Three Things: Crying All the Way to the Bank

[NB: check the byline, thanks. /~Rayne]

I cried all the way to the bank.

– attributed to performer Liberace

I’ve run the gamut from fuming to furious this past week. I didn’t have a dime in Silicon Valley Bank, but its failure royally pissed me off.

Did we not learn anything from the 2008 crash? Or the decade-long savings and loan crises?

For that matter, have we not learned to stop listening to millionaires and billionaires who will not go hungry when their investments fail though Mom and Pop and their tiny businesses will?

~ 3 ~

In March 2018, I wrote a letter to both of my senators asking them to vote No on S.2155 Economic Growth, Regulatory Relief, and Consumer Protection Act, explaining,

— While smaller community banks may complain about the cost of compliance with Dodd-Frank regulations, the costs may be entirely appropriate to a safe, secure banking system. We cannot expect safety and security at no cost;
— Too Big To Fail (TBTF) banks have been allowed to accrue economies of scale placing them at an advantage over smaller competitors. The balance should be in the amount of collateral TBTF banks are required to maintain to offset their much larger risk. It is not irrational to expect a trade off of cost savings in exchange for increased security;
— The bill backpedals on protections against racism in lending by preventing the Consumer Financial Protection Bureau from collecting data about lending demographics;
— And the Congressional Budget Office’s score is dismal:
•  The bill would increase federal deficits by $671 million over the 2018-2027 period
•  And “would increase the likelihood that a large financial firm with assets of between $100 billion and $250 billion would fail.”

And yet both of my senators voted for the bill. Sen. Gary Peters replied with a pathetic explanation that he was trying to help community banks.

Community. Banks.

Like Silicon fucking Valley’s bank, which grew to be Too Big To Fail.

Specifically, this is what he wrote:

   Community banks and credit unions have made great contributions to our economic growth, and in turn, we must make sure they can continue reinvesting in our economy. Our financial regulations must protect consumers and ensure that community banks, credit unions, and other financial institutions can continue to safely provide the mortgages, small business loans, and auto financing that make our economy work for Michigan families. Big banks and Wall Street caused the financial crisis – not Michigan’s credit unions and community banks. Our state’s credit unions and community banks kept Michigan families afloat during the financial crisis by providing loans when big banks would not. We should not have a “one size fits all” approach to financial regulation.

Our economy is healthier and more stable when our financial system is diversified and not concentrated in a handful of the biggest multinational banks. Local community banks and credit unions are having difficulty competing with large, multinational banks headquartered out of state and overseas. This has resulted in increased consolidation and growth of the largest financial institutions while too many community banks and credit unions are being forced to close their doors. I am committed to ensuring that these local institutions can continue to provide affordable, competitive, high-quality financial services to Michigan’s hardworking families and businesses.

Yeah? Well the lack of diversity still happened and now the small banks and credit unions which were supposed to be protected are going to feel the pressure from yet another TBTF bank failure which slipped through the crack created by rolling back regulations.

I hate feeling like Cassandra. The only comfort I have is that I’m not alone.

Max Kennerly shared what Sen. Elizabeth Warren was surely thinking when she wrote about SVB this past week:

That. We fucking told you so. When are legislators going to listen?

And by legislators, I mean any of these Democrats who are still in office who voted for S.2155:

Democratic Senators (13 of these 18 are still in office):

Last Name
























North Dakota


New Hampshire


New Hampshire






West Virginia



(Independent, caucuses with Dems)


New Mexico

(Not Voting)

Democratic House Reps:



Bishop (GA)


Blunt Rochester


Carson (IN)








Davis, Danny






Gonzalez (TX)



New Jersey







Kuster (NH)

New Hampshire

Larsen (WA)


Lawson (FL)


Maloney, Sean

New York

Murphy (FL)










Rice (NY)

New York





Scott, David


Sewell (AL)





New York







(Not Voting)



(Not Voting)

If any of these are your senators or representatives, feel free to call them at (202) 224-3121 and tell them they need to undo the damage S.2155 did in 2018, and re-assess Federal Deposit Insurance Corporation (FDIC) and National Credit Union Administration (NCUA) insurance and funding.

~ 2 ~

In a nutshell, this is what was wrong at Silicon Valley Bank:

•  SVB had many high-value depositors whose accounts exceeded FDIC’s $250,000 threshold; 97% of funds deposited were uninsured;

•  The bank leaned on borrowers to deposit all their cash with SVB if they were to be approved for a loan, leaving depositors greatly exposed to SVB’s failure;

•  Using depositors’ cash, SVB bought excessively into long-term bonds while interest rates were low; when rates increased and more rapidly than anticipated, SVB tried to shift its distribution, but without adequately ensuring enough cash to cover withdrawals;

•  SVB’s Chief Risk Officer left and no replacement was named between April 2022-January 2023; the absence of a CRO had not been widely known. A new CRO was named in January 2023, but long after volatility in the tech sector had increased and thousands of tech employees had been laid off.

Ultimately, the bank was extremely vulnerable to the trash talk among techbros who hung with Peter Thiel who pulled his cash and advocated his peeps do the same. They read a newsletter which said SVB was technically insolvent, got their panties in a twist and set off a bank run rather than carefully doing more research as to where SVB had distributed its portfolio and working with the bank to manage rejiggering SVB’s portfolio distribution.

These same depositors could have been asking questions about the CRO’s replacement last summer without raising a ruckus and starting a run, but no. They could have been asking about adequate stress testing last year, in tandem with the Federal Reserve’s moves to increase interest rates between July and December 2022, but no. Apparently they only talked to SVB management when they needed loans.

The capper was that SVB lobbied for weakening of Dodd-Frank Act regulations with passage of S.2155. None of these big bucks depositors batted an eye at that; some were surely donating cash to right-wing politicians who were bashing the Biden administration about interest rates.

One thing legislators could address is the nature of some of the deposits and the limits of FDIC insurance. If some of the depositors are businesses with sizable cash deposits needed for operating funds like payroll, it may be worth considering establishment of a particular kind of FDIC insurance on these accounts above and beyond $250,000.

