Watchman: Cryptocurrency Banks Are Being Targeted. The White House Targets Cryptocurrencies and Calls for Stronger Enforcement by Regulators–They (Gov) Don’t Want to Lose Their Monopoly
Despite President Biden and US Treasury Secretary Janet Yellen telling Americans that the US banking system is "safe and sound," Moody's Investors Service announced today that it had downgraded the US banking system to "negative" from "stable" to reflect "the rapid deterioration in the operating environment."
They also said today that they, along with five other regional banks, were investigating First Republic's debt rating for a possible downgrade.
Moody's Investors Service downgraded the US banking sector to negative from stable on Tuesday, citing "rapid deterioration in the operating environment" as a result of deposit runs and the collapses of Silicon Valley Bank, Signature Bank, and Silvergate Bank.
S&P Global Ratings is reviewing First Republic Bank's A-minus rating.
Moody's stated it was looking into downgrading First Republic's debt rating, along with five other regional banks.
Debt downgrades often increase the cost of borrowing money for businesses through the issuance of public bonds. In the case of banks, the downgrading may make other industries more desirable to public corporate-debt investors, while forcing banks to provide higher interest rates on their bonds. A downgrading may also tarnish a bank's reputation as a safe refuge in more unpredictable industries.
"While the Department of the Treasury, Federal Reserve, and FDIC announced that all SVB and Signature Bank depositors will be paid whole," Moody's said in a sector downgrade.
Banks are "well capitalized" to withstand a deteriorating operating environment, but unrealized losses on securities they hold are currently a headwind, according to Moody's.
"Profitability will drop for many institutions," according to Moody's.
Moody's has placed six US regional banks' debt ratings under evaluation for downgrade as it considers "highly unpredictable funding conditions" for some US lenders.
After the failures of Silicon Valley Bank, a unit of SVB Financial SIVB, and Signature Bank SBNY, downgrade warnings on First Republic Bank FRC, Intrust Financial, UMB Financial Corp. (UMBF), Zions Bancorp (ZION), Western Alliance Bancorp (WAL), and Comerica Inc. (CMA) may put additional pressure on regional banks.
Moody's cited First Republic's reliance on uninsured deposits, substantial unrealized losses, and poor capitalization relative to peers as reasons for the bank's downgrade. (Entire article. A subscription is required.)
Sifting through the avalanche of news about the banking industry's troubles today, some are wondering why the Feds closed down Signature Bank on Sunday, when other banks appeared to be in worse shape.
This has fueled speculation that bitcoin banks are being targeted, and the "Operation Choke Point" conspiracy theory has resurfaced.
In an article published late last night, Forbes, which is part of the corporate news media and NOT the alternative news media, reported on this hypothesis of the government pursuing the crypto business.
The New York Department of Financial Services has ordered the closure of Signature Bank, one of the largest banks in the United States (NYDFS). Authorities are currently pursuing a sales process for the bank while ensuring that clients will continue to have access to savings and services. This contentious action will have far-reaching consequences for the crypto industry, which has already lost several banking service providers.
Silicon Valley Bank was closed down, and then regulators stepped in to provide deposit access. Much has been written about what caused this, including a lack of risk management and a mismatch in the length of assets and liabilities in mortgage-backed securities and bonds purchased under zero-interest-rate environments to maximize yield.
When mortgage-backed securities are called in early in record-high interest-rate situations, the assets must be sold at a discount to meet depositor demands. This resulted in a bank run, which was averted by the US government, although Signature was shut down shortly afterwards.
First Republic, on the other hand, was not closed down despite being under even greater pressure than Signature in recent days. There were other other regional banks to be concerned about, and stock market trading in First Republic and others was halted the Monday after Signature's closure.
So, why was Signature omitted from this pack? Are regulators now deciding which bank has superior assets or which depositors they prefer?
Fed policy and interest rate hikes have been widely criticized for causing volatility in bank treasury management. In 2023, the crypto business has also faced a storm of regulatory enforcement action.
Several crypto enthusiasts believe the Signature suspension was part of Operation Choke Point 2.0, a covert effort by regulators and lawmakers to cut off financial services for cryptocurrency startups.
"I believe part of what happened was that regulators intended to send a very strong anti-crypto message," said board member and former congressman Barney Frank, who helped craft the Dodd-Frank Act during the 2008 financial crisis. (Complete article; emphasis added by us.)
While this article makes no mention of Central Bank Digital Currencies (CBDCs), it stands to reason that the US government would seek to minimize competition if it intended to replace the monetary system with CBDCs on a large scale.
The 2022-2023 Tech Collapse Continues on a Lower Spiral
As Silicon Valley venture capitalists continue to debate how to resurrect their failed Silicon Valley Bank so that they can continue to invest billions of dollars in new startups and new technologies like AI chat bots, which are all the rage these days, the Big Tech Crash that I have been forecasting since early in the fourth quarter of 2022 continues.
