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Episode 220: “Silicon Valley Bank: The Bill Finally Comes Due for Decades of Reckless Monetary, Fiscal and Regulatory Policy” with Rick Manning and Robert Romano
This week, Americans for Limited Government published a provocative and insightful piece about the banking system asking, "Has the United States banking system become too big to save?”
In the past three years, to finance massive federal spending, the Treasury has issued almost $8 trillion new treasury bonds with almost $4 trillion bought by US banks during the tail-end of the Fed’s era of zero interest rates.
US Treasury Bonds? Sounds like a safe investment for a bank, but here’s the problem. After 40 years of relatively stable prices, we now have raging inflation caused by reckless Federal spending. To try to fight this price inflation the Federal Reserve is raising interest rates which reduces the value of the commercial banks treasury bond investments. (We explain why this happens in this episode.)
The result: banks are now sitting on more than $600 billion of unrealized bond losses. Silicon Valley (SVB), Signature, and First Republic banks look to be canaries in the coal mine, potentially the first of many regional bank balance sheets to blow up.
The root cause for this – and the Fed is almost entirely responsible - is the 14 years of free money policies and asset price inflation driven by the Fed. Since 2008, banks have been borrowing from depositors at near 0% interest. With “free money”, bankers forgot how to be bankers matching assets and liabilities, interest rate risk and duration.
As they have during the banking crises of the past quarter century, the regulators have pulled out their default playbook: making more institutions “systemically risky,” foisting the tab on taxpayers and giving regulators more control.
But there’s also something new: the troubling problem of regulatory mission drift. The Fed’s historical mandates are to promote price stability and full employment and a safe and sound banking system. Instead, the Fed (and the Treasury) have changed their priorities to promote the progressive priorities of climate change and equity. Case in point: SVB received its first “outstanding” rating from examiners for fulfilling the SF Fed’s social and climate agenda. These didn’t cause SVB to fail, but it sure looks like examiners became more permissive of - or overlooked entirely - its balance-sheet risks.
The scenario playing out here is potentially accelerating toward something much worse:
What better way to push us towards a correct climate change and equity agenda than a wholly government-operated banking system where everyone's bank is effectively the Federal Reserve. In this system, our money will become a so-called “central bank digital currency” giving the federal government power over most of our personal financial matters.
Far-fetched? I don’t think so. Read about the “Overton Window.”
Joining me to talk through how we got here and where this may be going is Rick Manning, president of Americans for Limited Government, and its Vice President, Robert Romano.
Rick describes the banks recent “doomed-to-fail strategy, owning and trading government debt, dependent on falling interest rates to create a guaranteed profit.” When those trends reverse, crashes ensue and bailouts occur.
These bailouts, from the Savings-and-Loan Associations of the 1980s to Silicon Valley Bank’s today, have helped drive financial centralization as big banks get saved and little ones go under. After 2008, the Dodd-Frank Act made takeovers easier, setting up an arbitrary mechanism based on whether a bank is deemed to be a “systemic risk.”
Rick explains how this can be politicized:
“They determined that Silicon Valley Bank had “systemic risk” because politically connected people were investing in woke capitalism and the green agenda. But if you’re invested in drilling, you’re not going to get bailed out.”
Says Robert: “it's a lethal threat to the private sector if Treasury and the Federal Reserve can just label a bank ‘systemically risky’ and take it over.”
Rick and I served on President Trump’s transition team, and we know that sound ideas can get lost in the politics. Still, change has to start somewhere. What about solutions?
We have many but there’s so much in this episode, it almost resists description. Listen in for yourself. I worry that we’re seeing the weaponization of our money. We lay these issues out and you decide.
Episode 219: “The Labor Department’s Radical Agenda” with Pat Pizzella
Under President Joe Biden and his Administration the whole of government has been weaponized to promote a so-called Diversity Equity and Inclusion agenda that, in fact, will bring about just the opposite of what these words mean.
Case in point is an assertive, left-wing, anti-family Department of Labor with its power to regulate and attempt to social engineer virtually every aspect of the American workplace.
Congress has granted it a stunning amount of power to administer more than 180 federal laws and thousands of regulations affecting more than 10 million employers and 150 million workers.
And almost no knows what it does.
There's probably no one better equipped to explain this threat to liberty than my old friend, the very honorable Patrick Pizzella who served as Deputy Secretary of Labor for three years under President Trump, and as Acting Secretary for a few months in 2019.
I’ve known Pat since former Attorney General Edwin Meese brought me into the Conservative Action Project and introduced us. No one I know has a better grasp of the big picture and the minutiae of labor laws and regulations.
The New York Times calls Pat “a movement conservative” who when he was appointed was “far more consequential than those of the many acting secretaries that have served...”