Imagine you’re a general manager and owner of a technology business. Average pay of technology workers in Silicon Valley is $134,000/year, or $11,166/month. If you have 100 employees, your need for cash to cover payroll will exceed $1 million.

Silicon Valley’s technology businesses can be small shops of one or two people to several thousand – they all still need to cover payroll each month.

Are we really going to worry about making whole people who should be smart enough to know they’ve exceeded FDIC insurance limit with their deposits, people who are rather well off by comparison with the rest of the U.S.? Nope, especially not entrepreneurs’ personal deposits since taking risk is what entrepreneurs do, it’s on them.

But protecting the lower wage workers and the economy at large? Yes, we should consider this. In the past week I’ve seen small businesses scrambling with fire sales of product to raise cash for operations after losing money at SVB. There’s at least one Broadway production which may have been canceled altogether because its producer was a depositor at SVB. In both of these cases it’s workers whose salaries are much less than $100,000/year who are going to bear the brunt of this kind of failure.

It shouldn’t be that difficult to regulate a particular kind of account dedicated solely to payroll which the FDIC would insure for the value of one month’s cash equal to the highest average monthly payroll in the previous 12 months.

This would blunt the drive for businesses and employees alike to pull cash out of a bank, heading off a potential run. Insured banks should likewise be obligated to ensure there was cash on hand matching the anticipated one-month payroll needs, in addition to cash required to meet stress tests the Dodd-Frank Act required.

Some legislators could make this happen in a heart beat if they were really concerned about the economy now and voters in 2024.

~ 1 ~

I’m sure there are folks who aren’t going to like this third of three things but we have an immigrant problem.

Nope, not the folks seeking asylum, desperately fleeing with their families to the U.S. leaving violence and economic hardship behind, who take jobs Americans don’t want and work doggedly to support their families here and abroad.

We have a problem with immigrants like Elon Musk who think they are their gods’ gift to mankind, who believe their money makes them invincible and unaccountable, who are able to thumb their noses at laws in ways the rest of us can’t, feeling immune because he was born with a South African emerald mine in his mouth. Musk has managed to completely trash a critical communications platform used by most news media and marginalized populations, subverting necessary exchange of information important to a functioning democracy – and he did it for little more than the lulz.

We’d long had a problem with immigrant Rupert Murdoch whose News Corp and Fox News have likewise undermined American democracy by promulgating increasing fascism, weaponizing the First Amendment to do so.

Now we have a problem with immigrant cryptofascist who believes they can buy whatever political outcomes they want while ignoring the will of the majority in a democracy. They also believe their wealth doesn’t require them to act prudently for the benefit of the rest of their community and society.

In particular, immigrant Peter Thiel who was key to starting a bank run on SVB, triggering its failure. He pulled all his money out, encouraged his friends to do so, setting off a run which tanked SVB, destroying wealth of persons and businesses in competition with Thiel and his friends.

Fuck everybody else affected by this behavior as far as he’s concerned, because he got his.

If a hostile foreign entity wanted to damage the U.S. economy deeply, they could do *exactly* what Thiel did. Asymmetric warfare would not look different.

As noted on Mastodon, the amount it will cost to make SVB’s depositors whole exceeds the amount the U.S. spends in a year on its food stamp program. There may not be a full federal bailout, with only the FDIC’s insurance covering each depositor to $250,000, but the amount of private as well as public money in play on a single bank should tell us something about our national priorities.

Those national priorities should now include discussion about the kinds of people we’re letting into this democracy, what they are doing to this democracy, and letting them stay in this democracy.

And if we’re going to agree we can’t eject them because they’re wealthy, selfish, and sabotaging the country with their utter disregard for the country which gave them citizenship, then we need to have a serious discussion about disarming them.

Tax them to the hilt so they can’t create a fascist autocracy, for starters – one that looks like Nazi Germany in the 1930s, or an apartheid society like South Africa where both Musk and Thiel once lived.

You may argue this isn’t fair, that American-born billionaires like Robert Mercer and Charles Koch are just as bad at sabotaging democracy.

Okay, great – what are we going to do about that? This country bred their toxicity, and then allowed a new immigrant generation of toxicity to rise because they all had beaucoup money. Meanwhile, hard-working impoverished asylum seekers have been treated like trash.

Let’s deal with this moral and ethical challenge instead of ignoring it.

~ 0 ~

This is an open thread. We’re overdue for a space to dump about topics unrelated to January 6.

89 replies
  1. Rayne says:

    Worth a read:

    I Was an S.V.B. Client. I Blame the Venture Capitalists.
    By Elizabeth Spiers
    Ms. Spiers, a contributing Opinion writer, is a journalist and digital media strategist.
    March 16, 2023 | 5 MIN READ

    Gift link here.

    Also worth a read:

    What People Still Don’t Get About Bailouts
    Good financial-crisis management is about doing what it takes to stop the contagion.
    By Michael Grunwald | The Atlantic | MARCH 18, 2023, 7:30 AM ET

      • Rayne says:

        Jesus H. Christ on a freaking pogo stick…who *wasn’t* involved in the 2008 crash but worked at SVB in upper management? Lehman Bros’ Joseph Gentile as Chief Admin Officer and now BoA’s/Fannie Mae’s Tim Mayopoulos? All of it feels so incestuous.

        No wonder WSJ and its source pointed fingers at diversity. They didn’t want the public to notice what was so horrifically heterogeneous about SVB and past banking failures.

  2. David F. Snyder says:

    Peter Thiel possibly fomented the depositor stampede. Given his libertarian extremism, misogyny (re SVB’s new risk officer), and his past support of Trump, it’s reasonable to consider the possibility that Thiel saw a weak spot in the financial system and decided to give it a sucker punch instead of doing the right thing. Or maybe he just wanted to destroy her (the new CRO) career — why would he wait until March of this year, knowing the CRO post was unfilled?

