Silicon Valley Bank’s recent failure marked the second-largest bank failure in U.S. history and the largest since the 2008 financial crisis. The run on the bank sent shockwaves through the financial world. Nearly 94% of its total deposits were uninsured, according to S&P Global Market Intelligence data as of year-end 2022. The series of events leading to its demise have been described by some as the perfect storm. Was it the result of Trump-era rollbacks of Dodd-Frank regulations, increased rate hikes, insufficient risk management, or a combination of factors? Mike Konczal is director of macroeconomic analysis at the Roosevelt Institute, where he focuses on economics, inequality and the role of public power in a democracy. He’s also the author of the book “Freedom from the Market” and a co-author, with Joseph Stiglitz, of “Rewriting the Rules of the American Economy.” He joins WITHpod to break down what happened to SVB, FDIC intervention, what made the financial institution so peculiar, what its failure says about the state of the economy and more.
Note: This is a rough transcript — please excuse any typos.
Mike Konczal: We really did see a, essentially, bank run created in real time through social media, in a kind of very unique set of circumstances. I mean, the moment right now has brought together all these different things that are happening in the economy. On one hand, you have the culture of Silicon Valley, the collapse of this bank. You have, you know, the financial regulations, the deregulations that have happened, the question of what kind of financial crisis this is. You also have the Federal Reserve hiking rates that kind of bumped into this.
So, like wherever you’re pulling on this, there’s something that’s really fundamental to what’s happening in the economy, very similar to the great financial crisis in 2008.
Chris Hayes: Hello and welcome to “Why Is This Happening?” with me, your host, Chris Hayes.
Well, if you’re someone who’s my age, I just turned 44, you are of a generation, journalistically, where you had to learn a lot about financial crises. It didn’t matter who you were really or what you were covering, but particularly like me, I moved to Washington, D.C. with Kate when she got a clerkship on the Supreme Court in 2007. I became the Washington editor of The Nation after that.
And this was when the first sort of signs of unease were starting in this, in what was called the subprime market at that point, that this was a problem with subprime positions. Those are the mortgages that were, you know, outside the sort of prime category, people with good credit, with sort of quote, unquote, “normal 30-year fixed mortgages,” people outside the normal prime credit, people who didn’t have standard 30-year fixed mortgages.
There were all sorts of crazy forms of loans like NINJA, no income, no job application, which when you think about it, it doesn’t sound like a great product. You know, there were interest-only loans, which, you know, have their place. But anyway, a huge proliferation.
It was starting to teeter in the summer of 2007, of course. By the summer of 2008 and the fall of 2008, we had the great financial crisis. The worst financial crisis in 70 years. And, you know, I learned a lot. I had to learn a lot and I learned a lot about how banking works in financial crises and the fact that they’re often endemic and have been endemic to capitalism, to global capitalism through the years.
The role that central banks play in attempting to mitigate the risk, the fact that financial crises can happen sometimes, not even for particularly good reasons. There could be kind of stampedes, basically. If you think about a crowd in a theater or in a concert who think they hear gunshots or think something has happened, and people stampede towards the exits and people get trampled, and then it turns out there wasn’t actually gunshots. There wasn’t actually a threat. But the stampede itself caused a lot of damage.
Financial crises can be like that. Or financial crises can be an actual threat. There’s a fire in the theater, so to speak, right? There’s mass insolvency. There’s real problem. So, teasing those two things apart is one of the complex aspects of financial crises, because they are both economics and mass psychology, together, inextricably bound. They can’t be distinguished.
Both channels are working in cause and effect. That, of course, brings us to the closest thing we’ve had to a financial crisis. I think, since the great financial crisis, which was the quite sudden collapse of a bank called Silicon Valley Bank. You probably followed this. The bank looked to be teetering. There was questions about its solvency. And then it was closed. There was a run on the bank. And we’ll explain what a run on the bank is.
It was then closed by the FDIC, and the Fed and Treasury. They came out and they announced that they would be backstopping the deposits of people that had money in the system above the cutoff for federal deposit insurance, which is $250,000.
Shortly thereafter, the Fed took over another bank called Signature Bank. They’re then migrated some fears about the international bank Credit Suisse, which had long been seen as kind of a laggard in performance amongst global iBanks, but something about this sort of spooking like moved over to Credit Suisse and the next thing you know, UBS, which is another Swiss bank was buying Credit Suisse.
I’m talking today just after the Fed announced that it’s going to hike rates 25 basis points but was very focused on basically financial stability. So the big question right now is: what’s the deal? Do we have a financial crisis on our hands? Or have we cut it off? Or are there deeper issues that are roiling beneath the surface?
What does it mean to have your first ever financial crisis, post the great financial crisis, when a lot of things have been done: the passage of Dodd-Frank, lessons learned at the Fed and regulatory level to try to make sure we can never have one again. Are those things working? What have we learned and what haven’t we learned?
I thought a great person to talk through all that with is Mike Konczal. I’ve known Mike for years. I’ve relied on Mike for years. I’ve read him for years. He’s the director of Macroeconomic Analysis at the Roosevelt Institute, which is a think tank whose mission is develop progressive ideas that restore America’s promise of opportunity for all.
He focuses on economics and inequality, the role of public power in a democracy. He’s author of a great book called Freedom from the Market and he’s co-author with Joseph Stiglitz on “Rewriting the Rules of the American Economy.”
Mike, it’s great pleasure to have you in the program.
Mike Konczal: Thanks for having me on.
Chris Hayes: Let me start with Silicon Valley Bank. As someone who is immersed in this space and these issues, did that feel as out of nowhere to you, as it did to the rest of us who weren’t closely monitoring it?
Mike Konczal: Yeah. No, it was quite a surprise. And we really did see a, essentially, bank run created in real time through social media in a kind of very unique set of circumstances. I mean, the moment right now has brought together all these different things that are happening in the economy.
On one hand, you have like the culture of Silicon Valley, the collapse of this bank. You have the financial regulations, the deregulations that have happened, the question of what kind of financial crisis this is. You also have the Federal Reserve hiking rates that kind of bumped into this.
So, like wherever you’re pulling on this, there’s something that’s really fundamental to what’s happening in the economy, very similar to the great financial crisis in 2008.
Chris Hayes: So let’s start with what a bank run is. I mean, you know, folks kind of know and everyone does the “It’s a Wonderful Life” scene. It’s not, you know, it’s in your house, right, about sort of how reserves and lending. But just walk us through banks 101. What do banks do and why is a bank run possible even on a bank that is operating perfectly well and is perfectly solvent?
