In This Episode
- Following the sudden collapse of Silicon Valley Bank, the federal government has taken drastic action to protect the financial system, and to make the bank’s depositors whole. Business and tech journalist Jo Ling Kent joins us to discuss the backlash from both sides of the political aisle about the intervention — and whether or not it was technically a “bailout.”
- And in headlines: Donald Trump’s one-time lawyer and fixer Michael Cohen testified before a New York grand jury investigating the former president, the Biden administration approved a controversial oil drilling project on Alaska’s Northern Slope, and a 5,000 mile-wide blob of seaweed is slowly making its way toward Florida’s gulf coast.
- USA Today: “Silicon Valley Bank collapse explained in graphics” – https://tinyurl.com/yfaztyrd
- What A Day – YouTube – https://www.youtube.com/@whatadaypodcast
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Josie Duffy Rice: It’s Tuesday, March 14th. I’m Josie Duffy Rice.
Tre’vell Anderson: And I’m Tre’vell Anderson. And this is What A Day where now that award season is over, no one is allowed to ask Angela Bassett about doing the thing anymore.
Josie Duffy Rice: Yeah, you guys have to get a new Angela Bassett meme for 2023-24.
Tre’vell Anderson: We can do that. That’s not a problem.
Josie Duffy Rice: Not at all.
Tre’vell Anderson: Challenge accepted Josie. [laughing] [music break] On today’s show, Michael Cohen sat down with a New York grand jury investigating his old boss, Donald Trump. Plus, a giant blob of seaweed is making its way toward Florida.
Josie Duffy Rice: I kind of love kind of hate that sentence. [laughter] But first, the Silicon Valley Bank saga continues. As we discussed on the show yesterday, the bank shut down on Friday after a frenzied bank run led to widespread withdrawals. While the FDIC insures funds up to $250,000 when a bank can’t fulfill its obligations, that wasn’t gonna be enough for Silicon Valley bank depositors, given that 85% of the bank’s assets were uninsured. After a weekend of tech industry panic, the Federal Reserve, the Treasury and the FDIC announced on Sunday that all depositors would have access to their money on Monday by taking advantage of an exception that allows the FDIC to go above and beyond its obligation if there’s a risk to the financial system involved. This announcement led to backlash on both ends of the aisle and a lot of back and forth about whether or not this intervention was a bailout, kind of a bailout, not a bailout. I don’t know. So to make sense of all of this, I spoke to Jo Ling Kent. She’s a veteran business and tech journalist and former NBC News correspondent. I started by asking her to walk us through what the federal government has done to shore up Silicon Valley Bank until this point.
Jo Ling Kent: Basically, on Sunday, it was the triumvirate, the Fed, the Treasury Department, and the FDIC, and they’re basically taking action to like, protect the economy and fix the situation. So the FDIC usually insures deposits of like $250,000 or less. Now they’re saying, okay, obviously Silicon Valley Bank, a lot of the depositors were millions of dollars in the bank. So they’re going to make, the feds are going to make every depositor whole.
Josie Duffy Rice: Right.
Jo Ling Kent: Because that basically saves a lot of the important startups and small businesses and individuals. But basically, like the feds are bailing out Silicon Valley Bank and these small businesses and they’re not going to protect the shareholders. That’s a key thing here. And they’re not protecting the lenders. But basically, they’re trying to protect the customers so they can keep operating, making payroll and doing their thing and building their businesses.
Josie Duffy Rice: Yeah, I was going to ask about this bailout because we heard Treasury Secretary Janet Yellen on Sunday say that the feds are not offering a bailout. And we’ve seen, you know, back and forth happening over these past couple of days. This isn’t technically a bailout with a lot of people saying, well, it kind of is. Right? So how are you seeing this? How would you frame what’s actually happening here in terms of Fed involvement?
Jo Ling Kent: Look, bailout is a super weaponized word. It’s been basically taken to be used in a way that’s favorable to, you know, either side of the aisle in different ways. Right? And that’s been going on since like 2008. It brings us back to the financial crisis, the airline bailouts of the pandemic. Right? It doesn’t look good for venture capital, for Silicon Valley Bank, but it is a rescue and therefore it’s a bailout, even though the White House is saying like no taxpayer is going to be affected and like, yes, it’s not ’08, but it’s still a measure that basically was like to save depositors.