    • Rayne says:

      Yeah. I forgot about the misogyny. I need to go back and look for the source of the complaints that SVB was “too woke” meaning they had a diverse range of employees. I have to wonder now if this was fed to the media via Thiel, directly or indirectly.

      • P J Evans says:

        I looked at their board, last weekend when this blew up, and it looked to me like a fairly typical BoD: mostly men, all apparently white. (Three women, 9 men, that I could see.)

  3. P J Evans says:

    AIUI, SVB was a commercial bank, not a savings and loan, which is where most people put their money. Maybe commercial banks should have stricter rules and S&Ls, because they have so many huge accounts.

    ETA: maybe we shouldn’t allow rich people to buy citizenship. Make them go through the same process as the little people they despise.

    • Rayne says:

      If a tiny startup is in need of a loan and the bank says they need their deposits in order to approve the loan, what do they do? Quibble about it being a commercial bank versus S&L — especially if they were herded to the bank by VCs in the same industry or in their community?

      This is why Elizabeth Spier’s commentary at NYT about SVB is valuable. She gives us a borrower/depositor’s perspective.

      In re: buying citizenship — I don’t know what the situation was with Thiel’s family, only his mom pursued and became a US citizen. He naturalized. Believe Musk likewise naturalized but much later. I want to know how we make it clear during naturalization that being a selfish jackass isn’t going to cut it.

    • Rugger_9 says:

      There is a commonality to another aspect of 2008 which incidentally links the SVB to Signature. It concerns the collateral, and apparently SVB had a whole bunch of cryptocurrency (and NFTs) listed as collateral for the loans it made. Signature was also known for it and I have to wonder if the string is pulled hard enough that FTX won’t pop out too. This is too close to the 2008 standards for home loans (remember the ‘spend your way to wealth’ ads and liar loans for stated income or asset value? I do). When the derivatives market fell apart (the mortgage bubble was merely the last straw here) the nasty surprise was that the backstop asset was tissue paper.

      • Honeybee says:

        Interesting question about crypto failure. Was the Silvergate Capital liquidation earlier in the month involved in any of this?

  4. Alan Charbonneau says:

    “Using depositors’ cash, SVB bought excessively into long-term bonds while interest rates were low; when rates increased and more rapidly than anticipated, SVB tried to shift its distribution, but without adequately ensuring enough cash to cover withdrawals”

    I spent the last eight years of my career as a due diligence analyst for Wells Fargo. Wells invested their Wealth Management clients into numerous investments, a great deal of which were mutual funds or SMA’s (separately managed accounts). I met with numerous fixed income portfolio managers and the ones I most respected wouldn’t play the “yield curve game”, routinely telling me they weren’t smart enough to forecast interest rates. Those that thought they could were correct sometimes and wrong sometimes. Their portfolios reflected this in their long-term standard deviations.

    In 2008 the CEO of Merrill Lynch, Stan O’Neal, would constantly pressure his underlings to match the returns Goldman Sachs was getting. Their solution to meet his expectations? Take more risk—when it all comes crashing down, they’ll be working elsewhere. That same greedy bastard got a huge severance package from ML. He had wanted to merge with BofA or Wachovia to keep his shares from plummeting, even though his severance was gigantic.

    From Wikipedia: “ During August and September 2007, as the subprime mortgage crisis swept through the global financial market, Merrill Lynch announced losses of $8 billion. O’Neal finally realized the huge exposure that Merrill had to subprime mortgage-backed CDOs, and that the firm would have to be sold in order to survive. As the crisis worsened, O’Neal approached Bank of America and Wachovia Bank about a possible merger, without first obtaining the approval of Merrill’s Board of Directors, which led to his ouster. On October 30, 2007 O’Neal resigned as CEO. He left with a severance package including Merrill stock and options worth $161.5 million on top of the $91.4 million in total compensation he earned in 2006.”

    “Take more risk, take more risk, the government will bail you out!” That’s a poor business philosophy, but it’s probably not going away anytime soon. The “moral hazard” of the Bear Stearns bailout helped lead to the “too big to fail” later that same year. But here we are again.

    • Rayne says:

      In 2008 the CEO of Merrill Lynch, Stan O’Neal, would constantly pressure his underlings to match the returns Goldman Sachs was getting.

      That’s the same kind of pressure I heard about talking with Fortune 100 corporate hedge fund managers circa 2000. They were being told they needed to get the results Enron was getting, and they couldn’t figure out how Enron was doing it.

      Now we know why.

      • Jbryan says:

        As a low-level executive at Sprint I sat through multiple meetings where senior management said “we don’t know how WorldCom is doing it but the market wants us to match their numbers”. My friends at AT&T told a similar story. WorldCom’s fraud caused both companies to take risks that they would not have otherwise taken.

        [Welcome back to emptywheel. Please choose and use a unique username with a minimum of 8 letters. We are moving to a new minimum standard to support community security. You also used “Bryan” this time though your first comment last year was as “Jbryan.” Your username has been edited to match that of your last comment, but you’ll need to pick a unique 8-letter minimum username for future comments. Thanks. /~Rayne]

        • Rayne says:

          This kind of pressure creates industry-wide groupthink. It doesn’t encourage employees to ask if they are chasing the results of a competitor’s corrupt business model.

          I still think of those hedge fund guys who were perplexed and frustrated about Enron, and how it never occurred to them Enron was a massive scam. Did they think because they had to deal with auditors and regulators in their own work that surely Enron must have, too, knowing now that Enron had Arthur Andersen in the tank? I wish I could time travel to ask them.

    • Rayne says:

      I’m still laughing days later at this:

      David Sacks @DavidSacks
      Where is Powell? Where is Yellen? Stop this crisis NOW. Announce that all depositors will be safe. Place SVB with a Top 4 bank. Do this before Monday open or there will be contagion and the crisis will spread.
      3:36 PM · Mar 10, 2023

      Especially this epicness:

      David Sacks @DavidSacks
      The idea that depositors are creditors to a bank is an absurd and outdated notion. Everyone just wants a checking account, not to loan the bank money.
      8:19 PM · Mar 10, 2023

      Dude has absolutely NO clue how banks work, and he’s advising guys who were PayPal Mafia?

