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Taking It to the Bank

The story of Silicon Valley Bank continues to dominate the headlines, particularly the political maneuvering that its collapse has occasioned. So, we shall talk about it some more.

There is, of course, a hotly contested U.S. Senate race going on in California right now. Silicon Valley Bank is is California. And so, the three declared Senate candidates—Reps. Adam Schiff, Katie Porter and Barbara Lee (all D-CA)—are competing with each other to see who can chastise the banking system the loudest, and who will do the most to cut the banks down to size if they become a senator. Not mentioned is the fact that one U.S. Senator can do approximately zero about banks (or anything else) on their own.

Meanwhile, in our item yesterday, we referred to the federal government's rescue of Silicon Valley Bank as a bailout. That was sloppy, and quite a few readers wrote in to take us to task. For example, R.S. in Vancouver, WA:

I object to the constant discussion of SVB as a "bailout." When the FDIC seizes a bank, like SVB, the process is a liquidation according to legally defined asset class. This is the exact same process as a Chapter 7 bankruptcy.

There is one primary difference. When a bank fails the FDIC backs some or all of the deposits. The normal order of asset reimbursement in a liquidation are: (1) secured creditors, (2) unsecured creditors, (3) preferred stock and (4) general stock, with $0 dollars of a junior asset class being funded until 100% of all senior asset classes are funded.

When the FDIC seizes a bank and guarantees all or some deposits it creates a new senior asset creditor for reimbursement, the FDIC, thus creating a new schedule for asset liquidation: (1) FDIC, (2) secured creditors, (3) unsecured creditors, (4) preferred stock and (5) general stock. Since a bank deposit is an unsecured debt what's really happening is a class of unsecured debt is gaining preference over secured creditors. This is a fight of the wealthy (large depositors) v. the extremely wealthy (secured debt holders).

However, I know of nobody who considers themselves to be receiving a 'bailout' when going through a Chapter 7 bankruptcy.

Or R.H. in Santa Ana, CA:

The "bailout" of SVB refers to the FDIC extending its guarantee (normally $250K per account-holder) to cover all accounts, no matter how large. This will not necessarily cost the FDIC anything.

SVB has assets, but they're largely longer-term fixed-rate instruments whose "value" dropped when ambient interest rates went up.

I used the quotes around value because those instruments, if held to maturity, would pay off the same face amount whether ambient rates are 1% or 6%—the only sense in which their value fluctuates is the price at which they can be sold—the issuers are still going to pay the face value.

The FDIC doesn't have to sell those instruments—it can hold them to maturity and it will receive 100% of their value.

SVB didn't have that luxury—after Peter Thiel told his funded companies to withdraw their money from SVB ASAP, SVB had to (try to) liquidate some of those long-term holdings to get the cash to pay for those withdrawals.

This was a fire sale—they HAD to off-load those holdings, no matter what price they were offered. This led to their insolvency, which means the value of their assets was exceeded by the value of their liabilities.

One of two things will happen: Either SVB will be wound up, all of its assets will become assets of the FDIC (and the FDIC will pay off its depositors), or a larger bank will "buy" SVB, which means its assets and deposits will belong to that bank. In either case, the FDIC is unlikely to be out a lot of money on this.

A much larger issue looms in the near-to-mid future: What happens when most of these multi-tenant office building REITs default on their mortgages? The pandemic shutdown showed most of those tenants that it's a lot cheaper to give employees a laptop and cable modem than it is to rent expensive Class B and C real estate for them all to work in office buildings. (For now, Class A seems to be mostly unaffected, but that could change).

If you thought the Great Recession of 2008-09 was fun, you're going to LOVE what happens when those commercial loans get marked to market.

We stand corrected, or at least clarified, and we thank R.S. and R.H. and the other readers who wrote in.

Meanwhile, consistent with the logic laid out in the two letters above, Rep. Blaine Luetkemeyer (R-MO), who is a former banker and is a member of the House Financial Services Committee, is urging the government to temporarily guarantee all deposits at all banks. His argument is that if depositors at smaller banks are concerned about a repeat of what happened at Silicon Valley Bank, there could be a run on smaller banks. This would not only further risk destabilizing the economy, it could also cause most depositors to migrate to mega-banks that have the capital to ride out tough times. Luetkemeyer believes that bank consolidation like this would be a bad thing. Given the abuses we've seen in recent years from mega-banks like Wells Fargo, we are inclined to agree.

