Breaking the Cycle of Toxicity: Reimagining the Relationship Between the Fed and Banks

The recent collapse of Silicon Valley Bank (SVB) highlights a toxic relationship between the Federal Reserve and the banking industry. The Federal Reserve’s fast-and-loose monetary policy has incentivized risky behavior in banks, such as investing in interest-rate-sensitive bonds, and left them unprepared for sudden interest rate increases. SVB, in particular, loaded its balance sheet with risky investments and prioritized social agendas over profits, leading to its failure.

However, rather than letting SVB face the consequences of its mismanagement, the Federal Deposit Insurance Corporation, Federal Reserve, Department of Treasury, and the White House launched coordinated rescue actions. This decision seemingly obliterated the FDIC’s traditional policy of insuring accounts up to $250,000 and raised questions about how the Fed and FDIC determine which institutions are “too big to fail.” Moreover, the fallout from this new regime incentivizes depositors to shift their deposits to larger banks, putting pressure on mid-level and smaller banks.

In a sane society, troubled banks such as SVB would be allowed to fail, and depositors would lose their deposits above the insured amount. However, financial socialism is growing, where profits are privatized, losses are socialized, and everyone in the banking industry is a winner except for the taxpayers.

The toxic relationship between the Fed and banks must end. The fast-and-loose monetary policies of the Fed must come to a halt, and banks must be held accountable for their risky behavior. It is time for a wake-up call before another banking crisis ensues.

Related Facts:

– The Federal Reserve has monetized much of Congress’s excessive deficit spending in the past three years, bringing inflation to a 40-year high and distorting the banking industry and economy.
– SVB’s failure further muddied the waters as to how the Fed and FDIC determine which institutions are “too big to fail.”
– Financial socialism, where profits are privatized, and losses are socialized, is growing.

Key Takeaway:

The Fed’s fast-and-loose monetary policies have incentivized risky behavior in banks, leading to SVB’s collapse. Rather than letting troubled banks fail, financial socialism is growing, where profits are privatized, losses are socialized, and everyone in the banking industry is a winner except for the taxpayers. It is time for the toxic relationship between the Fed and banks to end and for banks to be held accountable for their risky behavior.

In conclusion, the relationship between the Federal Reserve and banks must change. It is not the taxpayers’ job to rescue failing banks, and banks must be held accountable for their risky behavior. The toxic relationship between the two must end before another banking crisis ensues.