      Has zero understanding of why TBTF is a problem more consolidation won’t fix.

      • earlofhuntingdon says:

        Sacks is a tool. As you point out, creating more TBTF banks through increased consolidation would worsen the problem. The recommendation seems comparable to how BoJo and TFG responded to Covid – let it run rampant in hopes all would turn out all right in the end. Destructive, but not creative.

  5. earthworm says:

    my immediate reaction when i read (probably here at EW) Thiel was pulling his assets at SVB and encouraging his buddies was that he was having a go at undermining/destroying the Biden gov’t.
    pure, libelous speculation on my part, of course.

    • Rayne says:

      You’ve labeled it speculation, you’re exercising your free speech, he’s a public figure with a habit of contributing to fascist GOP candidates and undermining media outlets (RIP Gawker). ~shrug~

  6. higgs boson says:

    All the legislators who voted for S.2155, probably: “Yes, you warned us that this was a terrible idea, but unfortunately your warnings weren’t accompanied by big bags of cash.”

      • Playdohglobe says:

        Hi Rayne,

        Thanks for writing this. Talked with Friends in the tech industry who had 100 % of their start-up company money in SVB that did not get the memo from Thiel’s group to, “Run!!” away.

        They are good people, hard working and very intelligent. The start -ups they fund and run employ many people and deliver great value to the Bay area and the USA overall.

        However, they are also the first to admit they use their intelligence to minimize taxes paid, thru putting founder’s stock options into IRA at 1/12 a penny to limit long term capital gains taxes, AKA Bain Capital style, have lawyers and tax men to advise ad nauseam on how to take advantage of the system. They say we take the risks, so we get the rewards. You can do it too if you want to.

        Not one of them knew or cared about the Chief Risk Officer vacancy being open. They just assumed they would be OK. AND they all know about the FDIC limit of $2500,000 per person guarantee.

        Now it is all about help me be whole, calling Congress people and looking for a handout. They are very savvy people.

        Comes down to this … Privatize profits and socialize losses.

        These are very educated people, supported by well trained lawyers, tax attorneys and funders of Congressional campaigns.

        Capitalism and Democracy are tough systems to work with educated and greedy people. Yet it is still the best system compared to all the rest.

        Thanks for writing this article. I agree that it is infuriating that again the rich get richer…and people avoiding taxes that should be paid…get bailed out by society writ large. Really sucks!

  7. Notyouraveragenormal says:

    Rayne, I don’t get the baiting talk about immigrants. Were you just trying to catch people’s attention? The US is nation of immigrants, with more coming everyday (this is not intended to be a political statement, rather a statement of fact). And you’re picking, like, five people to make a *generalized* argument about immigrants?! Seriously, what the hell. I *think* you’re saying that it’s a national security threat to allow rich people who don’t have some innate allegiance to the US through birth/asylum to accrue positions of economic power in a manner that could undermine the US. Do I have that right? If so, there’s a lot to unpack there. And why would that not be framed as a national security issue rather than an immigrant one?

    • Rayne says:

      Did I say everyone would like that bit? Nope. Thanks for confirming I was right.

      Look, we have these same few billionaires funding fascist candidates who are dangerously misogynist, racist, ageist, ableist, and xenophobic while squashing media outlets which don’t represent their hatefulness. They’re the same people who did not grow up in the US alongside immigrants whose parents struggled to get here and stay here. That’s a problem and yes, it’s a national security problem.

      But the national security problem was outlined in the ability of billionaire immigrants who have no clear loyalty to this country to destroy economic infrastructure. Did I need to spell that out again? Look for the keywords “asymmetric warfare.” Apparently I was tooo subtle about that for you.

      I’d better see you more upset about asylum seeking refugees than fascist immigrant billionaire white dudes who are actively subverting democracy. The latter don’t need your protections at all while they are stealing your country.

        • Building Guy says:

          Whoops! Actually I did, then forgot by the end. Still King Rube deserves special attention.

          Our bank regulatory system was gutted during Reagan’s reign, quite deliberately. Very long complicated story, lost my architectural practice during the S&L meltdown as a minor consequence.

          The FSLIC and Treasury were totally unprepared and incapable of handling the disaster. I was able to feed my family briefly helping the RTC wind down some projects that were basically scams. Attempted some workouts that could have made decent returns on investment capital, but that was too complicated for their need.

          The real winner was one of the Bass family who set up a distressed capital fund and bought the bulk of the failed asset portfolio for fractions of ents on the dollar. Massive transfer of wealth completely under the radar.

      • Parker Dooley says:

        Maybe there should be a progressive price for these people (who are in some sense economic refugees) to purchase citizenship — the same price most of the poorer immigrants pay, i.e. “everything you’ve got. Start at the bottom & *prove* your brilliance.”

    • David F. Snyder says:

      I’m reading the use of “immigration” more as dripping with sarcasm. Political refugees with genuine problems got turned away at the border while moneyed elite grease their way in. Certainly there’s a national security issue but there’s also the blatant hypocrisy of right-wingers that look the other way as long as there’s enough cash laid on the table by the immigrant.

      • Honeybee says:

        America is still tweaking the E-5 immigration program. See State Department info on the EB5 visa classification – PDF available in Chinese.

  8. Jim Luther says:

    The big lesson is there is simply no downside to taking massive risks if they don’t blow up in your face immediately. The Center for Public Integrity wrote an article in 2013 entitled “Five years later, where are they now?” (publicintegrity[dot]org/inequality-poverty-opportunity/five-years-later-where-are-they-now/).

    Another interesting thing that is simply being ignored by the press is really quite obvious. Every last bank has substantial holdings of government debt, and they have all seen the value of that debt fall. I am dumbfounded that no one even bothers to ask the question – why did it kill SVB, and not all banks? I suggest people read this for an explanation of what was different at SVB (and, I would guess, why the chief risk officer ran and a suitable replacement (with a combination of great resume and complete incompetence) was difficult to find. themacrocompass.substack[dot]com/p/banking-crisis

    The answer to your question “have we learned nothing” is clear – we have learned the behaviors that cause these regularly scheduled meltdowns are both very profitable prior to the meltdown, and there are simply no bad repercussions afterward.