Mike Konczal: Yeah, sure. So, you know, the “It’s a Wonderful Life” is, in fact, a great example. But in general, bank deposits are a very weird thing. If you have a deposit at a bank, you have made a loan to the bank. You are a creditor to the bank. But it’s a very unique kind of loan, which is to say, you can always or you’re meant to be able to always get your money out at par value.
So if you put in $10,000, you can get out $10,000 on short notice. The banks take those liabilities from their point of view and try to lend them out into assets, into houses, into mortgages, into cars, into businesses. And, you know, by borrowing short and lending long, there’s a lot of economic opportunity and growth that can be created. But there’s also this run risk, this sense that if everyone goes back and says we want our money right now, because we can get it at any time for its full value, the bank doesn’t have it. It’s in those loans. It’s in those communities.
And if it tries to sell those assets to get the cash, well, you can have kind of a fire sale where the value of those assets sort of become less. It’s hard to do in real time. And if enough people all panic at the same time and all want their money out at the same time, it’s very hard for a bank to have the option to get that money out to them.
Chris Hayes: Right. So the key point here, I think, before we can move to Silicon Valley Bank, right, is that a bank run is possible on basically any bank. And even if a bank is doing nothing, quote, unquote, “wrong,” if it’s not engaged in bad risk management, if it’s making relatively prudent loans, you know, to local businesses, it’s loaning the money out that are in deposits. They are not all held there at the same time.
And if everyone who has deposits, for some reason, gets spooked and they all show up at the bank on a day, and they say, we all want our money, that bank is going to be in trouble and probably fail. I mean, you know, except for the fact that we have regulation FDIC.
But in this abstracted way, right, even though the bank hasn’t done anything wrong, if enough people got spooked, and this happened before, you know, before modern deposit insurance and before, you know, in the 19th century, there were bank runs like that all the time, even on a bank that hadn’t done anything. It just was the victim of panic.
Mike Konczal: Yeah, and the most recent Nobel Prize went out to an economics set of research that shows, like, this is very rational, right, because if you’re —
Chris Hayes: Yeah.
Mike Konczal: — rational in the economic sense, too, like that if you see this as happening, even if you don’t want to be the last person holding the bag in this situation, because that’s how you really get screwed outside of the regulations that we’ll talk about, so, you know, like it can have this self-fulfilling prophecy to it. You know, even if there’s a little bit of stress, then that can make it, you know, way worse because then people will see that little bit of stress and then move much more quickly and set off this cascade.
Chris Hayes: So there’s two things I think what happened to Silicon Valley Bank that make it distinct to me. And we’ll take them in turn, that made it I think subject to this and then we could talk for a third thing.
The first thing is, it was the bank to a very incestuous community. It’s like it was the bank that all the startups banked out, all the VC founders, the whole culture of Silicon Valley and entrepreneurs, it’s a small world and people all know each other. And it came out later that there was like a group text with like, 250 founders where the germs of this all started where everyone was like, oh, man, things are not looking good at Silicon Valley Bank, you should get your money out.
And because it was a bank so concentrated in, basically, one sort of like social gossip space, it seemed to me like it was more vulnerable to a run. What do you think of that theory?
Mike Konczal: That’s absolutely correct. Three things stand out as being particularly unique in the situation. You know, a lot of particularly the mid-sized and bigger banks have a much more regional footprint and crucially a cross business footprint, right?
Chris Hayes: Right.
Mike Konczal: So this was a bank for venture capital. And so one, is you have venture capital starts to slow as the rate hikes are going…
Chris Hayes: Right.
Mike Konczal: — right? So the funding for VC has dried up quite a bit. Perhaps if you watch headlines, you see like layoffs at all these tech companies. So, there’s less money coming in and a little bit more money coming out, right? So, there’s a little bit of stress on that business model which shows up in the bank.
Chris Hayes: Right. And we should say this is real stress, like —
Mike Konczal: Yeah.
Chris Hayes: — again, to distinguish again between like economics and psychology, like rising rates have meant that the easy money that was flowing through the valley for the last 10 years, basically, or more, has really slowed. And that squeezed the bottom lines and that squeezed their portfolios. And it squeezed the business viability of a bunch of these firms.
Mike Konczal: And a second thing that’s really unique about this bank is that so much of their deposits were uninsured, which is to say, if you have a checking account, if you have, maybe you see this on your bank if you, maybe you see it on your bank’s website, if you’re more likely to go to your bank’s website, that if you have $250,000 or less in your accounts, it’s insured by the Federal Deposit insurance Corporation, a government agency that says if there’s a bank failure, you will get this money back.
We think that if you have $10,000 in a checking account, you’re probably not a sophisticated investor who can keep track and discipline the banks. We’re not going to require you to like be so on the nose for what’s happening in the banking sector.
This was not like this. This bank had a lot of, you know, startup money, a lot of, you know, a startup gets a billion dollars, they put it in this bank. But that’s way over $250,000. Something like 90 percent of its deposits were over the insured line.
Chris Hayes: Which is just like I looked at a graph where they like graphed banks in like percentage of uninsured deposits, and there was like one little dot at the top and it was Silicon Valley Bank. Like it does seem sui generis in terms of their deposit profile, 90 percent uninsured is just in a different ballpark than almost any other bank.
Mike Konczal: Yeah, it’s way higher. It’s probably more like around 50 percent across the banking sector as a whole. And so that falls from the business model that’s not particularly diversified. So that is the second thing. That means that when there’s a panic, it’s not so much like well, my money’s safe in there. I only have $20,000 in there or whatever it is, or even $249,000 in there, if you’re lucky enough to have that.
You know, you have businesses that have, and then there were some things, like Roku had tens of millions of dollars but —
Chris Hayes: They had half a billion dollars I thought —
Mike Konczal: Half a billion, yes.
Chris Hayes: — at Roku. What the hell? It truly blew my mind.
Mike Konczal: Peter Thiel was reported to have $50 million in a checking account there. Like that kind of thing where like suddenly, there is a real incentive to make a run for the bank run and cause and start the panic if you think that your really large amount of deposits are not going to be insured and they’re not going to be safe if the bank collapses.
Chris Hayes: Right. So Roku, Peter Thiel, these people have just unbelievable amounts of money in there.
Mike Konczal: Right. And that makes it very prone to like a panic, like you can just, you know, that’s not just, you know, a bunch of people with a little bit of money, it’s suddenly you have a real incentive to run the moment you get a little panic.
And then the third was that they basically bought a bunch of government bonds with the money, which made sense from their point of view. And it made sense at the time when interest rates were very low. And we’re going to learn more about its regulatory environment. But there’s some things we can talk about, and we’ll discuss it more, I’m sure.
