3/15/23

 Wednesday, March 15, 2023

Beware the Ides of March

In bed at 10:30, and up at 5:45.  20℉, high of 42, wind SSW at 9, gusts up to 28 mph, wind chill 10℉, ranging from 8 to 35℉ under sunny skies, sunrise at 7:04, sunset at 6:57, 11+53.

The End of Silicon Valley Bank—And a Silicon Valley Myth  From The Atlantic online: "Who killed SVB—and triggered the mini–banking crisis sweeping the United States?  (1)  You could blame the bank’s executives, who bet $80 billion on long-term bonds that bled value when interest rates went up, thus torching their portfolio with fantastic efficiency. (2)  You could blame the Federal Reserve for falling behind inflation and then quickly raising interest rates, bludgeoning investors who watched in horror as their bold portfolios melted down.  (3)  You could blame regulators or the auditors at KPMG, who gave SVB a clean bill of health when they looked into its portfolio just weeks before its historic collapse. (4)  You could blame the phalanx of interests—President Donald Trump, Senate Republicans, tech titans, bankers, and even a handful of Democrats—who called to roll back midsize-bank regulations in 2018, potentially setting the stage for this catastrophic mismanagement. (5)  Or you could blame venture capitalists. One week ago, SVB was technically insolvent but far from doomed. Without a massive run on its deposits, the bank likely would have puttered along as its long-term bonds matured. Surely, SVB had put itself in an awful position by tossing fresh cash into the Dumpster fire of the 2022 bond market. But actual bank death required one further step: Clients, led by the venture-capital community, had to turn on a trusted financial partner.  That’s exactly what happened. As SVB’s leadership scrambled to raise funds, Founders Fund and other large venture investors told their companies late last week to pull out all of their cash. When other start-ups banking with SVB caught wind of this exodus on group chats and Twitter, they, too, raced for the exits. On Thursday alone, SVB customers withdrew $42 billion—or $1 million a second, for 10 straight hours—in the largest bank run in history. If SVB executives, regulators, and conservative politicians built a barn out of highly flammable wood and filled it with hay and oil drums, venture capitalists were the ones who tipped over the barrels and dropped a lit match."

What seems clear is that the mechanisms, organizations, and institutions that we have relied on to protect the public don't - or more probably, can't - do the job.  Life and the economy that sustains it have become too complex, too complicated, too interconnected, and too fast-moving, for 20th-century sentry mechanisms to keep up with 21st-century risks.  This is especially true in our era of vast wealth inequality, where more and more economic power is concentrated in fewer and fewer hands.  The venerable Arthur Anderson didn't protect us from Enron; KPMG didn't protect us from SVB and Signature Bank.  Neither did the FDIC, the Federal Reserve, or the "free market."  Jeff Skilling and the top managers at Enron were too smart for Arthur Anderson's auditors and Arthur Anderson went out of business in 2002, turning the Big 5 into the Big 4: Deloitte Touche Tohmatsu Ltd., Ernst & Young LLP, KPMG LLP, and PriceWaterhouseCoopers LLP.  Will SVB and Signature Bank trigger the demise of KPMG and leave us with 'the Big 3, even further consolidating economic wealth and political power in the public accounting industry?  Quis custodiet ipsos custodes?  Who guards the guards?

Some things we now know for certain.  (1) The assurances that the collapse of SVB and Signature Bank did not create a danger of systemwide banking failures were inaccurate, misleading, false. (2) The claim by Biden's administration and other Democrats that the government has not provided a "bailout" is inaccurate, misleading, false.  Uninsured, very wealthy tech startups and venture capitalist depositors were indeed bailed out by the U. S. government, even if shareholders and bondholders of the banks were not. (3)  Without the massive government intervention orchestrated by the Treasury, the Fed, and the FDIC, the entire banking system and economy faced "a bloodbath" on Monday, 3/13.  Today's "Pearls Before Swine" comic strip reminds me of the elites and experts protecting us from scoundrels, swindlers, and nincompoops.  Pig: 'Hey, Rat.  This is my friend Joe.  He gives motivational speeches. " Rat:  "How much do you charge?"  Joe: "A thousand bucks."  Rat: "What have you achieved in your own life to justify charging a thousand bucks?"  Joe: "Gotten people to give me a thousand bucks."  Rat: "I've found my calling."

LTMW and feeling guilty.  The combination of cold temperatures and difficult-to-negotiate snow/ice/ground conditions have led me to permit our bird feeders to get scandalously low in seeds and suet.  This morning I see red finches elbowing in on the goldfinches on the niger feeder and a red-bellied nuthatch trying to nab some nourishment from the almost-gone suet cake.  This afternoon when the temperature is supposed to 'soar' above 40 I will do my bird daddy duty and replenish the feeders. . . .  There is a lovely pine siskin or song sparrow (I can't tell them apart) perched on the top of a shepherd's crook munching on a sunflower seed and a gorgeous male cardinal on the ground hoping to strike it rich.

Alzheimer's Disease currently afflicts about 6.7 million Americans 65 years old and older.  The Alzheimer's Association projects that number to rise to 12.7 million in 2050.  They report that the symptoms of "Mild cognitive impairment" include (1) losing things, (2) forgetting events or appointments, and (3) having more trouble coming up with words compared to people of the same age.  Query: how would we know whether we are having more trouble coming up with words 'compared to people of the same age? Query 2: where will the caretakers for 12.7 million Alzheimer's patients come from???

MULS Reunion Luncheon.  I received an invitation from the law school to attend a Reunion Luncheon for 'Marquette lawyers who graduated from the 1940s through the early 1970s,' i.e., those who graduated more than 50 years ago.  It's curious to think that we ancients in our 80s and 90s, who attended the school from the 1940s during World War II to the 1960s and 1970s during Vietnam have much in common.  Of course, the only purpose of the so-called Reunion is to persuade the ancients to make lifetime or testamentary gifts to the law school.  Query: why?  I feel no affection or gratitude to the law school which, after all, was and is a business like many others.  It offered a service for a price and I bought and paid for the service.   Actually, my classmates and I were treated badly, really contemptuously, by some members of the faculty and a number of my classmates transferred out of the school to UW-Madison at the end of the first year of instruction.  The most arrogant of our professors, James D. Ghiardi, reminded us often that the law school doors 'open out' and 'don't let the door slap you on the ass on the way out.'  Leo Leary regularly insulted students whose classroom recitations fell short of his expectations.  It was not a friendly or welcoming place and many of my classmates hated the place and carried a resentment towards it for many years.  Maybe because I had spent 8 years in the military including 4 years of active duty in the Marines before starting law school, I didn't seem to be as affected by the nastiness of faculty but on the other hand, I have no warm emotional attachment to the institution either.  Beyond all those personal feelings, I find it hard to justify donating money to support an institution whose sole reason for existence is the production of more lawyers most of whom are destined to serve the interests of the monied sector of society.  Why the law school rather than Repairers of the Breach, Doctors Without Borders, Planned Parenthood, St. Vincent de Paul Society, or a thousand other organizations dedicated to helping those in great need?