To Be Frank, Barney Bank Was Targeted by the Fed..

Barney Frank, whose name is on the Dodd-Frank banking regulation that came out of the Great Recession, is a board member at Signature Bank, which was just dissolved by the Fed and FDIC. While good ol’ Barn pretended to impose tough banking regulations, he made sure the bank he is now a part of would not be impacted by the harshest stress tests of his own bill. And that is why his liberal compatriot, Elizabeth Warren is now attacking him for making banks the size of the one he now helps govern immune to the tougher scrutiny of banking regulation.

Warren and Frank, when drafting the signature legislation, could have, of course, just put Glass-Steagall back in place after the Great Financial Crisis that created our greatest recession since the dark ages of the Great Depression, but that would have been real banking regulation. That was eliminated in the first place to pave the way for the Great Recession by allowing a lot more greed and risk-taking with depositors’ money and a lot more bank influence directly in the stock market. They could also have made highly market-rigging stock buybacks illegal again, as they had been before those banking deregulation days, too; but where would corporate greed be without that power? Where’s the fun in that?

So, reinstating those regulations that protected us all from the most egregious expression of Capitalist greed were never on the table, and Barney made sure some of the weaker provisions of his bill were not on the table when he drafted the regs we run on today … to the chagrin of Elizabeth Warren, his partner in the act.

A brief history of the mayhem the Fed has been waiting for

You may recall that I recently Republished my republication of a prediction I made in a Patron Post long ago. With the shutdown of Signature Bank, that prediction just got some hard evidence today to support its validity. Back in April of 2019, I offered the following observation about what I thought would likely become the Fed’s major argument in favor of its control over digital currencies via its own central-bank digital currency (CBDC):

Loss of [the Fed’s] greatest asset — public trust — will ultimately cause the public to move to exchange mechanisms the Fed has no control over, such as gold or digital currency….

One solution — since the Fed has no power to stop the public interest in digital currencies — is for the Fed to go with the flow but gain … full control over digital currency. That would require a huge number of “town-hall meetings” to convince the public that it is in the “best security interest of the American people” to let the Fed issue the ONLY legal digital currency in order to avoid some of the scandals we’ve already seen (more of which are certain). There are bound to be some digital currencies that aren’t anything other than a digital Ponzi scheme. 

The Fed would have to acquire that power from the government, and that means it must first win the public argument because right now the public is dead-set against the Fed seizing control over digital currencies. It will also have to convince the government that Fed control is a security need for the government.

That means a switch to digital currency certainly would require broad discussion and much preparatory groundwork…. Digital currency would actually give the Fed much more control than it has over cash…. Powell … clearly is anticipating a big untried solution that will need society’s buy-in….

Loss of trust in the Fed [when its recovery plans blow up in its face] would move the already digitally oriented masses toward digital currencies, so it’s not hard to see how that would be the Fed’s biggest concern should it lose its “most important asset.” [Trust.] Still, the switch to digital currency controlled by the Fed would require huge public persuasion because a lot of older people fear it.

“Teasing out the Fed’s Big Plan for our Future” April 12, 2019

How, I hope you would ask, does the Fed get from a world awash in crypto competitors outside its control to where it wants to be, which is fully in control of money? In August of 2022 right after the Cryptocrisis exploded into being, I predicted this event would become the evidence the Fed needed for its own face-saving argument once it was ready to issue its own CBDC as a core part of its answer to the next financial crisis (not all of which will be laid out at once by the Fed as the Fed is nothing if it is not patient, and it knows it needs to lay careful groundwork for acceptance). The public will buy into the Fed’s CBDC when it believes it has reached the conclusion for itself that a CBDC is the only safely regulated digital currency it can turn to:

The rapid implosion of many cryptos opens the doors wide for the Fed to ride into the cleared-out battlefield like the cavalry with something that will appear to the general public to give similar benefits but with none of the risks that blew up in the grand crypto explosions we recently saw….

The Fed will be glad to arrive with its CBDC during a time when the competition from digital currencies that actually do offer a fairly opaque level of anonymity has been damaged. Even more advantageous than the thinning out of the competition, the fear raised by the meltdown will boost the Fed’s public argument for the need of a CBDC with tight and dependable Fed oversight, though a CBDC is of no interest to those who value cryptocurrencies because they are cryptic….

Moving into next year, CBDCs will rise to fill the void and will probably seek to dominate Bitcoin or flush it if they can with political pressure.

“Economic Predictions for H2 2022, Part 3: Battle of the New Currency Competitors“

I just want my readers to be identifying the Fed’s groundwork as it is laid out, so there are no surprises about where the Fed is taking us. You can also be sure we will hear all of the following in addition to the role the Cryptocrash will play:

They will petition the government to allow only one digital currency under Fed rule to avoid counterfeiting, which devalues their physical currency, and to establish total control over money supply for reasons of helping the government manage the economy more directly and to avoid tax evasion and to curtail crime. After all, unregulated digital currencies have been accused of working very nicely for laundering illegally made money.

