Live from Music Row, Wednesday morning on The Tennessee Star Report with Michael Patrick Leahy – broadcast on Nashville’s Talk Radio 98.3 and 1510 WLAC weekdays from 5:00 a.m. to 8:00 a.m. – host Leahy welcomed the original all-star panelist Crom Carmichael to the studio for another edition of Crom’s Crommentary.
CROM CARMICHAEL:
I’ve been digging into what went on with SVB and also the related issues and trying to see what the ramifications are of all this. First of all, 85 to 90 percent of the deposits were above $250,000. In fact, there were 65,000 accounts. The average balance was $3 million. So when Biden says I’m bailing out small businesses, he’s being dishonest again.
He was bailing out Silicon Valley. He was bailing the VC’s out there, and he was bailing out some very big companies . . .The risk management position [at SVP was left open for a year] … how could the Fed have let that position go empty?
It’s not how, it’s, why. And that’s because Silicon Valley Bank was incredibly well connected politically, and we know that because Silicon Valley Bank’s depositors who are billionaires are not gonna take a penny loss. And Biden’s lying about it. And the same thing’s true with Signature Bank.
These are two very woke banks, two very well-connected banks politically; the depositors are not gonna take a penny loss. The directors of those banks ought to be sued and they ought to lose a lot of money. The executives ought to be sued and lose a lot of money. Barney Frank ought to go broke because he was the director of Signature Bank, and he’s the one that wrote the Dodd-Frank bill, he wasn’t doing his job.
And he got paid a lot of money as a director of Signature Bank. Now let’s look at where the other cracks are. You can Google hotels that are going into default, and you’ll see lots of hotels now and that will continue over the next 24 to 36 months.
You’ll see office building rates going into default. You can Google that, and you’ll see lots of that. And then when you look at the question of all of these government bonds that were out there at one percent, one and a half percent, and we said that Silicon Valley banks should have sold those bonds. Who would they have sold them to?
Who would be left hanging, holding the bag? See, that’s the great question. There are bonds out there, trillions of dollars of bonds out there right now that are still carrying those low-interest rates. Who exactly is holding those? Now, what the Fed has done and the FDIC has done is they said, oh, we’re going to change the rules. And now, if you’re holding a billion dollars of bonds that are a hundred million dollars underwater, guess what? You can borrow against the whole billion.
So they’ve changed the rules literally overnight to say you don’t have to mark your bonds to market. I don’t know exactly what that means. There are mortgages out there. A lot of mortgages out there that are three and a quarter percent. Those mortgages aren’t worth the value that they were when the mortgages were put on. I’m not talking about the value of the house, I’m talking about the value of the security because now mortgages are six and a half percent.
And so, who is holding those? And so what I’m saying is, we’re only beginning to see the tip of the iceberg. If the Biden administration continues through the Fed to raise interest rates, they will only dig the hole deeper. But if they don’t raise interest rates, then inflation will go up.
The problem is there is one solution that is needed right now, and that is a dramatic cut in federal spending. That’s the one that Biden refuses. He says he won a penny. So we’re in a very interesting and perhaps difficult situation.
Listen to today’s show highlights, including this Crommentary:
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Tune in weekdays from 5:00 – 8:00 a.m. to The Tennessee Star Report with Michael Patrick Leahy on Talk Radio 98.3 FM WLAC 1510. Listen online at iHeart Radio.
Photo “Silicon Valley Bank” by Coolcaesar. CC BY-SA 4.0.