But regulators were not pushing them to be more diversified. And as a result, when interest rates started hiking last year, they took a lot of losses, because those bonds were worth less. And so they couldn’t sell them as easy without taking losses. And there started to be reports in Silicon Valley, which again is a very tight-knit group of some newsletters pointing out that there were these losses on its balance sheet. And that caused people in group chains to start going. And that’s basically the story.
Chris Hayes: Yeah, let’s take a second just to walk through this because I know, and I know this is like if you’re out walking your dog right now or you’re making pasta or you’re cleaning your fridge or whatever you’re doing, you listen to this podcast, you know, this could take a little bit of mental work.
And I find for people that don’t live in finance and economics, where this stuff just is like automatic intuitive. It’s worth stepping through. So let’s say you buy a Treasury bond years ago when interest rates are low and it pays what’s called a coupon, right, of two percent or two and a half percent, right —
Mike Konczal: Mm-hm.
Chris Hayes: — and you’ve got that, right? Now, when rates go up, new treasuries now are being issued at, say five percent, right? So everyone wants to get, you want to get the new treasuries. You don’t want the old ones which pay much less. And so the value of those old ones you’re holding on to, in the case of Silicon Valley Bank, decline. And all of a sudden, your balance sheet, the value of those bonds has gone down considerably, right? That’s the general mechanism here.
Mike Konczal: That’s absolutely right. And, you know, it’s not a big problem if all you want to do is just hold on to it and, you know, get the value of the bond when it’s expired or when it runs out.
Chris Hayes: Right.
Mike Konczal: But if you need to sell it, it’s worth less. So you can’t sell it for what you would want or what you paid for it more importantly.
Chris Hayes: That’s the problem, right.
Mike Konczal: And that’s the problem. So if you are forced to liquidate some of these bonds that Silicon Valley Bank had to do to try to pay off its depositors, that’s when you get into real problems.
Chris Hayes: And this is where the spiral happens. People come and they say, I want my money out. I want my 50 million. I want my 100 million. Okay, now you’ve got to go liquidate those bonds. Well, the bonds are trading very low. So now, you’ve incurred a loss. So now, your balance sheet looks even worse.
If that gets out, then more people will come and, you know, downward spiral.
Mike Konczal: Yeah, absolutely. And it’s worth noting like the same way Silicon Valley is kind of hive-minded, so is a lot of the financial sector. And for the last 10, 15 years, the primary concern was essentially that interest rates would be low forever and the economy would be kind of like stuck in a low gear, or something called secular stagnation, that defaults would be high.
Your problem is like people are kind of broke and they’re not going to be able to pay you back. Where right now, the economy is running really hot, inflation is higher than expected —
Chris Hayes: Right.
Mike Konczal: — interest rates increases are much higher than expected. And a lot of banks, those are risks banks can manage. But it’s not the default mode to manage them. And certainly, they weren’t anticipating that three or four years ago. And Silicon Valley Bank seems to, and again we’re going to know more as more investigations happen, just didn’t switch gears to the new reality that we are in this different economy than we were for the past 10 years.
Chris Hayes: More of our conversation after this quick break.
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Chris Hayes: Okay. So there’s two regulatory questions here, which let’s take in order. One is deposit insurance. So, you know, the great genius of the FDIC, right, which is a new deal program, is one way to stop bank runs is just to have the government ensure deposits so that people don’t freak out, right?
I mean, the problem here was that there was a lot of uninsured deposits. And then the question became, over the weekend after the bank failed, what to do about that. Talk me through the thinking there about what to do about it and then what actually got done and whether that was the right thing.
Mike Konczal: Sure. So FDIC goes in on a Friday and says this bank is insolvent, we’re closing it and we’re going to reopen it on Monday. Normally, for many banks, for most banks, there’s enough resources there that they can reopen it with very little losses, and everyone’s pretty confident on that.
Often what they’ll do is they’ll sell it to another bank or they’ll, you know, they’ll go in and do some things. And there’s enough working capital there, either in the stuff that they already have or what the new bank will step into and buy it for, to kind of pay out most deposits. So even uninsured depositors, which traditionally are much less of the base here —
Chris Hayes: Right.
Mike Konczal: — will get paid out. Over that weekend, FDIC was unable to find a buyer. And so they went into the potential situation that Monday, a lot of these businesses that had uninsured deposits, that reflected crucially, like payrolls, business operating expenses, we talked about Roku earlier, a lot of businesses, especially in the Bay Area, might not have been able to pay bills.
And there was a worry that that would cause a broader panic. You know, we talked earlier about how a bank run can be rational for an individual bank. But if that bank fails, suddenly, every other bank, even if those other banks are healthy, suddenly get thrown into that same kind of cooker situation where people are suddenly starting to freak out about their deposits. Maybe some of these assets are going to be even more stressed because there’s fire sales going on.
So the FDIC has obligations to not do what it would traditionally be considered bailouts, not pay out people who are uninsured. But there’s a kind of in case of emergency break glass and do this provision in the law, which says if a two-thirds majority of the board of the FDIC, of the Federal Reserve and the Treasury Secretary, in consultation with the president, all agree that this is a systemic risk, you can essentially go in and pay out unsecured depositors using the insurance fund the FDIC has assessed. And that’s what they ended up doing.
They kind of broke the glass in case of emergency exemption to the normal procedure, which normally works, and went in and said, we will make sure that if you have uninsured deposits, you will be paid out, do not worry, do not panic.
Both for this bank and another bank called Signature Bank, which had real high exposure to crypto and also started to have basically the same run after Silicon Valley started to get stressed.
Chris Hayes: Was that the right thing to do?
Mike Konczal: I mean, it’s tough on the outside to see how much panic is building. Though all the reports at the time and especially since made it seem like there is a real potential for like —
Chris Hayes: Yes.
Mike Konczal: — a much broader cascade of runs. So if this was just the matter of a few businesses, like if it was just a matter, if it was just contain the Silicon Valley Bank, I think that’s one question. But it seemed like it was a much bigger problem with much bigger potential problems.
And at the end of the day, you know, the regulators, you’re giving them the choice of like try to do the fair thing or put a lot of millions of people’s livelihoods at risk if this suddenly plummets into a cascading financial panic and recession.
Chris Hayes: And there’s also, to me, there’s a little bit of the Lehman Brothers lesson, which is you could avoid moral hazard now and end up with more moral hazard later, right? So moral hazard is the economic term for essentially bailout, right? After the fact, ensuring coming into backstop losses, often the backstop losses of people who already have a lot of money, right?
But with Lehman Brothers, they let it fail, the panic spread and then you end up with a much bigger bailout. Here, it was pretty clear to me there was going to be a series of bank runs, I mean, just from my reporting over that weekend, and I was talking to a lot of people.
