Treasury Secretary Janet Yellen sounds like a waitress in a 1950s Jewish deli in Brooklyn, although she probably has less of a grasp on reality than that waitress. Ignoring her idiotic giggling demeanor, her acceptance of the worst excesses of the regulatory Deep StateTM has further eroded the rule of law.
Yup…the rule of law doesn’t just control crime. It is an integral part of a free-market economy, and with one fell swoop she has completed the destruction of the traditional…and legal…hierarchy governing financial failure. Just look back to the GM fiasco, in which settled financial law was upended by the Obama administration so that their union pets would be made whole, and the legally entitled bond holders were just shit out of luck! So what that people make investment decisions based on those laws!
However, Yellen warned that not all depositors will be protected over the FDIC insurance limits of $250,000 per account in the future, as has been the case with the two failed banks. Instead, uninsured deposits would only be covered in the event that a “majority of the FDIC board, a supermajority of the Fed board, and I, in consultation with the president, determine that the failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences,” Yellen said.
See what I mean? Orwell’s single commandment from Animal Farm speaks volumes:
All animals are equal, but some animals are more equal than others.
And we all know which animals are more equal…the ones putting food into the Democrat trough. Gavin Newsom is the latest example of a politician feeding a that trough…he has extensive business interests with financial relationships to SVB, and the bank actually donated $100k to his wife’s
slush fund charity. But that didn’t prevent him form pushing for a total bailout instead of one governed by established financial law and regulation.
So what will happen if another bank goes belly up, but wasn’t crooked enough to buy the correct politicians? Whoops! Too bad about those deposits in excess of the FDIC $250,000 limit, but the law is the law!
This is the sort of thing that increases systemic risk, because banks and other businesses that are well positioned for these sorts of extralegal bailouts can act much more recklessly, with the expectation that their financial losses will be made whole by a compliant and well fed Deep StateTM. There’s even a term for it: Moral Hazard.
That adds uncertainty to the millions of financial decisions made every day by the individual actors that make up the economy (Adam Smith’s “invisible hand”), and it decreases the possibilities for growth. If you don’t know the rules, then how can you make an informed decision?