House Republicans are pushing President Joe Biden to investigate the Chinese Communist Party’s ties to the collapsed Silicon Valley Bank – and demanding that he reveal any Biden family connections with Chinese companies set to benefit from the federal government’s bailout.
Silicon Valley Bank and a Shanghai-based subsidiary “played an indispensable role in financing China’s innovation economy,” Rep. Rich McCormick (R-Georgia) wrote to Biden Friday in a letter signed by 19 of his GOP colleagues, Fox News reported.
The letter listed four Chinese tech and pharmaceutical companies with deposits at SVB totaling $289 million — assets that have been protected by the Biden administration’s intervention.
“The Department of the Treasury, Federal Reserve, and FDIC cannot afford to be asleep at the wheel while the CCP finances its companies with the support of U.S. venture capitalists at the expense of American taxpayers,” the lawmakers wrote.
House Republicans want President Biden to reveal if any family connections with Chinese companies are set to benefit from the federal government’s bailout.REUTERS Republicans claim “recent revelations that members of the Biden family have received payments from Chinese companies” make this investigation “a matter of vital national interest.”AP
The Republicans also pointed to “recent revelations that members of the Biden family have received payments from Chinese companies” — calling it “a matter of vital national interest” to find out “what influence they may have on Executive Branch policymaking.”
The Post reported last week that $1,065,000 from a Chinese energy company was doled out to Biden family members — including first son Hunter Biden and his sister-in-law-turned-former lover Hallie Biden — over three months in 2017.
“The American people deserve to know whether their government is bailing out companies connected to the Chinese Communist Party,” McCormick told Fox News.
“Joe Biden should answer whether his family has received large payments from companies in China, and whether his judgment was influenced as a result.”
Stablecoin USDC’s issuer Circle said its chief strategy officer’s Twitter account was hacked on Wednesday, after the account posted a link appearing to offer holders of the stablecoin USDC a “one-time bonus” of free cryptocurrency.
The Twitter account of Dante Disparte, Circle‘s chief strategy officer, sent a series of tweets appearing to address the stablecoin‘s recent move away from its dollar peg.
One of the tweets — which is no longer visible — said that Circle “will be distributing a one-time bonus of USDC to all existing holders”.
“This bonus is our way of thanking you for your continued support and trust in USDC,” the tweet said.
That website contained a link which prompted users to “get USDC” by inputting the information for their crypto wallets.
A spokesperson for Circle told Reuters that Disparte’s account had been hacked. Circle’s official Twitter account said that Disparte’s account had been “taken over by a scammer”.
“Any link to offers are scams. We are investigating the situation and taking action accordingly,” Circle’s tweet said.
USDC hit a record low of $0.88 (nearly Rs. 73) on March 11, according to CoinGecko data, far below its intended peg of 1:1 against the dollar. The fall was sparked by concerns about the exposure of Circle to Silicon Valley Bank, which US regulators had shuttered the day before.
USDC and other cryptocurrencies stabilized after US authorities announced plans to limit the fallout from the collapse of SVB and Circle said USDC remained redeemable with the dollar.
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It’s a funny but sad spectacle that Joe Biden & Co. are trying to turn the mess at Silicon Valley Bank — and the crisis engulfing the banking system — into a political win.
Funny because the BS is working about as well as their spinning of the transitory nature of inflation, or how well they handled the alarmingly chaotic pullout from Afghanistan.
Of course, the final word has yet to be written on the collapse of SVB, Signature Bank, the near-collapse of First Republic Bank, and whatever else implodes by the time this column is in the paper.
But one thing I know for sure is that banking crises demand leadership from Washington — stuff that’s so obviously lacking at a time when it’s so desperately needed.
Back in 2008 we had Treasury Secretary Hank Paulson working day and night putting out multiple fires and leveling with Congress and the American people about the severity of the situation. Today we have Sleepy Joe Biden, his equally asleep Treasury Secretary Janet Yellen announcing that bank bailouts aren’t really bailouts because taxpayers aren’t involved.
Really?