But there’s sort of two aspects here. One is I think a lot of people’s reaction 100 percent understandably was here are these like Ayn Rand quoting VC, libertarian bros with like super dodgy politics, super like contemptuous of the Fed and of regulation and of welfare and all this stuff, they cause a run of their own bank and immediately start whining for the government to come in and backstop their uninsured deposits, which they can read, like everyone reads, insured up to $250,000. It’s not a hidden secret.
You guys are supposed to be very sophisticated dudes. And you had $50 million, 44.75 of that million dollars was uninsured. Like, hey, man, tough luck. If you’re going to get 90 cents on the dollar, like you made, you know, so there was that. And then the other side of it was yes but depositors, even uninsured ones, are very different than like bailing out, like, you know, a bank stock or management or equity.
I mean, you know, some startup that’s trying to, I don’t know, build some digital widget that’s got its payroll there and it’s uninsured, it doesn’t feel like a bailout per se to backstop. And those are sort of the two arguments on each side, I think.
Mike Konczal: Yeah, definitely. So, the board was fired. The management was fired. The shareholders’ equity were wiped out. So it didn’t look like some of the more traditional bailouts, what people talk about when you kind of go in and actually keep the firm alive —
Chris Hayes: Right.
Mike Konczal: — that this firm is going to be wound down. There’s some question about whether or not there’s the clear legal authority to claw back bonuses, there should be. And if there isn’t, the laws need to change. But there’s the ability to claw back bonuses that were paid out at the last minute and all this stuff.
You know, on the politics of it, it’s crazy, because, you know, it’s not just like the personality of a lot of the VC people, though, the fact that they are so angry even after they got bailed out.
Chris Hayes: I know, they’re still whining.
Mike Konczal: You contrast it to Wall Street in 2008, which at least kind of kept its head low a little bit, at least publicly, and like the auto companies after 2008, which like did a big media campaign saying, thank you so much, America, for helping us get back on our feet. And you have all these VC bros just like texting the most insane conspiracy theories about the government at this time.
But even more like generally that business model is like, is literally, you know, move fast and break things, but it’s like contempt for like labor law. Like we’re going to employ of these people in our apps as laborers and just ignore the labor law, like the contempt for like basic law in demark (ph), like that is so built into it that they then come to the government for a bailout is nuts.
Though on some fundamental level like FDIC insurances, you know, people contribute and then people benefit when they need the support. Like it is a classic social insurance fund exactly like Social Security or single-payer healthcare or —
Chris Hayes: Right.
Mike Konczal: — unemployment insurance. And so hopefully, I mean, I highly doubt it, but maybe you can teach more people about the benefits of social insurance funds.
Chris Hayes: Well, okay, so there’s a policy implication here, which I had never considered before, because Silicon Valley was a little sui generis, 90 percent of deposits are uninsured. But you just said earlier, and I didn’t know this until I started looking into this afterwards, that an average bank is like 50 percent, like there’s a lot of uninsured deposits out there.
Now, there are specific loan products, which are essentially like syndicated loans that you can use and where, because no one wants to, I saw a great piece about how Giannis Antetokounmpo, who’s Greek and knows from financial crises, like apparently has his cash in like 50 different banks, because he wants it all FDIC-insured, which is totally amazing.
But you could see at an operational level, if you were a firm or anyone, like if you had 50 different logins and had to move between 50 different accounts, like that would be pretty frustrating. Now, there are alternatives. There’s money market accounts, which is where a lot of people keep things that are essentially like cash.
And then there are syndicated loan products where you have one central login, you go to your bank, right, and you’ve got a million dollars there to pay payroll, but it’s actually broken up into syndicated loans from other places, so it’s all insured.
It does seem though there’s like a broader policy question about uninsured deposits, like should the FDIC limit? Should that be raised? Was this a one-time thing? Is this a thing that could happen again? Like how are you thinking about that stuff?
Mike Konczal: Yeah, and it’s not solved at all. And in fact, in real time, as we’re recording this, the administration does not seem clear about if you are an uninsured depositor at a small community bank, are you secure or not? And, you know, they’re dancing around this back and forth. And I think it’s really kind of dangerous and crazy.
There’s a question of like should the $250,000 be $400,000. Should it be adjusted for inflation? But I think there’s a more conceptual question like what does this fund do?
Chris Hayes: Right.
Mike Konczal: And there is the mental model I think most people approach it with which is this is consumers insuring themselves. But one thing I think about a lot is this is like a kind of boring banking crisis after the financial crisis in 2008, because if you think about the financial crisis in 2008, it’s like a very quick detour.
You think about firms like Bear Stearns, Lehman Brothers, AIG, things that are not deposit banks, things that do not have checking accounts, but they got in this kind of trouble because they borrowed money short-term, repo markets, all this stuff, if you remember those terms, and lent it and things that turned out to be pretty dodgy, asset-backed securities, so on and so forth, CDOs.
The acronym SuperSide (ph) like that was like a high-tech Wall Street banking crisis that forced us to sort of think through what, you know, terms like shadow banking, like what does it mean to be a bank. How do we reinvigorate our —
Chris Hayes: Right. Right.
Mike Konczal: — banking regulations to extend these 21st century Wall Street global financial equations? But this is like boring bank —
Chris Hayes: Classic, exactly. Yes.
Mike Konczal: — pure classic bank run. And we still have the same fundamental problems, like how much insurance we want to provide and when are we willing to let a firm fail if it risks the broader economy. And we haven’t solved this yet. And that needs to be the debate coming out of this.
Chris Hayes: Well, and then there’s another question, too, which is about, so that’s one regulatory question, right, which is what’s the status of these deposits. And again, like there’s a little bit of weird, mixed messaging, because at one level, you want to say, you want to stop these bank runs, right?
So what you want to say when you break the glass and say, SVB is systemically important as, hey, everyone who has uninsured deposits, don’t go running to your local bank to go get them out, because we don’t want this happening, wink, wink, nudge, nudge, basically without saying it, like if it gets bad, we’ll be there.
What you also don’t want to say, every uninsured deposit in America is guaranteed because that is not the law. Like the limit is a limit. The insurance, it’s, like you said, classic social insurance. There’s a premium that’s paid and then there is, you know, then you pay out claims against the pooled premiums.
Now, one thing would just be raise premiums and insure everything. But the banks don’t want to do that because they don’t want to pay the premiums, right? I mean, that’s the problem.
Mike Konczal: It’s complicated, because the problem is then you’ve suddenly backstopped a lot of banking activity. And if —
Chris Hayes: Right.
Mike Konczal: — a bank goes —
Chris Hayes: Right.
