Ha! Sometimes I Amuse Even Myself
Having invoked the spirit of 007, I shall prod Art into semi-sentience and get him to supply a bit of click-bait. Art, you Neanderthal sloven!
I always remember what Mani, Economics graduate, said of the London Stock Exchange - "The biggest casino in the world", so there's a bit of connection with today's title. For this Intro is another inspired by the caustic commentary on disastrous CEOs and how they destroyed businesses. This time the victim was 'First Republic Bank', who had a pedigree going back to 1985. Art!
Jim Herbert, CEO of FRB during their time of troubles.
Conrad vaguely remembers hearing about FRB going toes-up financially, last year, alongside a few other banks such as 'Signature Bank' and 'Silvergate Bank', the latter which got a dishonourable mention in the blog. These two banks were vulnerable to 'contagion' in the scamble cryptocurrency market as they had invested heavily in magic beans. FRB were a different case. Art!
They promoted themselves as being a bank for the wealthy, rather than snivelling penniless footpads like you and I. When I say 'wealthy' I mean people with tens if not hundreds of millions of dollars to invest.
Back to that Youtube Reddit, because although the Redditor did not name names, Conrad worked out he meant Jim Herbert in about twenty seconds flat. What Red Flags were present? O I thought you'd never ask!
NO PLAN FOR SUCCESSION: Mister Herbert, as per the Redditor, considered himself both immortal and indispensable, meaning he had no apprentice, understudy or junior waiting in the wings to take over. After all, such a person might get a tad ambitious and hurry up the process of retiring, which is why dictators don't like nominating a successor until they're practically at the gates of Hades. Art!
WHAT COULD POSSIBLY GO WRONG: Gambling that interest rates would stay low indefinitely, because if - or when - they rise, borrowing money becomes much more expensive. Rising interest rates create volatility and uncertainty in financial markets.
MASSIVE DURATION RISK: Conrad had to look this one up. It's a factor associated with interest rates, which can affect bond values. If interest rates increase, bond value decreases, and the longer the duration, the greater the effect. Art!
What the AI Art generator came up with
Conrad did a bit of digging himself and found more that the Redditor either ignored or didn't know about, because a serious issue with FRB was the amount of investors who had 'Uninsured Deposits' there. These are risky instruments that are not insured, meaning if there's a collapse of the bank, tough tumshy, you lost all your investment. They balance this risk by having a higher yield. Also, the 'Federal Deposit Insurance Corporation' doesn't cover deposits greater than $250,000 and I think we've already mentioned how immensely rich FRB's investors were. Art!
With three banks already collapsed, nervous investors at FRB began to withdraw their monies, leading to a run of $100 billion being taken out of the bank in March 2023. Here is where matters get interesting; FRB had a loan-to-deposit ratio of 111%, meaning they had loaned out a lot more money than they had in reserve.
Ooops.
By 19th March the companies that rate financial institutions had downgraded FRB to 'Junk' and it's share value plummeted, which merely triggered panic as investors sought to withdraw money before it vanished into the ether.
First Republic's stock value in 2022 had been $150 per share; by April 28th of 2023 it had fallen to $2, despite $30 billion being pumped into their coffers to try and stave off collapse. Staff were now being laid off on this date, as well as people quitting when they saw the writing on the wall.
Now, the Redditor on Youtube got the timeline wrong, stating that the company went under in a week when it was more like four or five.
Does the blame for this really lie with the CEO? In a word, yes, because it was his investment strategy and direction from the top that made them so vulnerable. Even though FRB didn't dabble in cryptocurrency scambles, the riotous upheaval caused by the failure of FTX and Binance made everyone twitchy and nervous. Kind of a Flock Of Black Swan Events. Art!
O the travails of being a banker! Remember all this was done without ill-intent or a desire to rip people off. Because -
Bernie Has Competition!
Madoff, just so we're clear. Yes, Ol' Bern jitterbugged his way off this mortal coil back in 2021, having spent his life since 2009 in prison.
Well, there are Young Turks coming up the rankings, no doubt inspired by Morals-Free Madoff, and here's a Twitter article that's relevant. Art!
Conrad has to say he's interested and wonders if a few second-hand copies m
NO! No more books, said my conscience. Not until you've at least read "Wild Swans" or "Wolf Hall"
ANYWAY this looks to be the story of Sam Bankman-Fried and his scamble crypto organisation FTX, who only managed to embezzle a paltry $8 billion. Must try harder*!
The Orange Land Whale Strikes Again
Conrad is firmly of the opinion that Donald Judas Trump will spend the entirety of his Presidency playing golf, because Presidenting is hard, and what else is a Vice President for? Art!
In other words, he was merely blowing smoke on the campaign trail, as this little item is about the 20% tariffs he threatened to impose on everything imported into South Canada. Now that the worm in his brain has gone to sleep again, patient people with big colourful crayons have been trying to get him to understand 'Blanket Tariff Bad'. Then, of course - obviously! - they have to try and explain the metaphor being used, without actually using the word 'Metaphor'.
O that felt satisfying, we've not criticised Pumpkinhead for ages, it seems.
What A Leading Question
O boy, there's a lot to unpack here. Firstly, let me mention the South Canadian journalist Julia Davis, who runs "Ruffian Media Monitor" and who regularly has these frothing maniacs translated.
This jowly sot is one Guryulov, whom looks older that I do despite being 10 years younger. Vodka is bad for you. He's got it kind of wrong here, nobody calls us 'Great Britain' any more, do they?
The second part of his sentence has SO MANY elements to it that we'd be here next Thursday were I to list them. Here's one. Art!
Finally -
Today was a day of four seasons in one day, and all of them wet and miserable. There was more snow, the novelty of which rapidly palls, and wind, and to top it all off, the roadworks outside started up again, forming a wonderful sonic background to my telephone work. This will be my fate for the next two weeks <sad face>. No, they're not loud enough for me to have to go on Team Chat and inform that I simply cannot do my job, just loud enough to be irritating.
I think I will now take refuge in the kitchen, make a bit of scoff and test-drive my new food processor. Doubtless there will be pictures, you lucky people.
* But they did manage this in mere years, not decades.