Meta announced today that they would be laying off another 10,000 people.
Meta Cuts 10,000 More Employees As Tech Layoffs Increase
In a blog post published on Tuesday, Meta Platforms CEO Mark Zuckerberg stated that the firm will "decrease our team size by roughly 10,000 employees and close around 5,000 more open roles that we haven't yet hired."
"Here's the timeline: over the next few months, org leaders will reveal reorganization plans focused on flattening our orgs, discontinuing lower priority initiatives, and reducing our recruiting rates," Zuckerberg stated.
"We will flatten our company by eliminating many layers of management," he wrote in the essay, referring to his "Year of Efficiency" to save costs. Employees at Meta had been bracing themselves for more layoffs in recent weeks. A Bloomberg story published on Tuesday detailed the impending job losses. The fresh round of layoffs follows a prior round of layoffs announced in November, which affected around 13% of Meta's total personnel. (Read the entire article.)
Apple Computers said today that bonuses will be delayed and hiring freezes would be implemented. Until recently, Apple was an outlier in the tech industry's cost-cutting drive. According to a Bloomberg story, an insider familiar with Apple's new cost-cutting strategy revealed that the tech giant will postpone bonuses for certain corporate units and apply more efficient techniques to simplify its operations.
The idea calls for bonuses to be given only once a year, rather than twice a year. Bonuses scheduled for April will be moved to October. "The majority of Apple's divisions, including software engineering and services, had already migrated to a once-a-year schedule for incentives and promotions, while personnel in operations, corporate retail, and other areas were still on the outgoing biannual scheme," Bloomberg observed.
Separately, Apple has halted the recruiting of some employment roles and is leaving vacant openings when staff leave. (Read the entire article.)
With so much of the globe now reliant on technology and these behemoth technological firms, this implies tremendous disaster for the economy, regardless of what happens to the financial sector.
Consider the country of Israel, where the IT industry accounts for roughly 25% of total income tax receipts and 10% of the employment. (Source.)
Bank Leumi and Bank Hapoalim, Israel's two largest banks, raised some suspicions in the United States when they were able to transfer nearly $1 billion from Silicon Valley Bank to Israel before the bank failed.
Bank Leumi and Bank Hapoalim, Israel's two largest banks, set up a situation room that has been running around the clock to assist firms in transferring money from SVB — before it was seized — to accounts in Israel. Teams at LeumiTech, Bank Leumi's high-tech banking subsidiary, have been able to assist its Israeli clients in transferring approximately $1 billion to Israel in the last few days, according to the bank. (Source.)
The Justice Department and the Securities and Exchange Commission were also reported today to be examining the collapse of Silicon Valley Bank and the likelihood of misbehavior by its officers relating stock transactions by executives that violated trading laws. (Source.)
This big tech crash, which has now spilled over into the banking system, is a constantly developing story, and I don't think the public in general truly understands the significance of what is currently happening, so I will continue reporting on it, but I will also continue reporting on the other major issues that face us during these troubled times.
Moreover, while I don't have remarkable "credentials" as a financial analyst, I do have over 25 years of experience as a business owner in the United States, including over 21 years of running an e-commerce business. To survive this long, we had to comprehend market dynamics and politics, having survived the dot-com disaster of 2001-2002, the 2008 financial crash, and COVID.
Many people have emailed me seeking for financial advice, but I do not offer it. I only give the news and the analysis, but what you should do with your money is a decision only you can decide based on your own particular circumstances. What I do with the financial resources entrusted to me is not always the same as what you should be doing.
And whatever counsel I did provide would be skewed since I make my living selling high-quality, clean food, and that is where God has directed me to invest for the previous two decades. If the Internet or the electricity grid ever go down for an extended period of time, or if there is a full-fledged banking collapse, we will suffer along with everyone else since customers will be unable to order our items over the Internet.
So, at the very least, we won't go hungry while we continue to distribute our goods around the country to distributors in the event that something like that occurs or if the financial system adopts a digital ID that is required to conduct Internet business. We would never comply with something like that, and as an ecommerce company, it would practically put us out of business.
The conclusion here is that everyone should begin planning for a post-technological world because our current reliance on technology is unsustainable.
It doesn't mean that all technology will vanish, but it does mean that the false promises of technology, as well as its limitations, are finally becoming known, and we haven't even begun to understand how much of our lives have been dependent on this technology in an unhealthy way that leaves us vulnerable.
Develop local communities and relationships, and stay as far away from technology as possible. Learn about your local producers and prepare to start supporting them when technologically dependent supply networks collapse, as they will as technology fails. It's just a matter of time.
The cautious recognize danger and seek refuge, while the simple continue on and suffer as a result. (Psalm 27:12)
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