^*Again, this is probably not an actually a quote from Charles Maurice de Talleyrand-Périgord. It was likely said by Joseph Fouché, but, "C'est pire qu'un crime, c'est une faute," is all too frequently credited to Talleyrand.