The legislation creating the Labor Department was signed into law by a reluctant President Taft on his last day in office. Since then its power has grown “like a rolling stone relentlessly gathering more moss” as Pat puts it.
In this wide ranging conversation we talk about how Labor is radically ratcheting up regulatory costs on productive industry and is pushing “environmental, social and governance” aka ESG initiatives that promise to dramatically reduce investment returns for pensioners.
The threat to Americans’ pension returns from ESG investing is that its principle focus is on the climate change agenda, even though it's utterly clear that high, or even positive, ESG returns don’t exist except through government subsidies.
(Trillions of dollars in federal spending in the past two years went to climate subsidies, in the form of tax credits, favorable financing for climate-related projects, and the like.)
The Biden Administration is obsessed with pushing its ESG climate agenda: this week Joe Biden’s first and only veto was to reject a bill passed by Congress that would have reversed a Labor Department rule effectively promoting ESG investing.
We also talk about Labor’s threat to the so-called gig economy - independent contractors - who comprise 15 to 20 percent of America’s workforce.
Gig labor benefits from the free-market principle of voluntary exchange: you can make a contract with me because you can discern what’s in your own interest; so can I. We’re adults.
Not surprisingly, many adults in America like this arrangement: proposals to eliminate it have been voted down even in California.
Nevertheless, the command-and-control Labor Department is preparing a rule “that makes it more difficult for people to be classified as independent contractors” and easier for unions to organize.
Listen in to learn some surprising and unsettling things about Labor, a boring-sounding agency which we need to watch like a hawk, because its actions are major threats our liberties.
The brute force of top-down government is no friend to freedom—and a friend to freedom this Department is not.
Episode 218: “The Ugly Truth About the White House, the FBI and the Social Media Companies” with Jenin Younes and Todd Zywicki
Newly released documents show that the White House has played a major role in censoring Americans on social media.
Email exchanges between Rob Flaherty, the White House’s director of digital media, and social-media executives prove the companies put Covid censorship policies in place in response to relentless, coercive pressure from the White House—not voluntarily as the government has claimed.
The emails emerged last month in the discovery phase of Missouri v. Biden, a free-speech case brought by the attorneys general of Missouri and Louisiana and four private plaintiffs, including leading epidemiologists Stanford’s Jay Bhattacharya and Harvard’s Martin Kulldorff.
Government's role in social media censorship has been just as bad as we feared and worse.
So what are the details, and what’s at stake? To explain, Jenin Younes, litigation counsel at the New Civil Liberties Alliance which is representing the private plaintiffs in Missouri v. Biden, joins me on this episode with
Todd Zywicki, Professor at George Mason's Scalia Law School and who was last on the show exploring with me whether “Chinese-Style Social Credit Will Be Coming to America”
The ugly truth.
We also now know that not only the White House, but also the Centers for Disease Control and Prevention, the Department of Homeland Security, the Federal Bureau of Investigation and other agencies have all played a major role in censoring Americans on social media, directing tech companies to remove certain types of material and even to censor specific posts and accounts.
Apparently they even censored this show.
“If you recall Bill,” reminds Todd, “the last time Jenin and I were here with you, was about when I sued my employer over trying to force me to get vaccinated even though I had natural immunity. And why that's so relevant to the conversation we're having today was that quite quickly that episode was removed from YouTube. It was taken down as violating the terms of service of YouTube. And to this day, we have no idea why.”
People were censored for saying things that we now know to be true.
“Martin Kulldorff is among the most cited scientists in the world when it comes to infectious disease issues and vaccine safety,” says Jenin. “And he was censored on Twitter for saying that people with natural immunity and children don't need the vaccine.”
The censorship regime has been widespread and relentless. Our argument here is that the companies, as private actors, have a right to do that, but that the government does not have a right to coerce private actors to do what the government wants them to do.
The White House emails demonstrate that the federal government unlawfully coerced social media companies in an effort to ensure that Americans would be exposed only to state-approved information about Covid-19.
The government’s unlawful, deceptive and dangerous conduct is the biggest issue of our day. We cover a lot in this episode: the First Amendment issues, public choice (government officials don’t have a monopoly on truth), shadow banning, Section 230 (protects the social media companies but is now abused by them) and how Twitter has changed with Elon Musk in charge.
This is a fascinating and entertaining overview of the sometimes hard-to-understand issues. We taped this in-studio to amplify its importance, but if you don’t have time to watch, be sure to listen in.