Mike Konczal: — really belly up doing —
Chris Hayes: Right.
Mike Konczal: — crazy stuff, you have to have your regulatory environment really strong to do that. And given that —
Chris Hayes: Crypt (ph) (CROSSTALK), right.
Mike Konczal: — we’ve deregulated banks like Silicon Valley Bank four years ago, after passing Dodd-Frank, that doesn’t give me a huge amount of confidence for the all-in strategy when it comes to deposit insurance.
Chris Hayes: Well, that perfectly tees up the next thing, which is that deregulation in 2018. You followed it closely. One of the ways that you and I got to know each other was, you know, I was reading you and listening to you through the Dodd-Frank legislative writing process. And you were very, you know, active in all that.
And so you actually, I think, you wrote a Time’s op-ed, right, back in 2018, when basically, Republican lawmakers, the Trump administration, some Democrats got together with the kind of mid-sized banks, including the SVB, the Silicon Valley Bank, and its president, who lobbied for this, and they basically said, you guys, your banking regulation from Dodd-Frank, is two one-size-fits all. The stuff that we mid-sized banks are doing is not that risky. We should be exempted from some regulation. What happened in 2018? Why did it happen? And tangibly, what did that legislation which passed and was signed into law, what did it do?
Mike Konczal: Yeah, so it’s worthwhile to go back for one second to Dodd-Frank, which passes in 2010. It’s part of President Obama’s achievements during his first two years in office.
And Dodd-Frank does a lot of things. It creates a dedicated consumer regulator. It does a lot of things with derivatives markets. But for banks, it says, if you’re a large bank and if you’re a large systemically risky financial institution, you’re going to have enhanced prudential regulations.
And one way to think about this is that in law, it says if you are above $50 billion in size, you are subject to these requirements. And as you get bigger, if you’re over 250 billion, you’re going to have another set of requirements. And if you’re over a trillion, if you’re globally significant, which is, in practice, is about a trillion, you have another set of requirements.
And that $50 billion line is really important, because if you, again, flashback if you came up with 2008, one big criticism of the financial institutions among the global carnage was that they were engaging in something called regulatory arbitrage. They were picking their regulators. They were able to dodge in and out of what regulations applied to them so that they could be like banks without having any kind of consumer protection laws, without having any —
Chris Hayes: Right, right.
Mike Konczal: — kind of risks against panics. And so that 50 billion line was really important. It says, we’re not going to mess around. If you’re above this line, we don’t care if you’re going to pretend to be this or that or if you’re going to argue you’re not really risky, this is the line. You have to abide by these rules as you go above.
People have wanted to deregulate parts of Dodd-Frank since it was passed. In 2018, there was a big push by President Trump to make that $50 billion line a $250 billion line. And this was sold as relief for community banks. When you’re talking about community banks, you’re talking about bank that’s essentially $1 billion in size, maybe $10 billion. We’re way outside what a community bank is.
Chris Hayes: Right.
Mike Konczal: And there’s a lot of banks that were between $50 billion and $250 billion in size. Large regional banks, which crucially are not Wall Street, so they don’t have that kind of political, you know, asterisks next to them as being Wall Street firms. They’re like mom-and-pop regional banks. They are the banks that are funding all the innovation in Silicon Valley.
Chris Hayes: Right.
Mike Konczal: And they have a lot of sway in Congress. And, you know, the Trump administration only had 51 votes in the Senate. So it needed 60 votes to overcome the filibuster. And it managed to get something like 16 Democratic senators and a fair amount of House members on the Democratic side to move that from 50 to 250 precisely on the theory that a mid-sized regional bank, around $200 billion in size, could not fail in a way that would cause a broader panel, which is literally what Silicon Valley Bank was when it failed a few weeks ago.
Chris Hayes: Oh, it’s so, so, so infuriating. I mean, take a step back for a second, before we get into like what actually that deregulation did. To me, the thing I learned from the great financial crisis, right, is that when push comes to shove, the bailouts are going to happen. Like people could say they’re not. They can argue. But when it looks like panic is going to spread, when it looks like, like the government is going to backstop.
And so the only way to make that work, both like morally and sort of policy-wise, is just like really regulate upfront, really like, because everyone can pretend, well, when it fails, it’ll fail. No, that’s not what happens. Like I’ve watched this so many times. So like what you want, if you’re a bank, like SVB, is the best of both worlds. Let us take risks and then when everything goes to hell, you’re left holding the bag. And that’s, of course, what the great financial crisis was.
But the motivating logic behind Dodd-Frank in some ways, right, particularly with like the too big to fail designation and this notion was, what does it look like to regulate upfront in a world in which we know on the back end if things get bad enough, the government is basically going to insure you?
Mike Konczal: Yeah, definitely. You know, and it’s funny because this law was written in such a way that they move it from 50 billion to 250 billion. But then they say, you know, Federal Reserve, if you want, you can go back and impose some tailored rules in that range, so like, which of course the Federal Reserve did not do. Like, you know, Chair Powell who’s still the chair of the Federal Reserve and Vice Chair, Randy Quarles, did a pretty aggressive deregulation of what Congress told them to do.
So Congress basically said we want you to deregulate banks in this range. But you can still keep some things. And they basically didn’t keep anything. And there was very strong dissents from FOMC member, Lael Brainard, who’s now part of the Biden administration’s team at the NEC, basically saying like if you do this, if you continue, what you’re going to do, it’s 2019, we, the Federal Reserve, are implementing the 2018 law, you’re going to see liquidity crises in banks in this size range. And it’s exactly what we saw. And it’s pretty frustrating, because a lot of us said that this capital requirements, the prudential capital requirements like Dodd-Frank, these aren’t nice to have. Like, these are fundamentally what you do.
Chris Hayes: Yep.
Mike Konczal: Making sure banks have enough capital and liquidity to handle moments of stress is the best cost-benefit analysis in the government. The costs to the economy are very low for a bunch of complicated reasons, but basically, firms, you know, banks can kind of shift around funds in certain ways and just make it slightly less profitable if even that, and the benefits are big for the firm and systemically across the board.
So these were really important regulations that were kind of pulled out in a way that Congress can now point the finger at the Fed and the Fed can point the finger at Congress. And we’re already seeing that nobody is to blame for this. But, you know, like we can go into the specifics like it was very clear that this would have played some role.
Chris Hayes: Yeah, I mean, I don’t want to get too in the weeds. But there is a sort of but-for question that happens with this, you know, thinking about the train derailment in East Palestine, where, you know, there was this break rule that had been passed and then rescinded on the Trump administration, which, you know, looks terrible and was bad, right?