And finally, quite a few readers wrote in wondering exactly how a bank could be destroyed by "wokeness," as claimed by Sen. Josh Hawley (R-MO), Rep. Marjorie Taylor Greene (R-GA) and many others on the right. The key to this "argument" is a woman named Jay Ersapah. Well, her and poor reading comprehension.

See, until Ersapah's LinkedIn page was taken down (you can see a screen capture here), it identified her as the Head of Financial Risk at SVB. It was also full of postings from her talking about various diversity initiatives she was working on. The conclusion that many right-wingers reached was that if Ersapah spent less time worrying about diversity, and more time focusing on her actual job (i.e., monitoring risk), then the bank wouldn't have collapsed. The Rupert Murdoch-owned properties have leaned into this angle particularly heavily:

The latter piece does not reveal its core thesis in the headline, but it does contain this sentence: "I'm not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demands." These various outlets, particularly Fox, have also suggested that Ersapah was so eager to promote LGBTQ hiring because she herself is gay, having received recognition from various LGBTQ organizations.

The only issue with this narrative is... Ersapah works for the British subsidiary of SVB. And that subsidiary is financially healthy enough that it was absorbed by HBSC. Oops! Oh, also, Ersapah is straight. Double oops! It's almost like you shouldn't rely on these Murdoch-owned outlets to report the news correctly. (Z)

Republicans Announce Their House Targets

On Monday, we had the DCCC's high-priority list of seats to defend. Those representatives will get extra money and support (unless they fall way behind in the polls, in which case they'll be put on an ice floe and allowed to drift off into the open ocean, so nature can take its course). On Tuesday, the NRCC released its list of high-priority targets. Whoever ends up as the GOP nominee for these seats will likewise get extra money and support (again, unless they fall behind in polls, or turn out to be some sort of nutter). We combined the two lists; an "X" in the "D" column means the seat is on the Democrats' defend list, and an "X" in the "R" column means the seat is on the Republicans' attack list:

District PVI Incumbent Dem Rep
AK-AL R+8 Mary Peltola X X
ME-02 R+6 Jared Golden X X
WA-03 R+5 Marie Perez X X
PA-08 R+4 Matt Cartwright X X
OH-09 R+3 Marcy Kaptur X X
MI-07 R+2 Open (Elissa Slotkin)   X
NC-13 R+2 Wiley Nickel X X
PA-07 R+2 Susan Wild X X
KS-03 R+1 Sharice Davids X X
OH-13 R+1 Emilia Sykes X X
MI-08 R+1 Dan Kildee X X


District PVI Incumbent Dem Rep
CO-08 EVEN Yadira Caraveo       X X
NH-01 EVEN Chris Pappas X X
PA-17 EVEN Chris Deluzio X X

 
     
District PVI Incumbent Dem Rep
VA-07 D+1 Abigail Spanberger X X
MN-02 D+1 Angie Craig X X
NM-02 D+1 Gabriel Vasquez X X
MI-03 D+1 Hillary Scholten X X
WA-08 D+1 Kim Schrier X X
NY-18 D+1 Pat Ryan X X
NV-03 D+1 Susie Lee X X
NC-01 D+2 Don Davis X X
IL-17 D+2 Eric Sorensen X X
OH-01 D+2 Greg Landsman X X
IN-01 D+3 Open (Katie Porter)   X
IN-01 D+3 Frank Mrvan X X
CT-05 D+3 Jahana Hayes X X
CA-49 D+3 Mike Levin X X
IL-13 D+3 Nikki Budzinski X  
NV-01 D+3 Dana Titus   X
NV-04 D+3 Steven Horsford X X
OR-04 D+4 Val Hoyle   X
RI-02 D+4 Seth Magaziner   X
OR-06 D+4 Andrea Salinas X X
NC-14 D+6 Jeff Jackson   X
CA-09 D+8 Josh Harder   X
FL-09 D+8 Darren Soto   X
TX-34 D+9 Vicente Gonzalez   X


As you can see, the Republicans are currently more ambitious to the Democrats. The blue team's list has 29 seats on it, including just one (IL-13) that is not on the Republican list. The red team's list has 37 seats on it, including 9 that are not on the Democratic list. The lists will certainly evolve over the next year, but GOP leadership is making clear they want to be very, very aggressive and expand their House majority. And maybe it will work for them. Or maybe it won't. Everyone remembers what happened to Icarus when he flew too close to the sun, and some of the Republican targets are real longshots (e.g., Harder, Soto and Jackson, each of whom won in 2022 by a dozen points or more).