Episode 217: “Ukraine: It’s Time for Realism” with David Goldman and Stephen Bryen
The Biden Administration - and a majority of Republicans in Congress - persist in their bellicose rhetoric about an “existential war to defend Ukraine” telling the Russians that “we're going to destroy your regime and dissolve the Russian Federation.” Really? After sending more than $100 billion to Ukraine to fight a proxy war against Russia, have they thought through whether the US is capable of doing this? They are calling for actions that only a global hegemon might possess. But a hegemon that no longer controls its own borders, has crumbling critical infrastructure, hollowed out military capabilities and is $33 trillion in debt is no longer a hegemon. This is an Administration that left $87 billion of U.S. military equipment behind when it bolted from Afghanistan, let a Chinese surveillance ballon pass unmolested over the entire Continental United States and is led by a Commander in Chief who daily elicits ever stronger labels for cognitive impairment. It is not to be trusted to lead ever more aggressive actions against Russia and tempt the possibility of nuclear war. Instead, Americans should demand that we seek to bring about a negotiated peace - if that is even still possible. To sort out where the war stands now, and how we might bring it to an end, two experienced and insightful observers, Dr. Stephen Bryen and David P Goldman have returned as guests to follow up on our conversation of a few weeks ago. Stephen Bryen is a senior fellow at the Center for Security Policy and the Yorktown Institute and David Goldman is the Spengler columnist and Deputy Editor for Asia Times and PJ Media. David is also the Washington Fellow at the Claremont Institute. Stephen has over 50 years national security experience including several stints in the Pentagon where he was known as the Yoda of the arms trade. “The global utopians, led by the likes of Tony Blinken and Jake Sullivan and Victoria Nuland, have plunged us into a war which could take us into a real catastrophe,” says David. Already, they’ve let take root a Russian coalition with China, Iran, North Korea, and perhaps Turkey and India. Whether or not Vladimir Putin made a costly mistake in invading Ukraine, the big battles right now are going badly for the Ukrainians and the Russians have solidified their gains. “The Ukrainians are out of ammunition,” says Stephen. “They're out of air power. They're out of air defenses. Their artillery is running low and it's a grim situation for them.” By escalating and destroying major Russian infrastructure, you risk widening the war in Europe. And this is not a war, at least a conventional war, that the United States could win. “I don't think the United States can fight in Ukraine at present without building up all the logistics, all the capabilities,” explains Stephen. “It would take years. It's not going to happen.” “American forces haven't fought a peer in a long time,” reminds David. “The Ukrainians probably fight a lot better than any American unit could at this point, who have only fought goat herders for the past 40 years. So I'm not sure how well American troops would perform, and that would be a real risk to take.” Pursuing this dangerous anti-Russian agenda is not in the best strategic interests of the United States. “We need a realist foreign policy. Donald Trump, of whom I have a long list of criticisms, managed to get out of office with no real important conflicts with the Russians, with a peace agreement between Israel and some of the Gulf states, and a generally stable world.” “I wish this could be settled. It is crying out for a political settlement. It's absolutely crying. It's in our international interests, in our strategic interests, in our leadership interests in the world, which is all important, that we settle this thing,” warns Stephen. “And the lack of desire by Biden and his people, all of them, to want to settle it, is really disgraceful.” This view - one I share - won’t be found in most of the mainstream media. You may or may not agree with our conclusions, but you should hear the arguments.
Episode 216: “What The Grateful Dead and Successful Dealmakers Have in Common” with Marc Morgenstern
Backstage with Bill Walton
In this episode I compare notes and share stories with veteran dealmaker and entrepreneur Marc Morgenstern.
In today’s polarized world, where people seem intent on not agreeing, Marc has had a long and successful career helping opposing sides come to agreement.
He’s completed billions of dollars of M&A transactions, buying, selling, and financing businesses as a managing partner of law firm Kahn Kleiman and as a venture capitalist.
Marc’s new book The Soul of the Deal: Creative Frameworks for Buying, Selling, and Investing in Any Business creatively reframes and radically changes how we can approach dealmaking of any type.
Marc is a brilliant synthesist who weaves in, for example, what he’s learned as a successful door-to-door encyclopedia salesman, as a leader of several rock bands in college (Yale) and as a lifelong fan of The Grateful Dead.
He’s come to believe - and I think this is right - that much of the conflict in dealmaking comes from seeing the other side as an opponent. They’d do better to listen like musicians rather than as lawyers.
“When you saw the Dead over time in many different venues, in many different cities, a thousand seats to a hundred thousand seats, you realize that they took into account, whether it's conscious or unconscious, that this is a different audience, these are different acoustics. I'm in a better mood, I'm in a worse mood. It doesn’t matter,” explains Marc.
“So the fact that you played something five nights ago one way, doesn't mean you’re going to play it that way tonight.”
“In the deal world, I think of each counterparty as my audience and in every deal I've got a different counterparty with different needs.”
A wise and creative man, Marc’s also has taught at UC Berkeley and is on the boards of both the Rock and Roll Hall of Fame and the Rex Foundation, which was started by members of the Dead.
This is a fun and enlightening conversation and Marc has a lot to teach us. Backstage and off the beaten path.
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