A Bailout By Another Name | Alexandra Scaggs | TMR

Sam and Emma host Alexandra Scaggs, a reporter for the Financial Times, to discuss the recent turmoil surrounding the Silicon Valley Bank and Signature Bank. Alexandra Scaggs joins as she walks Sam and Emma through the four central elements of Silicon Valley Bank’s collapse, starting by assessing the rollback of the Dodd-Frank capital checks on banks with under $250 Billion in assets, which allowed SVB, the 16th biggest bank in the US, to completely undercapitalize without any awareness from regulators or the Federal Reserve. Next, Alexandra looks to the behind-the-scene shenanigans at SVB that kept them below the $250 Billion threshold, before turning to their relationship with depositors, making outlandish deals to get their clients to deposit well above the FDIC $250k insurance threshold. Bringing these various elements together, Scaggs explores how rumors of SVB’s undercapitalization with the Fed’s constant interest hikes were then spread to depositors, who made these losses official with en masse withdrawals during last Friday’s bank run. Wrapping up the interview, Alexandra, Sam, and Emma tackle how endemic this particular failure was to the ideology of Silicon Valley, one that is grounded in cash-poor companies with promises of future profits, alongside the general culture of Big Tech

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Joining us now is Alexander Skaggs. She is a reporter for the financial times. Alexander thanks so much for joining us. Hi thanks for having me. I imagine it's a very busy week for you. yes. It's like your Christmas. in some weird way but this is when we really earn our paychecks. Okay so let's start. I mean if it seems to me and tell me I imagine I don't have the whole story on this at all. But it seems to me there's like four elements I was saying earlier about this: there is the rollback of the 2017-2018 Dodd-Frank rollback which changed the threshold in which Regulators would check on banks to make sure they're not, you know, under capitalized essentially. There is what Regulators actually did with those changes in those laws in terms of the way they executed them. There was SBV and maybe a couple other banks that were doing stuff they shouldn't have been doing. They were over, they were capitalized and they could do that because there was no regulation and then there were depositors depositing more than the FDIC threshold for what would be insured which is a really weird thing to do for people who have that much money. Yeah, so I mean you've really covered a lot of it. Let's start at the top and work our way down I guess. Regulation yeah so there are a couple of interesting things that play there. First is you know like you said the stuff you talked about with regulations being rolled back in 2017-2018. Basically again it sort of raised the size or it meant that bigger Banks could avoid certain kinds of regulations right? I like it, just slightly less oversight you could say. And how many banks are there between that it used to be at a 50 billion threshold and now it's at a 250 billion threshold? Do you have a sense? I mean, is there a way to know how many banks are I mean surely like okay so how many do we have now in that zone? So we don't. I don't have that number off the top of my head. But I can say that Silicon Valley Bank was the 16th biggest bank in the United States by assets. and it stayed under that threshold. Which is incredible right? Like the top 20 banks that still are managing to dodge these regulations. And they were very very careful about making sure that they stayed under that threshold too. And I think that's something that's coming out now as well. Wow. That's like you go and pulling 9999 out of your bank account because you don't want the IRS to know the opponent's 10 000 cash.