Eventually, the Democrats will release an "attack" list and the Republicans will release a "defense" list. But they have not done so yet. We wonder if the order in which these things are being announced says something about the cultures of the respective parties. (Z)

Mike Pence Reminds Us Why He'll Never Be President

As we noted on Monday, former VP Mike Pence gave a speech at this weekend's black-tie Gridiron Club dinner. The big news was that he took a direct shot at his former partner in... well, whatever they were partners in, namely Donald Trump.

That said, there is another element to the story that's worthy of some attention. These sorts of speeches are supposed to be fairly breezy, and to have a few laugh lines. And so, among his other bits, Pence uncorked this snide remark at the expense of Secretary of Transportation Pete Buttigieg:

When Pete's two children were born, he took two months' maternity leave whereupon thousands of travelers were stranded in airports, the air traffic system shut down, and airplanes nearly collided on our runways.

Pete is the only person in human history to have a child and everyone else gets postpartum depression.

We can't find video of the speech, and we believe the Gridiron Club prohibits recordings. But the crowd was reportedly underwhelmed by that particular bit.

It's remarkable, but in just 51 words, Pence managed to squeeze in the four biggest things that make him unelectable as president. To wit:

  1. He's anti-LGBTQ: The meat of the joke, of course, is that Buttigieg, as a gay man, behaved more like a woman than a "real man." Ho, ho! When Pence was governor of Indiana, his signature "accomplishment" was securing passage of a bill called the Religious Freedom Restoration Act. As is generally the case with bills that have names like that, the legislation was meant to give Hoosiers the right to discriminate in the name of freedom of religion. In particular, the bill was carefully worded in a manner so as to allow discrimination against LGBTQ people. Pence gaslighted for a couple of months, insisting that the bill did not sanction anti-LGBTQ discrimination. Nonetheless, the blowback was so great (very similar to the blowback to the North Carolina "bathroom bill") that it became necessary to pass an addendum that specifically prohibited anti-LGBTQ discrimination.

    In short, Pence was anti-LGBTQ 10 years ago, and he's still anti-LGBTQ. That attitude didn't play in ruby red Indiana in the 2010s, and it's definitely not going to play with a national electorate in the 2020s. And there's no way that Pence could ever convincingly change course on this; his whole persona is rooted in his evangelicalism, and it's not a secret that evangelicals of his type are almost invariably anti-gay.

  2. He's anti-woman: Pence's "joke" was nominally about paternity leave. But we have a sneaking suspicion that women voters who hear about it are also going to see it as pooh-poohing maternity leave. What they will definitely hear is that Pence is a man very much invested in traditional gender roles—man work, woman barefoot and pregnant, grunt. His unwillingness to dine with other women if his wife is not present, which is rooted in the notion that women are all teases and men are beasts who cannot control their sexual urges will not help dissuade folks from this perception.

    Oh, and Pence's other signature legislation was a series of bills that significantly restricted abortion in Indiana. That position isn't going to play with a national electorate either.

  3. He's a hypocrite: Pence's brand, like all evangelical politicians, is that he's about family values. But someone who is actually family values does not shame a father (or a mother) who chooses to prioritize their premature infant over their job.

  4. He's terribly media unsavvy: We have pointed out before that Pence brings to mind Alica Roosevelt's observation about Thomas Dewey, that he looks like "the bridegroom on the wedding cake." The former VP is truly plasticine, and is utterly lacking in charisma. If he and Gov. Ron DeSantis (R-FL) somehow end up on the same debate stage, it's entirely possible that the charisma void will be so profound that it will spontaneously trigger a black hole.

    Beyond that, however, is the fact that the Gridiron Club dinner attracts a huge media contingent, in part because it's in Washington, and in part because each year some politician says something really outlandish. Pence knows full well that it's a media-heavy event; that's why he chose the occasion to slam Trump. And when you know full well the media is sitting there, ready to pounce, how stupid do you have to be to say something offensive?

Note that all of this is in addition to the fact that most Republicans hate Pence, either because he "betrayed" Donald Trump or because he hasn't been sufficiently fanatical about the religious stuff. We've already pooh-poohed Nikki Haley's chances in 2024, but she's gotta be 10 times more likely to be elected president than Pence is. (Z)

Take That, Will Rogers

We presume that a fair number of readers are familiar with the old line from the humorist Will Rogers: "I am not a member of any organized political party. I am a Democrat." That is also a familiar lament among modern Democrats, albeit in less witty form.

