In every industry, the government has rules or regulations for each sector, it needs the regulations to both determine how the overall health of the industry is and to keep government bureaucrats working on something productive. That last statement is the typical statement from business owners who have to ensure the statistics needed by the government are done and sent to the departments. The government is interested in the overall number, not necessarily an individual business. Both political parties, Republicans tend to want less regulation and the Democrats tend to want more information, need the information to ensure government is responsive to what they feel the needs of their voters are. When things are going well, corporate interests tend to dominate; when things go badly, individuals who were harmed tend to dominate. The political parties tend to do a balancing act with enough wiggle room to offer both blame and credit for their actions in government.

In an article by Christopher Rugaber of the Associated Press, the regulators of banks noted they warned the management of the banks about their concerns but the management did nothing or changed the models to reflect their way of thinking. When that happens, the issue is for a depositor to the bank or someone who uses the services of the bank when would a reasonable person know the bank is in trouble. If the answer is when there is a public run on the bank, then the government is expected to do more than the minimum, because how would a mythical average consumer know and react? For the banks, the government quickly held hearings, in this case the Senate banking committee held hearings to determine if they should do something? The Federal Reserve top official is Michael Barr, said in light of the fact the bank regulators told management, should the Reserve have the ability to force or ensure their recommendations are followed?

The Senate banking committee were held as the Silicon Valley Bank and the Signature Bank failed and sent financial tremors in the US and across Europe. The Fed changed the rules – even though 90% of both bank’s deposits exceeded the $250,000 threshold all deposits were insured. The Fed also established a banking program to ensure banks to more easily raise cash if needed. The Fed estimated the costs to be in the $20 billion range and hopes to recover the funds from a levy on the banking sector.

Silicon Valley Bank had $200 billion on deposit, then depositors move $42 billion on Thursday and $100 billion on Friday and at the end of Friday the bank was in receivership and sold to First Citizens Bank of South Carolina. SVB added $110 billion in deposits, $72 billion in loans and 17 branches across the US.

Martin Gruenberg, Chairman of the FDIC said, the top 10 depositors at SVB held $13.3 billion in their accounts.

Linking to dividend paying stocks, when you buy these types of companies, the Presidents of the companies are used to going to Washington and testifying before committees. Often times there is limited press because it is routine up dates. When something goes wrong, Washington politicians call the Presidents in to show they can ask questions of the Presidents. The real work is done in the committee work where the balancing act of what the rules and regulations should be and what is acceptable politically. For the companies you have investments in Senate and House committees can often give you more information and help you determine if you want to hold the stock or seek alternatives.

There are more questions than answers, till the next time – to raising questions.