Treasury Secretary Janet Yellen reportedly said that bank bailouts aren’t really bailouts because taxpayers aren’t involved.AFP via Getty Images
The government just handed SVB a blank check to cover all its depositors, mainly lefty Bay Area venture capitalists. That means all accounts are covered with FDIC insurance, even those above the limit of $250,000.
He says with a straight face the money is coming from the big banks who contribute to the FDIC insurance pool. OK, but if the banks are financing the fund, they will pass on those costs to depositors. That means everyone with a bank account, which means just about every American taxpayer, will be making whole those wealthy VC dudes.
Duh.
Not very ‘stress’ful
Biden and Yellen then say the watering down of the banking law known as Dodd-Frank meant that midsized banks like SVB were spared the so-called stress tests that would have uncovered its weaknesses. They appear to ignore (or most likely have no clue) the dirty little secret that such exams are known derisively in banking circles as “feather tests” because even big risk-management-challenged basket cases like Citigroup seem to pass them.
Another whopper: Biden and Yellen want us to believe that the San Francisco Fed had no idea what was happening in its backyard with a bank that grew exponentially in three years before it sank.
Again, don’t believe it. SVB’s CEO was on the board of his local Fed bank. Everyone who should have known what SVB was up to did. And by many accounts they were too busy making sure the banks they regulated lived up to ESG standards and embraced so-called social-justice remedies to care about SVB’s obvious risk taking. One of my sources worked at SVB until about a year ago, and here’s how he described the bank’s business model: “Loans to VC-backed companies that made no money, asset-based credit lines to PE funds and little else. It should never have been given FDIC insurance. This wasn’t a place that made loans to construction companies and took deposits from your aunt.”
Biden said the watering down of Dodd-Frank meant that SVB were spared the so-called stress tests that would have uncovered its weaknesses. Bloomberg via Getty Images
Yes, FDIC insurance was supposed to protect smallish depositors like your aunt, not dice-rolling tech millionaires who banked at SVB and knew it was a risky business. Those tech millionaires (like the SF Fed) either knew or should have known that a hiccup in the economy like rising rates could doom this bank and maybe others.
As I first reported last week, the big banks are now freaking out about another midsized bank also in San Francisco about to succumb to market forces named First Republic. (See a pattern here?) They chipped in with $30 billion to stabilize the bank at least for the time being.
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That’s because I also hear the bank could be sold in the coming days to one of the bailout participants. The reason they’re doing this is not necessarily because they think First Republic is a great business — rather they’re seriously worried about economic contagion that policy makers have no clue how to handle.
Remember 2008?
The bill is coming due for the unserious economic policies of the past two-plus years: The wildly unprecedented spending by the Biden administration to turn the US into a quasi-socialist European welfare state and money printing by the Fed to make that happen.
Every top bank executive I speak to says the current troubles in the financial system could lead to something on the scale of what went down in 2008. They’re also seriously worried the banking tumult is yet another example of Sleepy Joe & Co. not being up for the job.
Or as one remarked to me: “Where’s Hank Paulson when you need him?”
Top Indian information technology firms Tata Consultancy Services and Infosys have the highest exposure to regional banks in the United States that are gripped by a financial turmoil, analysts at JP Morgan said on Friday.
Regional banks in the United States account for 2-3 percent of their revenue, JP Morgan said in a note, adding that the exposure to the recently collapsed Silicon Valley Bank could be 10-20 basis points for TCS, Infosys and smaller rival LTIMindtree, with the Tata group company in the lead.
All three companies might need to set aside provisions in the fourth quarter due to their exposure to SVB, JP Morgan said in a note.
“The collapse of SVB, Signature Bank and concerns of liquidity across US and the European Union can further soften tech spends by banks over the short term in a year with slowing growth in bank tech budgets,” JP Morgan, which has an “underweight” rating on the sector, said.
India’s IT industry is already facing a challenging macroeconomic environment in its key markets of Europe and the United States, where technology spending is contracting amid delays in decision-making on long-term deals as the pandemic-led surge in demand faded.
The banking crisis could delay deal ramp-ups, impacting revenue conversions over the next two quarters, and push back new order closures that could hurt revenue over the next four quarters, JP Morgan said.