But then when you look further and actually the train in question wouldn’t have been covered by the break rule. So like clearly, the derailment shows the need for regulation in a general sense, but also in a specific but-for causal sense. The classification of that train was not such that it was one of the trains that didn’t have to put in the pneumatic brakes because of the deregulation.
And I guess my question with this is and Ro Khanna was on my show and he said, no, like this rescinded things that would have helped, for instance, stress testing, like there was a but-for cause, that the stuff that they were exempted from really did lead to this. What do you say to that?
Mike Konczal: Yeah. So, I think there’s three ways to approach this and high level. So the first level is that there’s a bunch of things that Silicon Valley Bank would have had to do. Some of them may have passed anyway. This is a big bank talking point right now. But some of them we don’t know because they just weren’t done.
And notably, things like stress testing, things like a living will, which is what it sounds like, it makes sure the bank can fail in a way that’s proper, a lot of that stuff wasn’t done or was slow-footed or otherwise just not, it was nowhere near where it should have been for a bank of that size.
I think second, the bigger but-for is that this was a stand down order to regulators at the San Francisco Federal Reserve Bank and the other bank regulators who would have overseen it. So like if you are a bank examiner who sees all these problems in Silicon Valley Bank in 2022, which we’re starting to hear reporting, saying people were flagging things, are you really going to go hard on them knowing that Congress, the Senate, the Federal Reserve board, you know, Chair Powell have all told you to stand down, that this is not a systemically risky bank.
You know, like the stand down order, the culture of the supervision, I think is just very important. And again, we’ll learn more about this, but that stand down order is very relevant. That is how those regs are read through.
And then third, maybe Silicon Valley Bank still fails, but a lot of these regulations are about banks failing well and failing in a way that contains the panic.
Chris Hayes: Right.
Mike Konczal: So, is Silicon Valley Bank still here? I don’t know. But I think it’d be more likely they would have found a buyer over that weekend and maybe we could have resolved this thing without —
Chris Hayes: Right.
Mike Konczal: — the bigger panic that ended up happening and all the unfairness and panic and chaos and confusion that we have leading out of this situation.
Chris Hayes: We’ll be right back after we take this quick break.
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Chris Hayes: So let’s talk about the bigger panic and confusion. Signature looked like it had some crypto-related issues, but also, I think Signature and First Republic, which was not rescued by any government intervention, but a bunch of big banks made a big show of putting tens of billions of dollars in deposits in First Republic, which many people thought was going to fail in the way SVB was.
Now, First Republican had a similar thing to SVB which is that it has a pretty affluent client base. It’s based out of San Francisco. It’s a pretty affluent client base and had a lot of uninsured deposits. So it was sort of exposed. Then we saw like everyone just turned to Credit Suisse.
It was like I sort of understood Signature. I understood First Republic. They were sort of adjacent in some ways. They looked a little like SVB. Credit Suisse is just a totally different thing. And I wonder what do we make of that and what does it say about the degree to which like there’s some roiling problems in the general financial system that are not quelled yet.
Mike Konczal: Yeah. So, I mean, there’s two ways to look at it. One is, you know, the failure of regulations particularly in the U.S. and Credit Suisse, I think, we’re still learning a lot about. You know, it has the Swiss government stepped in and helped ensure that that panic didn’t spread.
I think there’s two things that are relevant. One is that the panic spreads pretty quickly, right? So like the moment —
Chris Hayes: Yeah.
Mike Konczal: — you start to have a little bit of worry, that’s the whole contagion aspect of this. That it’s not just at one bank, but it goes to many other banks that freak people out.
And second is, you know, the United States and other central banks have been raising interest rates pretty rapidly. And, you know, there’s a phrase, people have used that, the Federal Reserve is going to raise rates until something broke and like this is the thing that broke.
Chris Hayes: Right, right, right, right.
Mike Konczal: And so, you know, the first failure is always going to be unique in its own way. But we do know that there’s a lot of losses on bank balance sheets. We do know that there’s a more general stress that the Federal Reserve has stated. It wants financial market conditions to weaken.
And so I think you have the kind of one-two punch of like very deregulated banks failing in a very specific way. And then also like globally interest rates are much higher than people had anticipated and how well is the system going to handle that.
Now, what the balance there is for Credit Suisse is a big question mark. We know the banks that failed so far really did have regulatory issues, really did have idiosyncratic bank issues in the United States. But there is a question of like what happens next here because there’s been a lot of stress introduced. So we don’t know at what level it kind of levels out.
Chris Hayes: Right. And there’s a broader question here about Fed policy, too, and where this is all going. So I’m talking to you a few hours after they announced at the Fed meeting, they’re going to raise rates, another quarter percentage point, 25 basis points. And they changed their forward guidance language from basically ‘will continue to raise rates’ to ‘may,’ that’s the short version.
Now, it’s probably worth, again, doing a little monetary policy 101 here, because we think of the Fed as the main instrument. And it is the main instrument for monetary policy, how loose or how tight money is, how easy or hard it is for capital flows with the system.
But banks are the sort of ground level means by which, you know, money supply is created. The more expansive a bank is feeling, right, the less risking, the less small see (ph) conservative, the more lending they’re going to do, the more money will flow through the system, the more squeezed they are, the more conservative they will be.
So there’s some thinking that independent of Fed actions on rates, the financial conditions of these banks who are now going to be worried and looking at balance sheets is going to lead to tightening. And in fact, they might be doing so much tightening that Fed rate rises are no longer necessary and/or combined with Fed rate rises are going to be the thing that finally push us into the waiting for Godot recession, which everyone keeps telling us coming, it hasn’t come yet. What do you think?
Mike Konczal: Yeah. I mean, that sounds right. So, you know, inflation had been higher than expected over the last couple of months. There was a big revision to the seasonal adjustment that made it look like it had been coming down pretty sharply over the winter. And then it looked like maybe it wasn’t coming down as much as people had hoped.
And crucially, in the last couple of months, has been kind of moving sideways, so it’s leveled out at a level that’s a little bit higher than what people wanted. I think people wanted to level out closer to three percent and now it’s leveling out closer to five percent going into this.
And so there was a real move for the Fed to have a much more hawkish position going into the announcement today, Wednesday, March 22nd, you know, 50 basis points, much more strong language. And I think they were rightfully concerned that this is kind of a tipping point.
So like you saw the language shift towards a hike that was much more dovish than I think people anticipated, you know, strong language about making sure saying that the financial system is strong, there’s a lot of ample liquidity and capital, they’re going to stand behind it, it’ll be okay. But also, a little bit of like, okay, maybe we’ve pushed the economy to where it needs to go to slow down or, alternatively, maybe they’ve already tipped it over into a recession.