    • Molly Pitcher says:

      Thank you for he Macro Compass link. It has an excellent explanation of just how crooked SVB was.

      • Jim Luther says:

        Since I starting reading EW a few years ago, it has really illustrated the difference between a legal interpretation of events and a statistical (my profession) interpretation of events.

        Take driving over 65 mph in a 65 mph zone for example. From a legal viewpoint, I believe it is clearly illegal, but from a statistical viewpoint illegal is the norm. Another example: the clearance rate for motor vehicle theft is about 14%, which makes me think, although illegal, is it really a crime?

        I suspect the the American legal system is working exactly how the legislative branch intends it to – providing a superficial security theater and little more. SVB was probably acting within the law, at least as enforced. Effectively, if the norm is breaking a law (such as speeding), it provides law enforcement the opportunity to choose who is prosecuted using any criteria that law enforcement chooses. It’s a truly flawed system, IMHO.

        • Rayne says:

          No, it’s that the law was fucked with and it was already inadequate to begin with. It’s not theater, it’s the constant tension between what the people want and need and what corporate interests and the investor class want, meeting in imperfect legislation.

        • earlofhuntingdon says:

          LOL. Your logic is suspect. The rate of convictions (and investigations) for rape is low, too. Does that mean it’s not a crime? And I’m pretty sure anyone who’s had their car stolen – grand theft, a felony – is confident that the theft is an invasive and expensive crime.

        • Jim Luther says:

          Of course, it is a tautology that breaking a law is a crime, but that is not the point I was attempting to make. To the best of my knowledge, laws are put on the books to discourage an action, and they are supposedly effective via either through punishment, or deterrence. The point I was attempting to make is that the laws against looting a bank (similar to those against speeding and a number of other things) don’t seem to have the ability to deter or punish – so what good are they? I think this is generally true about a number of laws and I suspect the legislatures pass something fully knowing it will have little to no impact.

        • Jim Luther says:

          Although he recognized the very subtle difference between historical clearance rates calculated after the passage of time and presumption of immediately solvable crimes, straw man quietly absorbed his punishment.

  9. Snarkhuntr says:

    I’m not sure why asymmetrical warfare would need to, or even want to, involve immigrants at all.

    If I were a hostile foreign power looking to insert a disruptive force into the US’s money/power system, I think it would make more sense to find some local psychopath with enough moral flexibility to do whatever I wanted and just fund them through some kind of opaque backchannel. So basically Jeffrey Epstein.

    As for bailing out medium sized payroll depositors, why should some separate baroque federal insurance scheme need to exist at all? Private deposit insurance already exists – some SVB clients chose to purchase it and are doing fine. Other clients choose to assess the risks differently and are not. What is needed is a market solution – allow the costs of the failed payroll to hit the investors and corporate officers/board members personally, pierce that corporate veil – and suddenly no company will ever allow their payroll to sit at the mercy of one single bank with no insurance. Bail them out, and as they’ve shown here, they’ll continue to socialize risk and privatize gain. Those who chose to keep their entire cash holdings with SVB did so for specific reasons – they thought they’d make more money. If you want to make this stop, you need to increase the real and personal risks faced by the capitalists, not reduce it with a government backstop. I feel bad that some programmers or actors or whatever working folks might not get paid if the state doesn’t step in, but ultimately that’s something they should be taking up with their employers, not asking the rest of the society to step in because they had a shit boss.

    • Rayne says:

      If I were a hostile foreign power looking to insert a disruptive force into the US’s money/power system, I think it would make more sense to find some local psychopath with enough moral flexibility to do whatever I wanted

      You just described Donald Trump and his cohort — and they did that, several hostile foreign powers worked to get him into office and keep him there.

      The thing about asymmetric warfare is that it’s not a war the targeted opponent can meet head on because it’s easily seen as it emerges. Effective asymmetric warfare is difficult to predict and from more than one direction which makes it difficult to stop on a timely basis. I suggest reading up on the concepts of “assassin’s mace” (shāshǒujiàn) and “beyond-limits combined war.” That you would not use an immigrant billionaire to conduct some aspect of asymmetric warfare means you will not be prepared for it, assuring it could be a likely vector of attack.

      As for bailing out medium sized payroll depositors, why should some separate baroque federal insurance scheme need to exist at all?

      Clearly you can’t math or have never done payroll for a company with over 100 employees. As I spelled out, $250K is inadequate to cover payroll funds and punishes workers who are innocent of the stupidity of their employer’s bank. Covering a month’s payroll is a means to stem the contagion of a bank run as well, which punishes more than just the stupid employer’s bank.

      • Snarkhuntr says:

        No, I can math just fine. I simply don’t think you’ve made any kind of a case outlining the need for your federal government to step in and provide an insurance scheme that exactly duplicates an insurance product that already exists. Companies can choose to purchase deposit insurance that exceeds the FDIC minimums. Clearly many have not done so in this case.

        If the federal government were providing some sort of mandatory payroll insurance, that program would inevitably end up becoming a subsidy that rewards reckless risk taking and transfers the costs of those risks to the public.

        What is needed, in my opinion, is significant financial and/or carceral penalties for employers who don’t pay their employees in full and on time. A bank failure is not a meaningful excuse in a world where the employer could have purchased deposit insurance to cover the risk. However those consequences would need to flow past the corporate veil, else the entrepreneurial ‘risk takers’ who allowed their businesses to be so entangled with SVB would be happy enough to walk away leaving their employees holding the bag. Make sure they have personal skin in the game, and they will reweight their risk assessments around payroll liabilities.

        • Rayne says:

          exactly duplicates an insurance product that already exists.

          It doesn’t exist. $250K limit on all deposits may be just fine for the average individual or household, but it does not work for employers to ensure business continuity while preventing contagion of a bank run.