Indian IT firms draw the bulk of their revenue from the banking, financial services and insurance (BFSI) sector.
Within BFSI, their exposure to the US banks is on average 62 percent and Europe 23 percent, JP Morgan said.
LTIMindtree this week said it had negligible exposure to US regional banks, including SVB.
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Indian startups had deposits worth about $1 billion (roughly Rs. 8,250 crore) with embattled Silicon Valley Bank and the country’s deputy IT minister said he had suggested that local banks lend more to them going ahead.
California banking regulators shut down Silicon Valley Bank (SVB) on March 10 after a run on the lender, which had $209 billion (roughly Rs. 17 lakh crore) in assets at the end of 2022.
Depositors pulled out as much as $42 billion (roughly Rs. 3.4 lakh crore) on a single day, rendering it insolvent. The US government eventually stepped in to ensure that depositors had access to all their funds.
“The issue is, how do we make startups transition to the Indian banking system, rather than depend on the complex cross border US banking system with all of its uncertainties in the coming month?” India’s state minister for technology, Rajeev Chandrasekhar said late Thursday night in a Twitter spaces chat.
Hundreds of Indian startups had more than a billion dollars of their funds in SVB, according to his estimate, Chandrashekhar said.
Chandrashekhar met more than 460 stakeholders this week, including startups affected by SVB’s closing, and said he had passed on their suggestions to Finance Minister Nirmala Sitharaman.
Indian banks could offer a deposit-backed credit line to startups that had funds in SVB, using those as collateral, Chandrashekhar said, citing one of the suggestions he had passed on to the finance minister.
India has one of the world’s biggest startup markets, with many clocking multi-billion-dollar valuations in recent years and getting the backing of foreign investors, who have made bold bets on digital and other tech businesses.
Credit Suisse on Thursday said it would borrow up to $54 billion from the Swiss central bank to shore up liquidity and investor confidence after a slump in its shares intensified fears about a global financial crisis.
The Swiss bank’s announcement helped stem heavy selling in financial markets in Asian morning trade on Thursday, following torrid sessions in Europe and the United States overnight as investors fretted about potential runs on global bank deposits.
In its statement early Thursday, Credit Suisse said it would exercise an option to borrow from the central bank up to 54 billion dollars. That followed assurances from Swiss authorities on Wednesday that Credit Suisse met “the capital and liquidity requirements imposed on systemically important banks” and that it could access central bank liquidity if needed.
The Credit Suisse logo on one of the buildings at the North Carolina campus on March 15, 2023.REUTERS
Credit Suisse is the first major global bank to be given an emergency lifeline since the 2008 financial crisis and its problems have raised serious doubts over whether central banks will be able to sustain their fight against inflation with aggressive interest rate hikes.
Asian stocks followed Wall Street’s tumble on Thursday and investors bought gold, bonds and the dollar. While the bank’s announcement helped trim some of those losses, trade was volatile and sentiment fragile.
“It does help. It removes an immediate risk. But it confronts us with another choice. The more we do this, the more we blunt monetary policy, the more we have to live with higher inflation — and what is it going to be?” said Damien Boey, chief equity strategist at Barrenjoey in Sydney.
“Do bailouts make things better? On the one hand, you are removing a source of risk to the markets which is a clear and present danger. On the other hand we are feeding into this paradigm of monetary policy bucking within itself.”
Credit Suisse’s borrowing will be made under the covered loan facility and a short-term liquidity facility, fully collateralised by high quality assets. It also announced offers for senior debt securities for cash of up to 3.2 billion dollars.
“This additional liquidity would support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs,” the bank said.
Credit Suisse Chief Executive Ulrich Koerner had earlier on Wednesday sought to reassure investors about the lender’s strong liquidity.
“Our capital, our liquidity basis is very, very strong,” Koerner told media. “We fulfill and overshoot basically all regulatory requirements.”