Politico has an interesting piece right now that makes clear this perception is not always reality. It's about the soon-to-be open U.S. Senate seat in Michigan. In essence, the retirement of Sen. Debbie Stabenow (D-MI) has been a finely choreographed ballet. The Senator made her decision several months ago but, before announcing it publicly, did a lot of legwork behind the scenes (as did Senate Majority Leader Chuck Schumer, D-NY). They steered ambitious Michigander politicians to other opportunities, and kept the decks clear for Rep. Elissa Slotkin (D-MI), the person that Democratic leadership agrees is the most electable person they currently have on the bench.

This process stands in contrast to, say, California. There, the Democratic Senate race has been something of a circus, with two or three candidates declaring (depending on how you count Rep. Barbara Lee, D-CA) even before the retirement of Sen. Dianne Feinstein (D-CA) was official. But in the Golden State, Michigan-level choreography was neither possible nor necessary. It wasn't possible because Feinstein has lost her fastball, and probably isn't capable of doing the sort of legwork that Stabenow did. And it wasn't necessary because California is so blue, and the Republican bench there is so thin, that the seat will remain in Democratic hands pretty much no matter what happens. Not the case in Michigan, of course.

In any case, it's an interesting story. And these machinations strongly suggest that Slotkin is not going to draw any serious competition. In turn, that means she'll enter the general with a pile of money and with the full backing of the Democratic Party. So, this seat does not look to be in serious danger. Unlike, say, West Virginia, Ohio, or Montana. (Z)

Trans Bill on Tap in the House

To provide a foundation for the reader comments on Trans Hate, we're writing up the many and varied news stories on the subject. The idea is to build a list of the various sources and purposes of trans hate, with some evidence. We will definitely do a wrap-up at the end.

Today, it's time to belabor an obvious point, namely that one of the things that is fueling trans hate is conscious efforts by politicians to use trans people as a wedge issue. We've seen plenty of this on the state level, of course, but now it's going national. Specifically, Rep. Greg Steube (R-FL) has introduced H.R. 734, which he calls the Protection of Women and Girls in Sports Act of 2023. That pretty much tells the story, but in case you would like it spelled out, the legislation would amend Title IX to say that a person's sex is based solely on their reproductive organs at birth.

There is, of course, no chance this bill becomes law. It won't come up for a vote in the Senate, nor could it pass that body if it did. And if we were somehow mistaken about that (we aren't), there's no way it would ever get Joe Biden's signature. His administration has already announced plans for guidelines that would tell schools to do the exact opposite of what the new GOP bill would dictate.

Still, the House Education and Workforce Committee took up H.R. 734, and engaged in 16 hours of markup. So, it's going to come to the floor of the House for a vote. And the purpose of that vote, of course, is to force vulnerable Democrats to take a position on the subject. Hence, wedge issue. It's a shame that so many House Republicans seem to be interested in posturing and staging show votes, and that there are so few members like Patrick McHenry (R-NC) and Blaine Luetkemeyer, who seem to be interested in, you know, actually governing. (Z)

Why the Trans Hate?, Part VI: Stories of the Trans-Adjacent

We've heard from trans readers, and we'll hear from them one more time before this series is all said and done. But today, we're running letters from folks who are not trans themselves, but have experience of various sorts that gives them insight into the matter. We are using the phrase "trans-adjacent" because if there's a more correct term, we don't know it. We recognize these are on the lengthy side, particularly in the aggregate, but we found them compelling.

Thanks, all! More tomorrow, of course. (Z)

Word Cup, Round 3: Presidential Slogans

The end is near! Today, we reveal the quarterfinalists for the political slogans. First, from Group F vs. Group H:

That means that the quarterfinal matchup here, appropriately enough, is Hope vs. Make America Great Again.

And from Group B vs. Group D:

That means that the quarterfinal matchup here is Tippecanoe and Tyler, Too! vs. A New Deal for America. America's shortest-serving president against its longest-serving.

Here are some reader comments on these various clashes:

Here is the ballot for this round. And, of course, we continue to welcome comments.

Also, the thing that clued us into the fact that yesterday's posting did not properly go live was the utter lack of response to the suggestions for the bracket competition. We were flabbergasted that nobody saw fit to offer up a single blunder for consideration. Of course, we eventually figured out what the problem was, and now we've gotten a bunch, but the mailbox is definitely still open. Note that we're going to take the suggestion of several readers, and switch the title from "Worst Blunders" to "Greatest Blunders." As reader T.P. in Cleveland observed: "Think positive! Some of these blunders will be tremendous! Stupendous! Awesome!" Fair enough. Some of them might even be bigly. (Z)


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