US banks want socialism for themselves - and capitalism for everyone else
G reg Becker, the former CEO of Silicon Valley Bank, sold $3.6m of SBV shares on 27 February, just days before the bank disclosed a large loss that triggered its stock slide and collapse. Over the previous two years, Becker sold nearly $30m of stock.
But Becker won’t rake in the most from this mess. Jamie Dimon, chair and CEO of JPMorgan Chase, the biggest Wall Street bank, will probably make much more.
That’s because depositors in small- and medium-sized banks are now fleeing to the safety of JPMorgan and other giant banks that have been deemed “too big to fail” because the government bailed them out in 2008.
Last Friday afternoon, the deputy treasury secretary, Wally Adeyemo, met with Dimon in New York and asked whether the failure of Silicon Valley Bank could spread to other banks. “There’s a potential,” Dimon responded.
Presumably, Dimon knew such contagion would mean vastly more business for JPMorgan. In a note to clients on Monday, bank analyst Mike Mayo wrote that JPMorgan is “battle-tested” in volatile markets and “epitomizes” how the largest US banks have shed risk since the 2008 financial crisis.
Recall that the 2008 financial crisis generated a gigantic shift of assets to the biggest Wall Street banks, with the result that JPMorgan and the other giants became far bigger. In the early 1990s, the five largest banks had accounted for only 12% of US bank deposits. After the crisis, they accounted for nearly half.
After this week, they’ll be even bigger.
Their giant size has already given them a huge but hidden effective federal subsidy estimated to be $83bn annually – a premium that investors and depositors willingly pay to these enormous banks, in the form of higher fees and lower returns, precisely because they’re
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