        • earlofhuntingdon says:

          Insured Cash Sweeps and competitive products might qualify.

          The FDIC limit might need to be raised, but I think there’s been inadequate public attention paid as to its purposes and who it serves. How many households in America haven’t the cash to meet a two or four hundred dollar emergency expense? How many have a hundred thousand in cash, let alone two fifty? The vast majority.

          The FDIC issue, while important, should not obscure other banking reforms, such as allowing the USPS to act as a bank for simple small accounts. It could be easily done, it’s a common feature of European postal services, and its inexpensive.

          Banks don’t want the competition, of course, or a government marker on costs that would expose their price gouging. But how many banks can we keep bailing out when their failures are preventable?

        • earlofhuntingdon says:

          A sizeable minority of Americans do not have $400 to cover emergencies, and the vast majority of accounts do not exceed $250K. Excess cover over the FDIC limit is a problem for businesses and the well-to-do.

        • Rayne says:

          You really need to listen to this week’s podcast at In The Bubble with Andy Slavitt. Your perception of what is adequate insurance for small-to-medium sized businesses is likely outdated.

 — episode: Could Your Bank Fail? (51 minutes)

        • earlofhuntingdon says:

          Yes, it’s obvious $250K is not adequate for virtually any business. But my focus and comments were about consumers.

        • Rayne says:

          And if small businesses are told they need to put adequate deposits into their bank before they get a loan, consumers who are business owners will put all their cash into the business account. Again, listen to the tail end of that podcast — it’s articulated well how tiny startups operate.

  10. Konny_2022 says:

    @Rayne: “… these same few billionaires funding fascist candidates who are dangerously misogynist, racist, ageist, ableist, and xenophobic while squashing media outlets which don’t represent their hatefulness. They’re the same people who did not grow up in the US alongside immigrants whose parents struggled to get here and stay here.”

    Peter Thiel grew up in the US (his parents immigrated here when he was one year old), but most likely “not alongside immigrants whose parents struggled to get here and stay here.”

    All the more it’s detestable when he makes use of the 1st amendment to spread his antidemocratic views (2009: “I no longer believe that freedom and democracy are compatible.”) and anti-market views (2012: “Competition is for Losers”.). So he’s not only funding fascist candidates but is a fascist himself.

    When I did a search with “Peter Thiel” on my PC for links and articles kept since Jan. 20, 2017, I found an article in the context of Cambridge Analytica, with the heading “Peter Thiel Employee Helped Cambridge Analytica Before It Harvested Data” (now available at A day later, on March 28, 2018, Thiel’s Palantir claimed that this employee was “engaged in an entirely personal capacity with people associated with Cambridge Analytica” and that they would investigate (

    I followed reports on Cambridge Analytica relatively closely at that time but don’t know what came out of the Thiel connection, most likely because reporting on CA petered out after they discontinued business activities soon after (with a brief reminiscence apropos of the Meta settlement last December). I think, though, future historians could still find something when reviewing the tangled web named Cambridge Analytica.

    • Rayne says:

      Go back and re-read his bio. He did not go to school in the US for the entirety of his K-12 years.

      • Konny_2022 says:

        You’re right, he lived with his parents in southern parts of Africa (South Africa and then-South West Africa, now Namibia) for some years before the family returned to California when he was about ten years old. I’m sorry for this inaccuracy.

        My point, however, was rather an extension of your post as to how despicable Thiel is in my view, than to criticize you. (That’s btw one reason why I never used paypal.)

  11. Tetman Callis says:

    Heather Cox Richardson made the point this past week that there may have been one additional reason for the federal government’s quick and broad action in regard to SVB. I will quote from her newsletter:

    ‘In the U.S., Michael Brown, a venture partner at Shield Capital and former head of the Defense Department’s Defense Innovation Unit, told Marcus Weisgerber and Patrick Tucker of Defense One that the collapse of Silicon Valley Bank had the potential to be a big problem for national security, since a number of the affected start-ups were working on projects for the defense sector. “If you want to kind of knock out the seed corn for the next decade or two of innovative tech, much of which we need for the competition with China, [collapsing SVB] would have been a very effective blow. [Chinese President Xi Jinping and Russian President Vladimir Putin] would have been cheering to see so many companies fail.”’ — Heather Cox Richardson, “Letters from an American,” March 15, 2023

  12. rattlemullet says:

    The 1933 Glass-Steagall act was basically weakened of its key components by the 1999 Gramm-Leach-Bliley- act. Ten years latter the the Great Recession strikes, then the 111 Congress (2009-2010) passed the Dodd- Frank Act signed into law by President Obama. Your history of S.2155 under trump weakened key components of the Dodd-Frank act. Least we not forget Barney Frank sat on the board of Signature Bank one of two banks that failed this past week. That leads us up to the point where many of the prominent venture capitalist on social media and in private chat groups prompted the first twitter driven bank run, withdrawing 42 billion dollars in a single day from SVB. This coupled with, criminal actions and bad decisions by the SVB executives produced a very rapid bank failure.

    Americas elected representatives are ill suited to integrate laws to govern the lighting speed of social media and banking. The average age of a congressional representative is 58 and a senator is 64, most have to turn to there young staffers to do anything on line other than use social media, specifically, twitter, without which they seems to think they are being censored. Seventy percent of stock market activity is done by algorithms.

    Speaking of billionaires, America is truly a socialist nation for the rich. Ever since Americas founding, America has been at war with labor. The American Military was used regularly in suppressing labor strikes until 1878 with passage of the Posse Comitatus act ceased that use. However since then State sanction violence against labor has continued unabated. These violent repressions of labors voice only serves the billionaire class, after all it is more difficult to become a billionaire if you truly have to pay labor its true worth.

    My final comment is that Americas billionaires during one year of the pandemic increased their wealth by 46%. This wealth increase was not accomplished by paying labor more. To garner that much wealth during a health crisis, in my opinion, was a crime against humanity. Laughing all the way to the bank.