Josie Duffy Rice: Right. And so what can we sort of expect to see in the coming weeks now that the government has made this decision or even the coming months and years? Like what does this tell people, you know, who are putting their money in small banks, who are putting their money anywhere, really?
Jo Ling Kent: I think what this really hammers home for me as a journalist is diversification is key. The major fear here, that pervasive sort of underlying concern is that, you know, there’s going to be contagion. There’s even more panic, more worry. And you saw it happen, right? Signature bank another small–
Josie Duffy Rice: Right.
Jo Ling Kent: –bank failed. They were spooked by SBV. I mean, that’s why that happened. It could get worse. But what you’re seeing is that the feds also stepped in on that as well. And so the goal, I guess, is to maintain stability. But this is really about confidence of depositors. This is about small businesses, individuals not doing a classic run on another bank to prevent this from happening again. And that really is about confidence in your bank, in the economy, in the Fed. And we’re in a really complicated time right now. People are not feeling necessarily very confident, as we’ve seen over the last week.
Josie Duffy Rice: Right. Well, I mean, to your point, just a few days ago, many financial experts seemed pretty confident that SVB wouldn’t trigger adding broader problems. Like you said, you know, that this would be kind of confined to this one industry. And like you said, now we’re seeing other banks start to wobble and at least one crumble. Are you getting the impression that this is creating a domino effect more than you would have expected? Or are you surprised to see another bank go down?
Jo Ling Kent: I guess I’m not that surprised, Josie, because as soon as the Silicon Valley Bank stuff happened at the end of last week, what we started to see as depositors going to, here in California, like First Regional Bank, there was like lines outside, right? All these smaller banks that often deal in similar or overlapping sort of depositor base. And so I think the real question is like what happens next from a regulatory standpoint? Because a lot has changed in the last, what, like seven or ten years. And so we had Dodd-Frank right.
Josie Duffy Rice: Right.
Jo Ling Kent: –in the wake of ’08. And then basically, like President Trump signed that bill to like reduce how often regional banks are stress tested by the Federal Reserve. And so the critics are saying, you know, if Dodd-Frank hadn’t been scaled back, then SVB and all these other places would have been able to better handle this whole situation because they’d be subjected to stress tests. And so I think the question is, can lawmakers and I realize this is an ambitious, unlikely scenario, but can lawmakers come together and figure out a way to prevent this from happening in the future in maybe a compromised way? I don’t know. It seems impossible, given this political environment where everyone seems to be using this as like a political statement rather than like a good read on how depositors are feeling. By the way they’re voters.
Josie Duffy Rice: Is your expectation that there will be joint regulation in the coming days? Do we see some sort of political agreement here? I mean, there is some sense on both sides of the aisle, right, that a lot of people are not happy about this bailout.
Jo Ling Kent: Yeah. When you have banks under stress and they’re in trouble, then you would hope both sides of the aisle would come together for a solution. What I think is also really interesting coming up is like how the Fed is going to deal with rates like, will they continued to hike rates? You know, some people expect yes to some inflation, but a lot of this was caused and sort of um based on interest rates going up. Right. And loans being made for certain periods of time. And so it’s a really complicated situation. And I also think that because bailout has become such a politicized football, it really prevents lawmakers from like seeing a solution in a fast and clear and obvious way because it’s just become like an issue for them to use for fundraising.
Josie Duffy Rice: So what does this all mean for the average person with a bank account or a savings account? What should they take away from what the federal government is doing right now?