Of course, anything man can make, man can break; so their new system will always be vulnerable to counterfeiting by hacking and to theft by hacking and to the bank’s own abuse of power and to all kinds of problems we haven’t even thought of yet; but that is material for other conversations down the road.

“Teasing out the Fed’s Big Plan for our Future“

And, now, here we are. As I said last week, as soon as the Great Banking Bust of 2022 emerged with crypto currencies at its core,

Conveniently, the announced testing [of a Fed CBDC] is happening during a time of major crypto-currency scandals and carnage.

Now, you know I don’t think the Fed is the one [that should] come in and save us from anything. We need to be saved from the Fed, but most of the US population do not think like me … and most do not think like the cryptoverse either. So, I am certain the recent unravelling in crypto will play directly into the Fed’s hands as I said back in 2019 would happen once the coming out of the Fed’s debutant currency [CBDC] finally arrived. Whatever god central banksters offer their sacrifices to, they were praying or whirling their magic chakras or whatever for a moment just like this to frame the emergence of their champion onto the digital currency scene … because it [their CBDC] will seek to overcome the liabilities seen in those wild-west digital cryptocurrencies as its selling point.…

“CONTAGION: Terrorist Fed Wipes out Banks as Cryptocollapse Flushes through the System“

This is why I predict these things — not just to help forewarn my own readers (though that is certainly a big part of it) but so that, when they happen, the perps and those who believed them and parroted their words are without excuse. I’m not claiming crypto was designed by the Fed to fall in order to pave the way or even that the Fed helped crypto fall, but just that crypto would clearly have problems of its own and that, as soon as it did, the Fed would be ready to swoop in like a vulture and eat the freshly dead meat to make its point.

I am saying that the death of Signature bank at the Fed’s bloody talons certainly looks like the Fed actually killed that bank on purpose once it was lying wounded on the ground in order to seize the day to make the point it has hoped it could make. And, I’m not the only one saying this. As it turns out, Barney Frank, the author of bank regulation as it stands today, is making that accusation, too.

Elizabeth Warren and Barney Frank | Wikimedia Commons

Frankly Fed-up with the Fed’s vulture capitalism

That little bit of blog history brings us to date with all we need in order to understand today’s kerfuffle between comrades Warren and Frank as well as Frank’s accusations regarding the Fed’s dissolution of Signature Bank.

In short, Barney believes his bank was targeted by the Fed for liquidation solely because of its deep involvement with crypto currencies just so the Fed could make exactly the kind of point I said long ago it would want to make once it was ready to roll out its premier CBDC:

Regulators announced late Sunday that Signature was being taken over to protect its depositors and the stability of the U.S. financial system.

The sudden move shocked executives of Signature Bank, a New York-based institution with deep ties to the real estate and legal industries, said board member and former U.S. Rep. Barney Frank….

“We had no indication of problems until we got a deposit run late Friday, which was purely contagion from SVB,” Frank told CNBC in a phone interview….

[Silvergate’s and SVB’s collapse] led to pressure on Signature … late last week on fears that uninsured deposits could be locked up or lose value…. As waves of concern spread late last week, Signature customers moved deposits to bigger banks including JPMorgan Chase and Citigroup, Frank said….

According to Frank, Signature executives explored “all avenues” to shore up its situation, including finding more capital and gauging interest from potential acquirers. The deposit exodus had slowed by Sunday, he said, and executives believed they had stabilized the situation.

Instead, Signature’s top managers have been summarily removed and the bank was shuttered Sunday. Regulators are now conducting a sales process for the bank….

The move raised some eyebrows among observers. In the same Sunday announcement that identified SVB and Signature Bank as risks to financial stability, regulators announced new facilities to shore up confidence in the country’s other banks….

For his part, Frank, who helped draft the landmark Dodd-Frank Act after the 2008 financial crisis, said there was “no real objective reason” that Signature had to be seized.

“I think part of what happened was that regulators wanted to send a very strong anti-crypto message,” Frank said. “We became the poster boy because there was no insolvency based on the fundamentals.”

CNBC

And there you have it. According to the architect of the Dodd-Frank regulation, the regulators had no basis left for seizing the bank because its fundamental problems had been resolved by the bank and because the Fed had just created that same day its own mechanism for resolving the problems, which they opened to all banks the very next morning. Frank says the reason for closing down Signature Bank was to create a poster child against cryptos and the banks involved with cryptos.

Of course, it’s not like Frank’s hands are clean…

And that is why Elizabeth hopped out of her warren to thump him on the head.

The originator of the Dodd-Frank Wall Street Reform and Consumer Protection Act used his cachet as a presumed banking expert to legitimize a rollback of the very framework he helped enact in 2010 as chair of the House Financial Services Committee. But the ex-lawmaker wasn’t merely an uninterested bystander. In 2015, he joined the board of directors at Signature, a crypto-friendly bank that was poised to benefit from less stringent oversight….