  13. SivaDancer says:

    Ummm…speaking as a former FDIC Bank Examiner, I’m pretty sure you really, really don’t want the bank regulatory agencies making distinctions based on the intelligence level of depositors.
    And while you say you think it should be simple to identify accounts used for payroll – ummm, how, exactly, do you think that could be done? If you are imagining that there are standardized numbering sequences for various types of savings/checking accounts, I’m here to tell you that most banking computer systems are about 50-60 years old, written in COBOL, which nobody really knows how to do anymore, and have been patched and tweaked to the point where any minor change being made could cause the entire system to stop working.

    And do you really want the bank regulators to specify how all banks tech providers should recode their systems to do this?

    Having worked with a lot of examiners and senior management over the years, I can tell you that almost none of them have the technical training to understand basic software, let alone complex banking systems.

    I understand the need to rant about SVB, but please, don’t start spouting off about things where you have little or no familiarity. There’s enough emotional logic coming from the idiots in the GOP – don’t fall into the same trap…please…

    • Rayne says:

      Good gods, where do I even start with this crap?

      — The FDIC exists as a backstop in no small part because depositors and banking personnel and bank investors are obviously not on the same level of intelligence. If they were AND banking was wholly transparent, insurance of deposits would likely not be necessary to begin with. Obviously not all examiners operate at the same level, either.

      — How do banks distinguish regular savings from checking from money market to Christmas savings accounts? Banks do this all the damned time. This is merely regulating a particular account for businesses, like creating a business Christmas savings account. Jesus, banks issue businesses working capital or cash flow loans all the time, yet another form of account delineated from other accounts but a loan instead of a deposit, and a loan delineated from other loans. This is not genetic science here, just banking databases.

      — You’re telling me that SVB, the premier bank to the entire technology sector, will have relied on COBOL. Don’t you think first that’s a bank business model problem? A banking industry problem? A technology sector problem when it can’t assure its own banking operates at the level of the technology sector? I’m really fed up with the whining about the sustained use of archaic coding languages, should have fucking been dealt with back when Y2K was being addressed, by which I mean the banking industry should have planned ahead for changes in computing languages requiring migration. The front end of banking has changed multiple times in the last two decades, including migration from HTML to HTML5; I’m absolutely certain banks like JP Morgan are using Python, C++ and Java in the backend. Python last had a major update around the time of the last crash, and it wasn’t backwards compatible, yet JP Morgan carries on as do other banks using it.

      When asking for a single new field to denote a particular kind of account in contrast to other accounts is a problem, it should NOT be the taxpayers’ problem. This is a business’s problem which should not be socialized. Fix it or die.

      — Training. Same, fix it or die. The industry is fucked up if you believe they don’t have adequate training but they can use a new phone and a new computer if it’s handed to them. Banks own insurance companies and they have changed with technology — and that’s a field I’m well familiar with since I did technology rollouts for a Fortune 100 company with a captive insurer. Again, not a taxpayers’ problem.

      I’m not falling into the trap of believing we need to be stuck in the past when it’s clear business including banking hasn’t.

      ADDER: Do NOT tell me there’s no compelling business case to eliminate COBOL in banking because it’s stable. The business case is that there are few people left who are COBOL fluent and they are literally dying out like dinosaurs. That’s the business case: viable businesses do not rely on dinosaurs in an extinction-level event.

      • El Ingeniero says:

        I work for a Fortune 100 super-regional bank. We still use COBOL for some systems. We also run a training program to find and hire new COBOL talent. It’s one of the few roads into tech left for people without formal technology training.

        Legacy systems aren’t something to replace from scratch at the drop of a hat. If it works, and you have the source, you can fix it. I’m pretty sure adding a new account type is fairly easy, it’s sorting through 1/2 million lines of code looking for logic referencing the account type that would be in any large bank system that’s existed for 30 or 40 years no matter what language it’s in.

        There’s simply no incentive large enough to replace large systems done in COBOL, shy of a disaster that makes a large enough percentage of COBOL talent permanently unavailable.

        • Rayne says:

          I’ve been hearing this excuse for more than 10 years now. I also know what was done to avoid Y2K failures.

          The excuses need to end.

          ADDER: At some point this refusal to deal with technology lock-in will be a threat to national security.

          Let me spell out one possible scenario though there are many. Someone chooses to use GPT AI as a replacement for more personnel who are fluent in COBOL. Someone else slips in GPT AI which undermines the work the previous brilliant someone implemented and there aren’t enough fluent coders who’ll catch it promptly. What could this do to the banking system? To any government systems which still rely on COBOL?

    • pH unbalanced says:

      That’s not even taking into account things like sweep accounts, where you only put money into designated payroll bank accounts as payments are scheduled to clear. So with linked accounts, are they all payroll? Or are none of them payroll?

      Since the goal is to keep people at other banks from panicking, and the decision has to be made so quickly, I’m ok with backstopping all depositors, but letting management and investors take the brunt. But if we are going to do that, we should stop pretending we are only going to insure $250k.

      • Rayne says:

        You know which account is payroll? The one issuing payroll checks. *smh*

        If a business is relying on deposits from sweep funds alone to make payroll each month, I have to wonder what line of business they’re in.

        • earlofhuntingdon says:

          One might think it was impossible to mandate accounting changes that require particular treatment of payroll accounts. Various penalties would enforce it, such as loss of FDIC cover.

          As Robert Reich says about poverty and wealth accumulation in America, these things are policy choices, not the hand of god. Rules can be made to make other choices.

        • Rayne says:

          It’s funny how the impending risks of Y2K caused nearly every industry in the US to tear through their technology looking for exposures which they then repaired. Business continuity and potential liability were enough to set most audits and preemptive mitigation in motion.

          But legislators did pass the Y2K act addressing related failures.

          Funny how that all worked out, Congress literally passing a bill to ensure U.S. business continuity because of an earlier failure of imagination among programmers.

          Ditto the changes to numerous industries post-9/11 to address potential terrorist threats.