And you know, these things are all so crazy and unique at each time, so it’s very hard to know what’s going to happen here. But certainly, the economy is not going to be stronger as a result of this. And there’s a lot of reasons to think it might be a lot weaker. And so I think it was appropriate for them to start to signal that they’re going to be much more wait and see going forward.
Chris Hayes: One question I always have is like they’ve been sort of hitting the brakes and hitting the brakes and hitting the brakes. And again, I, you know, I think, all of us who are in the world of covering this stuff and I will be the first to say that I’m just a guy with a philosophy BA in a cable news show, so, you know, my monetary policy judgment is worth what I’m charging you for it, but everyone’s always second guessing the Fed.
And, you know, like I think they’ve been probably hiking too much in the last several months. But I also think that I understood why they have been. The inflation thing is real. And the data is mixed. And there is some sense in which it seems to have sort of burrowed into the system a little bit after, you know, the supply disruptions went away.
You know, that said, I guess my real question is like how quickly the rate hike or rate cut policy channel can move into the system. There’s like this lag problem I think we’re all dealing with. There’s lag in the data. There’s lag on like rental costs. There’s lag on the effects of the cuts or the hikes. And you just worry about, you know, hiking until it’s too late. And then the lag and the recession hits. And then when you try to cut, you can’t unwind what you’ve done and then, you know, you’re in a bad situation.
Mike Konczal: Yeah, absolutely. So the phrase Milton Friedman coined is monetary policy works with long and variable lags. And even people who think it moves fast still thinks it takes about six months to kind of feel the full tightening impact, where a lot more people think it may take more, like one to two years.
And so like all the rate hikes from the fall still haven’t really gone through the system, even if you think they move pretty fast. And so there’s a lot of built-in tightening.
Crucially, one of the things the Fed watches and what it references is its impact on financial conditions, like how easy it is, what the financial markets are up to, how much credits being lent, under what term is credit being lent. And it is certainly the case that that has almost certainly started to tighten.
You know, people are debating what metrics to use, and the actual terms are sometimes complicated. But the Chicago Fed’s metric of financial conditions tightened at the fastest one-week rate after this crisis, since it had, since a year-plus ago when the Fed, became apparent that the Fed was going to raise rates quite aggressively in 2022.
So, you know, it’s one of those things where recessions kind of have, and the economy in general has like a kind of built-in tendency, right? So, if things start to slow down, they might slow down very rapidly and very quickly. And this could be the scenario everyone wanted to avoid, which is like a very deep recession.
And who knows what’s going to happen? I’m not predicting anything. I’ve generally been very keen on the idea that there’s so much strength in the economy and in the labor market, you could have a so-called soft landing, which is a —
Chris Hayes: Right, right, right.
Mike Konczal: — deceleration which did not hit the labor market, because balance sheets were so strong, consumers were so strong, labor market was doing really well. We were bringing in a lot of workers and bringing people in off the sidelines. But you know, throw in a financial crisis, that’s just like no one really knows well what to make of it.
Chris Hayes: Well, and there’s also just been this very weird dynamic of like this game of chicken between Wall Street and Powell, where because Powell basically has like announced that the target is the financial conditions, it then makes it like he needs financial markets to be like, every time that there’s any sense that they’re going to ease up, stocks rally, Wall Street rallies. And then it’s like he then has to hike to like discipline them.
And it just, it really feels like a weird dynamic where it’s like lost sight of the target a little bit. It does feel like the standoff with Wall Street because people want, I think, in the business world and financial markets, there’s this desire to kind of like get back to normal. And I think that’s like, basically, the channel that has driven so much of what life has been post-pandemic. And I think you see it in the mass psychology of financial markets, you know, throughout the country is when will we get back to normal, right?
And this desire to do that means that there has been this sort of hair trigger to want to rally and for equities to go up and everyone to start like bonanza happy days are here again. And then every time that happens, he has to discipline it. But then it means it like, he’s sort of locked in this, you know, game of chicken.
Mike Konczal: Yeah. There’s a great example of this in the past week where, you know, people are concerned that there’s a lot of tightening. And the Federal Reserve sees a lot of bank data that everyday people don’t, and even sophisticated economists don’t. And if they thought that things were really bad, they would want to do no hike. They want to keep rates at, you know, not hike, to a zero, you know, hike.
Chris Hayes: Right.
Mike Konczal: However, a lot of people came out and said, if you do a zero hike, it’s going to tell people that things are bad and then it’s going to get worse.
Chris Hayes: Right.
Mike Konczal: It might cause like even more panic or even more conditioning because you have now signaled that you are worried.
Chris Hayes: Right.
Mike Konczal: And so like a lot of people wanted 25 basis points which is what they did.
Chris Hayes: Right, right.
Mike Konczal: Kind of like a Goldilocks in between thing. And it kind of has like that scene in Princess Bride where you’re like four dimensions into like overthinking who’s doing what.
Chris Hayes: Totally. That’s exactly what it is. It is the scene. All monetary policy, all Fed decisions for the last year have felt like the Wallace Shawn scene in The Princess Bride of like you think that I thought that you think that I thought that I put the poison in this one. Like it all feels that way to me.
Mike Konczal: Yeah. Yeah. And it’s, you know, the fact that the Fed has said it might be leveling off, I think might be a break from this. And certainly, I think financial markets are at least talking to a lot of people, like everyone’s certainly taking a step back and realizing that, like things might be different for a little while. And, certainly, there might be need for new regulations. But more practically, more than the immediate term, there might just be a general cooling to the economy in a way that people had not anticipated even weeks ago.
Chris Hayes: Well, okay. So then let’s bring this question here about kind of a little bit of the schadenfreude. I think you and I are aligned in our sort of vision of you want tight labor markets, you want the economy to run hot. We’re sort of anti-liquidationists, which is Andrew Carnegie during the Great Depression basically, gives a speech where he basically says, like, let them all suffer, sell it all off, liquidate labor, liquidate land, like everyone, you know, like the pain is good, the pain is salutary for the system.
And, you know, the great insight, I think, of Keynes is that it isn’t actually. Like that you could actually run a version of capitalism that doesn’t have that kind of pain. And that’s the great, you know, intervention of the general theory. It’s the great intervention of the policy that gets created in the new deal and forward.
All of that said, there’s a Warren Buffett quote about, you know, when the tide goes out, you can see who’s standing there naked. And there is a little bit of that like particularly vis-a-vis tech, where it’s like maybe all this whole business model of never being profitable ever, just worrying about growth and never actually having a thing that anyone is like paying for and turning a profit on, like the basics of like, if you opened a sandwich shop, like the sandwich cost me $4, I charge you $6, I take the $2 as profit.
