Credit Suisse and SVB – start of the new financial crash?
If so, WE will be the ones to foot the bill again
By Jasmine Birtles
ANOTHER day, another bank failure. Well not quite.
Credit Suisse has managed, by the skin of its central bank (the Swiss National Bank), to avoid complete collapse after its major shareholder, the Saudi National Bank, finally pulled its money out, not wanting to keep throwing good money after bad.
Mitch Feierstein, author of Planet Ponzi, warned about the lack of credit-worthiness of Credit Suisse back in October last year. “I tweeted about Credit Suisse in October when they posted their earnings” he says. “I said then ‘it’s a zombie bank’. They posted another $4billion loss. Their business units were being sold. All the top people were quitting. There was nothing left.”
The European central bank has made noises about being ready to step in to shore up ailing banks in case of ‘contagion’, but it itself looks like it will need a bail-out soon, thanks to the insane amount of money-printing it has been doing over the last three years.
Will all this lead to another banking crash in the West? Feierstein believes all the elements are there: “The US central bank is broke,” he says “Its liabilities far outstrip its assets. As I’ve said many times, you can never taper a Ponzi scheme and this is one of the biggest ponzi schemes I’ve seen.
“Back in 2017 Janet Yellen said that we will never see another financial crisis in our lifetime because of measures the Fed put in. Well she’s a liar.”
That’s awkward if he’s right because this time she’s come out saying that the US banking system remains sound: Financial Times
It will all be on the taxpayer
Whatever happens in the West’s financial system in the next few weeks/months (and that is going to be a lot of interesting events) one thing we can be sure of is that it will be taxpayers who will shoulder the brunt of the fall-out, as it was in the 2008 financial crash.
After that debacle – in which not a single top banker was jailed for the outright criminality that brought on the crisis – central banks went into a orgy of money-printing, culminating in the insane levels of Quantitative Easing we saw in the last three years (take a look at the graph above again…that’s just the situation in Europe). This money-printing is the fundamental source of the inflation levels we are all ‘enjoying’.
Central banks across the West seem to be one-trick ponies and if we get another banking crisis, they’re likely to pump up the printing presses again, this time at extra speed. It’s not going to end well – and we will be the ones to foot the bill again.
Somehow the top brass at HSBC saw fit to pay £15m in bonuses to the SVB UK staff at the end of last week [Full story here]. It beggars belief that staff of a failed bank should merit bonuses, just when the company has been taken over for £1. Again, the Government has said no taxpayer’s money was used in this takeover but there will have been all sorts of sweeteners given behind the scenes.
More information coming to light about Silicon Valley Bank too
News Uncut reader, and financial consultant, Bob Lyddon, at Lyddon Consulting, responded to my article from March 14, Buckle up for the financial new normal, about the Silicon Valley Bank collapse with this extra information about who is really picking up the tab for this and pretty much any other, bank collapse around the West. Bet you can’t guess who:
“It must be great to have money, status and power. A few phone calls and emails and you can get the UK’s Prime Minister, the Chancellor of the Exchequer, the Chief Secretary to the Treasury, the City Minister and the Science and Technology Secretary jumping around on their strings like marionettes.
“That’s what the UK tech and fintech sectors did to avoid their pocket bank – Silicon Valley Bank UK – going into resolution over the weekend. Instead, it was sold to HSBC for £1 and now it is business as usual, with tech and fintech companies burning through the cash from their latest funding round, continuing to make losses and not troubling the scorers with any burdensome payments of corporation tax.
“Once they have burnt through their current funding round, SVB’s UK customers will duly go into liquidation, only now in June or July, rather than March or April, as Venture Capital funding has dried up - a suitable finale to this pantomime.
“The Daily Telegraph reported that ‘Government officials ruled out a full taxpayer bailout of the bank’. Jeremy Hunt stated that there was ‘no taxpayer support’, whereas HM Treasury said that ‘no taxpayer money is involved. Weasel words that mask the truth.
‘The government has relaxed ‘ringfencing rules’ for this deal. Ringfencing protects taxpayers from subsidising blow-ups in international and investment business – like this one – by ensuring that high-risk business is not booked into the UK domestic arms of the major banks where the current accounts and savings accounts of UK businesses and consumers are held.
“SVB’s portfolio of high-risk loans (estimated at £4-5billion, 15-20 per cent of the equity of HSBC UK Bank plc) should be booked OUTSIDE the ringfence into HSBC Bank plc but it will initially be held INSIDE it, into HSBC UK Bank plc.
“This reduces the creditworthiness of HSBC Bank UK plc, puts the money of UK businesses and consumer at risk and makes a call on the Financial Services Compensation Scheme more likely, to fund which HM Treasury would have to issue more gilts, for which all UK consumers and businesses are responsible: if we don’t lose first time around, we can be hammered second time. That qualifies as ‘taxpayer support’ in my language.
“The ministers involved in the rescue discussions have lionized tech and fintech in the past: they are conflicted and should have recused themselves. Instead they worked all over the weekend – with representatives from the ‘industry’, the Bank of England, SVB UK and HSBC – to set aside the UK laws put in place after the last crisis to protect the taxpayer.
“Only one stakeholder was not invited to this jolly party, the one who will pick up the tab if things go wrong: the UK general public.”
The funny thing is this: everyone knows it is all going down, but the folk at the top of the pyramid appear to believe that they are immune.
This will all end badly, and quite soon.