Credit Suisse Group AG, CEO Ulrich Koerner at an interview in London on March 14, 2023Bloomberg via Getty Images
EUROPEAN EPICENTER
The 167-year-old bank’s problems have shifted the focus for investors and regulators from the United States to Europe, where Credit Suisse led a selloff in bank shares after its largest investor said it could not provide more financial assistance because of regulatory constraints.
Investor focus is also on any action by central banks and other regulators elsewhere to restore confidence in the banking system as well as any exposure businesses may have to Credit Suisse.
Silicon Valley Bank’s demise last week, followed by that of Signature Bank two days later, sent global bank stocks on a roller-coaster ride this week, with investors discounting assurances from U.S. President Joe Biden and emergency steps giving banks access to more funding.
On Wednesday, Credit Suisse shares led a 7% fall in the European banking index, while five-year credit default swaps for the flagship Swiss bank hit a new record high.
The investor exit for the doors raised fears of a broader threat to the financial system, and two supervisory sources told Reuters that the European Central Bank had contacted banks on its watch to quiz them about their exposures to Credit Suisse.
The U.S. Treasury also said it is monitoring the situation around Credit Suisse and is in touch with global counterparts, a Treasury spokesperson said.
‘FLIGHT TO SAFETY’
Rapid rises in interest rates have made it harder for some businesses to pay back or service loans, increasing the chances of losses for lenders who are also worried about a recession.
Traders are now betting that the Federal Reserve, which just last week was expected to accelerate its interest-rate-hike campaign in the face of persistent inflation, may be forced to hit pause and even reverse course.
Bets on a large European Central Bank interest-rate hike at Thursday’s meeting also evaporated quickly on growing fears about the health of Europe’s banking sector. Money market pricing suggested traders now saw less than a 20% chance of a 50 basis point rate hike at the ECB meeting.
The Credit Suisse campus in Research Triangle Park in Morrisville, North Carolina. REUTERS
Unease sparked by SVB’s demise has also prompted depositors to seek out new homes for their cash.
Ralph Hammers, CEO of Credit Suisse rival UBS said market turmoil has steered more money its way and Deutsche Bank CEO Christian Sewing said that the German lender has also seen incoming deposits.
India’s 116-year-old SVC bank was compelled to issue an official clarification regarding the status of its business after confused customers mistook it for US’ recently shuttered SVB — Silicon Valley Bank. The similarity in the acronyms of their names may have led to the confusion. Putting the minds of its users at ease, the SVC bank said it is ‘totally unrelated’ to the now defunct SVB. The California-based SVB catered largely to the IT companies located in the Silicon Valley tech hub, including crypto companies.
Established in 1906, the SVC Co-operative Bank was formerly known as the Shamrao Vithal Co-operative Bank. In the fiscal year 2021-2022, the Mumbai-headquartered bank said its total business stood at a net worth of Rs. 31,500 crore, having churned over Rs. 146 crore in profits.
The bank has warned people against spreading rumours suggesting its business is, in any way, linked to the collapsed Silicon Valley Bank.
“SVC Bank is completely unrelated to Silicon Valley Bank (SVB) that was based in California. We request our members, customers and other stakeholders not to pay attention to baseless rumours and mischief-mongering by unscrupulous elements insinuating similarities in brand names. SVC Bank reserves the right to take due legal action on rumour mongers for tarnishing its brand image,” the bank said in a prepared statement.
Oops. Missed it. SVC Coop Bank says it has nothing to do with SVB — the Silicon Valley Bank. Of course, you’ve completely unrelated SVC. Banking is such a tricky business! pic.twitter.com/lu2W8JLTKn
Within one week, the US witnessed three large crypto banks crumble under market pressure. Regulators who approved the closure of these banks said their unstable business status could have posed severe threat to the US economy.
The back-to-back downfalls of these crypto-friendly banks in the US, however, did manage to grasp the attention of the world, sounding a loud alert around the risks of crypto’s volatile nature.
On March 14, India’s state minister for technology — Rajeev Chandrasekhar— interacted with a group of start-ups to assess the impact of Silicon Valley Bank’s collapse on them.
To mitigate the financially damaging after-effect on the market, US authorities were quick to announce that all custodians linked to the collapsed banks will have access to their funds.
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