When banks like Silicon Valley Bank collapse, money floods to bigger ones like JPMorgan. Clients know they’re ‘too big to fail’
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.
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,” DimonPresumably, Dimon knew such contagion would mean vastly more business for JPMorgan. In a note to clients on Monday, bank analyst Mike Mayothat JPMorgan is “battle-tested” in volatile markets and “epitomizes” how the largest US banks have shed risk since the 2008 financial crisis.
Dimon was at the helm in 2008 when JPMorgan received $25bn from the federal government to help stem the financial crisis which had been brought on largely by the careless and fraudulent lending practices of JPMorgan and other big banks. Dimon earned $20m that year. Rather than defend CEO paychecks, Obama might have demanded, as a condition of getting bailed out, that the banks help underwater homeowners on Main Street.
In April 2008, Dimon and the banks succeeded: the Senate voted down a bill that would have allowed bankruptcy judges to modify mortgages to help distressed homeowners.against policies that Bernie Sanders and Alexandria Ocasio-Cortez were then advocating, including Medicare for All, paid sick leave and free public higher education. Dimon said they amounted to “socialism”.
But, as demonstrated again this past week, American capitalism needs strict guardrails. Otherwise, it is subject to periodic crises that summon bailouts.
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