Like Silicon Valley has been running on this model which like the sandwich costs $6 and I give it to you for $3, but I’m selling lots of sandwiches, I’m making it up on volume, right? Like this idea of the way to go is you lose money on every customer, but growth is everything and you want to grow as much as possible. That’s the way fortunes are made.
The degree to which like that was just a product of easy money and as the money tightens, that goes away, it seems like there’s something to that story and also maybe not the worst thing for like businesses to go back to the question of like, huh, can I actually produce the thing that I can sell for a profit, which seems like a very quaint concern in Silicon Valley for a long time.
Mike Konczal: Yeah, absolutely. And the reason that mechanically happens is when interest rates are very low, financial firms don’t need as much of a profit upfront because the dollar is worth less upfront. You’re more indifferent between whether or not you get paid back immediately or in the long-term, right, when interest rates are very low —
Chris Hayes: Right, right.
Mike Konczal: — because money is cheaper. So whether or not you can make that dollar or two upfront or whether or not you can make a hundred dollars 10 years from now, suddenly, you’re kind of indifferent between those two or whatever the right calculation is there. You’re much more interested in things that could make a huge amount of money further down the line than you are in something that’s more dependably profitable upfront. That’s kind of the definition of what low interest rates do.
And, you know, as interest rates tightened, you know, we saw two things, one is that the labor market got a lot better really quickly as opposed to the great recessions, because like this business model is created alongside low interest rates. But the value is also created among a really bad labor market where a lot of people worked really terrible, service jobs for apps that paid very little off labor law.
Chris Hayes: Right, cheap money and weak labor markets, right? Like that’s what Uber was. That’s what made Uber possible in some ways or at least made Uber possible at the prices that Uber was charging.
Mike Konczal: Yeah. And the first thing we saw is the labor market came rip-roaring back in 2021 and 2022. And so that was the first pressure on that business model. You saw a lot of like articles about how that kind of business model is over. And now that interest rates, it’s not clear what interest rates will look like five or 10 years from now. Perhaps they’ll still be kind of lower in the secular stagnation kind of world. But they won’t probably be as low as they were during the Great Recession. So you’re going to get hit on both.
If people are going to tell the story about the end of one iteration of the Silicon Valley in its technology, and its VC culture, and its ideology, the sudden collapse of Silicon Valley Bank would make a very good entry to that story.
Chris Hayes: Yes. I mean, that to me is the big question, like what comes next and, you know, can it be better. I do think there’s like really, you know, at the same time that you’re seeing investment in this area, you’re seeing layoffs in tech and investment, you are seeing a ton of money flowing into energy and climate-related stuff. partly that’s because of the Inflation Reduction Act.
And, you know, you could get crappy business models there, too. It’s nothing. It’s American capitalism. So you could come up with bad exploitative businesses in a whole variety of areas. But I mean the hope, right, is that you get these kind of like high wage, high road actual building physical things in the world that matter as incentivized sort of investment over, you know, whatever the latest app that is produced that, you know, is the Uber of whatever.
Mike Konczal: Yeah, definitely. And it’s important that, you know, that’s done well, because not only just labor but also resource extraction is going to be a big part of it. And you want that to be more environmentally just than not. But it does seem between the Inflation Reduction Act, the way major countries are reacting to supply chains after the COVID, that we’re going to enter a kind of new political economy. Many people are calling this already. And what that looks like, it will probably be a little less app-based than the one of the last couple decades.
Chris Hayes: Yeah, that’s the big question and maybe more focus on, you know, atoms, not electrons kind of thing. You know, is it, are we going to have a sort of political economy and investment decision? I mean, this is a big question, right? Where does investment flow? Where does investment money flow?
And does it flow towards, and I mean, believe me, I love me some apps. I mean, I’m on Riverside right now. I don’t want to like denigrate, like I love tech. I love my phone. I’m writing a book about the attention to industry right now. So I don’t want to like denigrate.
I just think that like there was just a lot of money flowing through the valley that was really looking to hit it big on these kind of, what are called unicorns. And, you know, I think a lot of that wasn’t the most productive investment, frankly, particularly at a time when like we have to make these very crucial investments on the energy transition. And I’m hoping that, you know, some of that investment does go forward.
Mike Konczal: Yeah, absolutely. You know, a lot of people look at the 2010s and with interest rates really low, with economic activity very low, with the capacity to hire and employ a lot of people because unemployment was so high, the fact that we didn’t invest more —
Chris Hayes: Yep.
Mike Konczal: — in climate —
Chris Hayes: Enormous.
Mike Konczal: — the fact, huge social costs. Hopefully, we can start making up for it now with many things that are happening already.
Chris Hayes: Enormous, enormous, enormous, missed opportunity, truly. Like I mean, there’s been so many missed opportunities in the climate story, but that’s one of the biggest ones.
Mike Konczal is director of Macroeconomic Analysis of the Roosevelt Institute. And he’s the author of “Freedom From the Market,” co-author with Joseph Stiglitz of “Rewriting the Rules of the American Economy.” His last name is spelled K-O-N-C-Z-A-L if you want to find him on Twitter.
Mike, thanks so much.
Mike Konczal: Thank you for having me.
Chris Hayes: Once again, great thanks to Mike Konczal. I really learned a lot from that conversation. Now, I should note that since recording this, the FDIC announced it has sold most of the Silicon Valley Bank to First Citizens BancShares. That’s a Raleigh-based bank. It’s one of the largest regional banks in the country. And it is acquiring all of Silicon Valley Bank’s deposits, loans and branches.
FDIC added that about 90 billion of SVB’s securities and other assets remain under its control, meaning the FDIC’s control. It’s also worth pointing out SVB’s deposits and assets were transferred into a bridge bank earlier this month. That’s a standard procedure that FDIC uses. The 17 former branches of Silicon Valley Bridge Bank opened as First-Citizens Bank & Trust Company this week. First-Citizens’ shares jumped on that news.
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“Why Is This Happening?” is presented by MSNBC and NBC News, produced by Doni Holloway and Brendan O’Melia, engineered by Bob Mallory and featuring music by Eddie Cooper. You can see more of our work, including links to things we mentioned here, by going to nbcnews.com/whyisthishappening.
Tweet us with the hashtag #WITHpod, email WITHpod@gmail.com. Follow us on TikTok by searching for WITHpod. “Why Is This Happening?” is presented by MSNBC and NBC News, produced by Doni Holloway and Brendan O’Melia, engineered by Bob Mallory and features music by Eddie Cooper. You can see more of our work, including links to things we mentioned here, by going to nbcnews.com/whyisthishappening.