by Pam Martens and Russ Martens, Wall St On Parade:
Remember those Fed bailouts of the mega banks on Wall Street during and after the 2008 financial crisis that the Federal Reserve battled in court for years to keep secret from the American people? Those bailouts went to the same Wall Street mega banks that collapsed the U.S. economy with their unbridled greed and unchecked corruption. The banks were even allowed to pay big bonuses to their execs with the bailout funds.
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When Senator Bernie Sanders forced the bailout details into the sunlight with a mandated government audit, the findings were so revolting that Senator Sanders had this to say:
“As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world. This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”
Well, bailouts for wayward banks are back in style in a big way. According to Securities and Exchange Commission (SEC) filings made by crypto-friendly banks, Federal Home Loan Banks (FHLB) in San Francisco, Boston, New York and Pittsburgh have made large advances of money to banks facilitating crypto in various ways as bank depositors yanked their cash and/or the banks’ share prices tanked.
Among the crypto-friendly banks tapping into these FHLB advances are Silvergate Capital, parent of Silvergate Bank; Signature Bank; Provident Bancorp (owner of BankProv); and Ally Financial. This may, however, be just the tip of the iceberg because many crypto-engaged banks are not publicly traded and thus are not required to file SEC reports. S&P Global reports that as of October of last year, “the Federal Deposit Insurance Corp. was aware of about 80 financial institutions under its supervision that expressed interest in cryptocurrency-related activities, and about 24 of them were actively engaged.”
Let that sink in for a moment: 24 federally-insured banks in the U.S. are being allowed by their federal regulators to actively engage in crypto when it has been thoroughly discredited by those in the know.
One of the most respected investors in America, Warren Buffett, summed up Bitcoin like this in May 2018: Bitcoin is “probably rat poison squared.” Also in 2018, Bill Harris, the former CEO of Intuit and PayPal, wrote a detailed critique of Bitcoin for Vox, under the headline: “Bitcoin is the greatest scam in history.” Harris wrote:
“In my opinion, it’s a colossal pump-and-dump scheme, the likes of which the world has never seen. In a pump-and-dump game, promoters ‘pump’ up the price of a security creating a speculative frenzy, then ‘dump’ some of their holdings at artificially high prices. And some cryptocurrencies are pure frauds. Ernst & Young estimates that 10 percent of the money raised for initial coin offerings has been stolen.”
In July 2019, NYU Professor and economist Nouriel Roubini launched a scathing analysis of crypto. In a Bloomberg interview, Roubini said this:
“Crypto currencies are not even currencies. They’re a joke…The price of Bitcoin has fallen in a week by how much – 30 percent. It goes up 20 percent one day, collapses the next. It is not a means of payment, nobody, not even this blockchain conference, accepts Bitcoin for paying for conference fees cause you can do only five transactions per second with Bitcoin. With the Visa system you can do 25,000 transactions per second…Crypto’s nonsense. It’s a failure. Nobody’s using it for any transactions. It’s trading one sh*tcoin for another sh*tcoin. That’s the entire trading or currency in the space where’s there’s price manipulation, spoofing, wash trading, pump and dumping, frontrunning. It’s just a big criminal scam and nothing else.”
Just last June, 1600 of the smartest scientists and software engineers in technology sent a letter to Congressional committees warning that both crypto and blockchain were shams. The letter included this:
“We strongly disagree with the narrative—peddled by those with a financial stake in the crypto-asset industry—that these technologies represent a positive financial innovation and are in any way suited to solving the financial problems facing ordinary Americans…
“As software engineers and technologists with deep expertise in our fields, we dispute the claims made in recent years about the novelty and potential of blockchain technology. Blockchain technology cannot, and will not, have transaction reversal or data privacy mechanisms because they are antithetical to its base design. Financial technologies that serve the public must always have mechanisms for fraud mitigation and allow a human-in-the-loop to reverse transactions; blockchain permits neither.”
There can be no better real-world experience to prove the thesis of these scientists and software engineers than what has gone on at the collapsed FTX crypto exchange house of fraud since it filed bankruptcy on November 11. After more than $8 billion of customer funds were looted by executives before the bankruptcy filing, even after federal prosecutors were on the case FTX was hacked and hundreds of millions of dollars took flight.
One of the most striking examples of the bailout hubris currently going on is at Silvergate Bank. On January 5 the bank lost 42.73 percent of its market value in one trading session, putting its stock price losses at 91 percent over the prior 12 months. According to a statement released that day by Silvergate, its “total deposits from digital asset customers declined to $3.8 billion” as of December 31, 2022 (down from the previously reported $11.9 billion on September 30, 2022.) That’s a stunning 68 percent drop in deposits in one quarter. According to an SEC filing, as of December 31, 2022, Silvergate had taken $4.3 billion in advances from the FHLB of San Francisco.
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