In the wake of Signature’s collapse on Sunday night, Frank’s role in downplaying the risks of deregulation—while being paid by a bank that stood to gain from it—has received fresh light….

“I don’t think that had any impact,” Frank told the outlet. “They hadn’t stopped examining banks.“

Frank went so far as to tell CNBC that there was “no real objective reason” that Signature had to enter federal receivership.…

Salon

Warren feels differently:

“Had Congress and the Federal Reserve not rolled back the stricter oversight, SVB and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks,” Warren wrote Monday in a New York Times opinion piece.

“They would have been required to conduct regular stress tests to expose their vulnerabilities and shore up their businesses,” the lawmaker continued. “But because those requirements were repealed, when an old-fashioned bank run hit SVB, the bank couldn’t withstand the pressure—and Signature’s collapse was close behind.”

But seriously, how bright did either regulators at the Fed or bank executives have to be to figure out that a rapid drop in bond values would come part and parcel with the Fed’s rapid raising of bond yields? That’s a no-brainer in the bond world. So, there is no excuse for any bank, outside of pure greed, for not adjusting their asset portfolio to more shorter-term bonds and liquid assets that would cost them little or nothing to deploy if they needed to.

JPMorgan saw that problems were likely to come from Fed tightening and made some substantial cash set-asides to make room for whatever might spring up. That was money taken out of profit-making and basically parked. The Fed didn’t need harder stress tests just to look at banks like SVB or Signature before they launched their tightening and say, “You guys have to diversify more of you assets toward shorter-term instruments and cash because longer-term bonds are going to devalue considerably, losing their usefulness as true reserves.” That was a one-person, easy-afternoon job without stress tests. Just do the obvious

“These bank failures were entirely avoidable if Congress and the Fed had done their jobs and kept strong banking regulations in place since 2018,” she added.

Well, let me add they were avoidable anyway. If the Fed had simply done its job overseeing the banks to make sure they were positioned to be able to take the obvious liquidity hit that was coming.

The rift between Frank and Warren is just a preview of what’s to come….

From his front-row seat, he blames Signature’s failure on a panic that began with last year’s cryptocurrency collapse — his bank was one of few that served the industry….

Frank … said his bank was in “good shape” but was hit with a run generated by “the nervousness and beyond nervousness from SVB and crypto.” The bank’s digital assets business made it the “unfortunate victim of the panic that really goes back to FTX,” the cryptocurrency exchange that failed last year.

“The FDIC and the state of New York looked at things and made their decision,” Frank said. “Frankly, I was surprised by it. They apparently had a more negative view of our solvency.”

Politico

But then Frank, himself, stumbles into helping the Fed make its case down the road, playing right into their hands:

“I think, if it hadn’t been for FTX and the extreme nervousness about crypto, that this wouldn’t have happened — even to SVB or to us,” he said. “And that wasn’t something that could have been anticipated by regulators.”

That is exactly the kind of argument the Fed will use for launching its CBDC. “We couldn’t have seen this coming because we do not operate in the crypto space, which is entirely unregulated. A CBDC, on the other hand, would be fully under our purview and oversight.”

But who could have seen that coming?

After all,

SVB did not fail because they were making a bunch of high-risk NINJA loans. Far from it. [Neither did Signature.]

SVB failed because they parked the majority of their depositors’ money ($119.9 billion) in US GOVERNMENT BONDS.

US government bonds are supposed to be the safest, most ‘risk free’ asset in the world. But that’s totally untrue, because even government bonds can lose value. And that’s exactly what happened.

Most of SVB’s portfolio was in long-term government bonds, like 10-year Treasury notes. And these have been extremely volatile….

If you’re not terribly familiar with the bond market, one of the most important things to understand is that bonds lose value as interest rates rise. And this is what happened to Silicon Valley Bank….

Again– these losses didn’t come from some mountain of crazy NINJA loans. SVB failed because they lost billions from US government bonds… which are the new toxic securities.

Sovereign Man

The same can be said for Signature. This change in the landscape is so basic for bonds that anyone dealing in them should have known they would drop in value and become relatively non-liquid assets in bank reserves. It doesn’t take a stress test to figure that simple math out if you understand bonds.

If SVB is insolvent [or Signature], so is everyone else … including the Fed.

All it takes is a run on the bank to learn what you should have known as a bankster: Non-liquid assets are no shelter in a storm, and bonds that have lost 20% of their face value due to Fed tightening cannot be “liquified” without adding substantially to your struggling bank’s losses.

But who could have seen that coming?

At least, now that Silvergate, SVB, and Barney Bank — all banks heavily involved with crypto — have collapsed and are the only banks to have been taken into receivership in less than a week, they sure do make three useful stooges for the Fed to parade when it makes its case for its own digital currency (being tested now) as the “one ring to rule them all!”

(Articles for the above story were covered in Tuesday’s edition of The Daily Doom.)

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