Jo Ling Kent: What this means for you is it’s basically a colliding of a bunch of different factors. And one of them, of course, is driven by inflation and the Fed raising rates. The other thing it has to do with is confidence in banking infrastructure and the banking industry. Basically, like when Silicon Valley Bank made all these moves over the past, what year or two years, the investments that they made were basically promises made when interest rates were really low. And what they did was very shortsighted. And so that ended up being like a trigger for panic at Silicon Valley Bank and now Signature Bank and now other places. So the bank didn’t really think about what was happening in the broader economy. It seems, from the reporting I’ve seen, which was like way out of balance and it was like a super hot, like overheated year and a half of all that stimulus money. It’s an individualized situation. It’s a reflection of possibly what a lot of other institutions are going through. And so I think as a person, if you’re banking and you’re looking at this and you’re like, what do I need to know? What you need to know is that there was a lack of confidence in Silicon Valley Bank that caused a classic run on the bank, and that then spilled over to Signature Bank and now the federal government is going to have to deal with this situation and stop it from happening elsewhere. And so what the individual can do really is, I guess the experts might say, don’t go withdraw all your money out of the bank. Like but again, we’re talking about like big venture capital firms and we’re talking about small businesses. So I would say that if you’re a person with a bank account and you’re thinking about interest rates, you know thinking about the Fed and you’re seeing this Silicon Valley bank thing, and if you’re wondering oh, are they still going to raise interest rates at the next opportunity? They might, but they still have to deal with the overall inflation picture, which is cooling, but still like a really, really big problem.
Josie Duffy Rice: That was my conversation with veteran business journalist Jo Ling Kent. We will, of course, keep you posted on how this all develops, but that is the latest for now. We will be back after some ads. [music break].
Josie Duffy Rice: Let’s get to some headlines.
Josie Duffy Rice: President Biden announced a new deal yesterday to sell nuclear powered submarines to Australia. They’re going down under. And then some. [laugh] He met with leaders from that country and the United Kingdom and San Diego to lay out the details of the agreement. It’s part of a strategic partnership that was reached between the three allies back in 2021 and marks the first time since the 1960s that the U.S. has shared any of its nuclear technology. The goal is to counteract China’s growing military power in the Indo-Pacific region and to prepare for any threats against Taiwan. How do they share this information? I am picturing Joe Biden handing these people a thumb drive that he got for free at a fundraiser.
Tre’vell Anderson: You know what? We’re going to actually take it back even further. They’re still operating off of floppy disks.
Josie Duffy Rice: Oh, my gosh. [laughter]
Tre’vell Anderson: Michael Cohen, Donald Trump’s onetime lawyer and fixer, testified yesterday before a New York grand jury investigating the former president. Cohen is a key witness in the Manhattan DA’s criminal investigation into Trump and hush money payments made to adult film actress Stormy Daniels back in 2016. He was the one who actually gave Daniels the checks and he later spent time in prison for it after pleading guilty to federal charges, including campaign finance violations. But no hard feelings, right? Cohen had this to say to reporters outside the courthouse yesterday.
[clip of Michael Cohen] This is not revenge. This is all about accountability. He needs to be held accountable for his dirty deeds.
Tre’vell Anderson: Trump and his legal team have denied any wrongdoing. But as we’ve discussed on the show before, the Manhattan D.A. will soon decide whether to seek criminal charges against Trump. You know what I think is interesting, Josie?
Josie Duffy Rice: Tell me.
Tre’vell Anderson: Is that all of these folks who were part of Trump’s team, we spoke about Mike Pence and his–
Josie Duffy Rice: Right.
Tre’vell Anderson: –strong-ish words–
Josie Duffy Rice: Right.
Tre’vell Anderson: –yesterday–
Josie Duffy Rice: Right.
Tre’vell Anderson: –for Trump. And now you have Mr. Cohen saying that Trump needs to be held accountable for his dirty deeds. Where were y’all a couple of years ago?
Josie Duffy Rice: I could not feel less bad for these people.
Tre’vell Anderson: Right.
Josie Duffy Rice: Y’all have no backbone. And we all know it. The family of an environmental activist killed by Georgia police in January says they were likely shot as they were sitting down cross-legged with their hands in the air. That’s according to an autopsy the family commissioned for 26 year old Manuel Paez Terán on who went by the name Tortuguita. They were part of an encampment of protesters trying to block construction of Atlanta’s controversial cop city police training facility when they were fatally shot by state troopers. Investigators have previously said Terán fired at officers first, seriously injuring one of them. But there’s no body camera footage or other video of the confrontation from any of the police officers. Very strange. The DeKalb County medical examiner has already conducted an initial autopsy, though it hasn’t been made public yet. Terán’s family also filed an open records lawsuit against the Atlanta police to force them to release more information about their death.
Tre’vell Anderson: The Biden administration has approved a massive and controversial oil drilling project on Alaska’s northern slope. The multibillion dollar venture known as the Willow Project will take place over the next few decades on a large, untouched tract of public land the size of Indiana. The decision yesterday came amid fierce opposition from environmentalists and some Alaskan native communities that fought to stop the project, saying it will accelerate climate change. In an apparent concession, the administration also announced that it will limit new oil and gas leases in the surrounding area. However, that won’t do much to offset the amount of pollution the new drilling may pump out. Over the next 30 years, all the oil burned from the Willow Project site is expected to release over 280 million metric tons of carbon emissions into the atmosphere.
Josie Duffy Rice: The pharmaceutical giant Pfizer, which has brought us hits like penicillin, the first COVID vaccine, outrageous prescription drug prices and the opioid crisis is now training its sights on cancer drugs. The company announced Monday it wants to buy the Seattle based biotech firm Seagen for $43 billion dollars, almost as much as Twitter, [laughter] Seagen is known for developing what has been described as guided missiles against various types of cancers because the compounds target those cells without harming the healthy tissue around them. But Pfizer isn’t necessarily making the deal out of the kindness of its corporate heart. The company is expected to take a $17 billion dollar hit to its profits in the next decade after the patents expire on some of its best selling drugs.
Tre’vell Anderson: There is a 5000 mile wide blob of seaweed slowly making its way toward Florida’s Gulf Coast. And she’s large, she’s in charge and she smells like a barge.
Josie Duffy Rice: Is that the weirdest sentence you’ve ever said out loud?
Tre’vell Anderson: [laughing] I’ve lived a life Josie, you’ll be surprised, the sentences I have said. [laughter] Okay. The blob, which is big enough to be seen from space, is a thick matte of an algae known as Sargassum. In its typical context, the brown seaweed provides an essential habitat for organisms like crab, shrimp, sea turtles, tuna and marlin. But in this enormous formation, it’s likely to cause ecological mayhem as it gets closer to the shore, blocking light from reaching delicate coral reefs and rapidly decomposing as it does so, emanating a foul stench evocative of rotten eggs. The encroaching sea goop only adds to Florida’s recent aquatic problems, as the Gulf Coast has reckoned this month with a toxic red tide algae bloom. While one could say being overtaken by the Godzilla of stinky algae blooms is karmic retribution for electing Ron DeSantis to public office. Josie and I are much too nice to ever imply that, so we’ll say it directly. This is what y’all get. Okay, now you have to deal with this rotten, egg smelling blob of seaweed encroaching upon your coastline and your nose hairs. So there you go.
Josie Duffy Rice: I can’t even be happy about it because I live in Georgia. [laughter] And those are the headlines.
Josie Duffy Rice: That is all for today. If you like the show, make sure you subscribe. Leave a review, dodge the stinky algae bloom coming to a coast near you and tell your friends to listen.
Tre’vell Anderson: And if you’re into reading and not just belated digs from former Trump associates like me, What A Day is also a nightly newsletter. Check it out and subscribe at Crooked.com/subscribe. I’m Tre’vell Anderson.
Josie Duffy Rice: I’m Josie Duffy Rice.
[spoken together] And you know what you did, Florida.
Tre’vell Anderson: We all know what you did. Florida. Okay. You brought it on yourself.
Josie Duffy Rice: I’m really in a glass house over here in Georgia throwing stones. I need to shut it down. [laughter] [music break]
Tre’vell Anderson: What A Day is a production of Crooked Media. It’s recorded and mixed by Bill Lancz. Jazzi Marine and Raven Yamamoto are our associate producers. Our head writer is Jocey Coffman and our executive producer is Lita Martinez. Our theme Music is by Colin Gilliard and Kashaka.