        • pH unbalanced says:

          Maybe this is a “business of a certain size” thing, but sweep accounts aren’t even slightly risky. They’re just a way to keep money in your savings account (earning interest) until it’s time for the checks to clear. It’s been 20 years since I’ve worked at a company that didn’t have all their auxilliary accounts (including payroll) set up as ZBAs (Zero-Balance Accounts).

          I mean, if we wanted to start treating payroll accounts differently, you could absolutely set up different structures, but going back and looking at *current* structures and trying to draw the line would be difficult.

        • Rayne says:

          Jesus. It’s not difficult. I have three accounts with an investment bank — Roth IRA, traditional IRA, regular investment account. The last is the one into which interest/dividends are swept. I don’t trade in any of the accounts relying on sweep money inflows, only on the cash in the accounts at the time a trade is executed. The sweep is vapor until it’s in the account and clear to use for trading.

          That’s how the payroll account should work. Fuck the sweep money, it’s a strawman. The issue is protecting workers and preventing spread of a bank run — insure a month’s payroll, it’s just that simple.

        • pH unbalanced says:

          Totally agree on your bottom line. And that it’s not worth arguing over the details. Sorry for chasing my point too far into the weeds.

        • Rayne says:

          Waiting for the crypto bros to drop in and start DDoS-ing this place exhorting the magnificence of their favorite vaporware.

          It’ll be like dealing with Musk fanbois.

        • bmaz says:

          Lol, you can bounce it IF you admit it was funny!

          [Nope. You posted it, you can live with it. /~Rayne]

  14. pH unbalanced says:

    At the end of February, the FDIC reported that US banks held $620 billion in unrealized investment losses at the end of 2022. This is pretty much all directly or indirectly related to the speed with which the Fed has raised interest rates.

    At the tactical end of things, policy-makers are trying to keep shocks from spreading throughout the banking system, because the banking system has (once again) been hollowed out. I have a lot of sympathy for decisions made in the moment to keep the plates spinning, as long as actual decision-makers don’t get let off the hook.

    On the strategic side of thing, I absolutely agree that every time we weaken financial system regulations, it’s been stupid and blown up in our faces. And anyone paying attention (and not being paid to think otherwise) can see it coming.

    I worked for a Japanese company in the late 90s early 00s (ie the Lost Decades) — so I can tell you we’re going to be paying for the ultra-low interest rates of the last decade for a long time. What I’m most worried about now is that we’ll start it all off with a crash due to the Fed raising interest rates at hyper-speed, which would crash the banking system even if it *were* completely healthy.

  15. Parker Dooley says:

    One solution to the payroll issue would be to allow businesses to establish depository accounts at the Fed, earning the Fed discount rate, and not conferring borrowing privileges at the Fed “window”.

    “Investors” should die by the same risks they live by.

  16. Ed Walker says:

    The Lever pointed out that SVB got an exemption from the Volckler Rule as it was incorporated into Dodd-Frank. This enabled it to keep its investments in VC funds. I checked the 10-K, and it looks like that was around $850 million at the end of 2022. I’m not certain about the number because the financials are complicated.

    That investment does several things. First, it gives SVB a way to influence the VC Fund managers to encourage large uninsured deposits. Second, it sets up connections that can be used to trade favors including insider information.

    Third, it explains why the VC crowd demanded a government bailout for the companies they invested in. If there was collusion between the VCs and SVB on the deposit issue, not only did they stand to lose their investments, they were going to be sued for demanding that these start-ups keep vast sums in uninsured accounts against all sound money management principles.

    That doesn’t explain Roku, a real company with real products and real income. They hade $487M in uninsured accounts. Why?

    • Rayne says:

      I’ve wanted to know if Roku had loans with SVB, and/or if there was something else brewing which Roku may not have disclosed for proprietary reasons.

      Was SVB Securities a potential underwriter for M&A deals, which might include a Roku-related deal? SVB was one of a multi-party credit agreement when Roku acquired Dataxu in 2019. Was there more in the offing?

      • Paulpfixion says:

        Love this post and discussion. Ed Walker’s comment and the conversation about sweeping funds gave rise to a question— At the business I once managed we had multiple accounts, including a line of credit. It was as easy as me logging in and pushing a few buttons to transfer money from our general account to payroll, or from the line of credit to the general. Would it have been possible for companies like Roku to have drawn down their lines completely so the funds were then treated as deposits instead of loans?

        • Rayne says:

          I haven’t yet read Roku’s statement about its exposure at SVB — think it was a filing with SEC, IIRC, don’t have the link handy. But it’s possible they had an operating cash/cash flow loan with the deposit acting as collateral and as a source for payments of the loans. In this scenario, the draw down would only equal cash required for operations on a monthly to quarterly basis.

          I tend to think the $487M was there as a source of liquidity for other reasons, though. It seems like a lot for operations alone, even if Roku has +3500 employees.

        • paulpfixion says:

          Yeah, thanks, maybe I was reading too much into it. It is really crazy to think about having $487M cash on hand, but looking into it a bit more, Roku lost $498M last year on 3.3B in sales.

          Also, Geekwire reports that the entity regulators set up to continue SVB’s operations will not only honor existing lines of credit, it will even grant new loans as well. Here is a link:

        • Rayne says:

          $487M was 26% of Roku’s cash, IIRC. It’s a lot of money, and yet they’re not crippled if that’s only a quarter of the company’s cash.

  17. Artzen Frankengueuze says:

    Thank you for the link to the Warren opinion, and another informative read. You and the Senator both have great ability explaining complex problems in an understandable fashion.

    Also, it was great to see Alonso on the podium again today.

  18. Toldain says:

    There’s a really important thing your post doesn’t engage with. That is that all those companies with big accounts in SIVB had payrolls to meet. Those payrolls were going to go out on the Friday it failed. This is not a coincidence. I don’t blame you for any lack of sympathy with Peter Thiel, or founders or VCs. But those people on payroll include admins, and programmers, and sales people, and accountants and bookkeepers and probably a few staff lawyers. They all need to get paid. They are common people.

    So, if the Fed doesn’t step in and make the accounts whole (Which cost them nothing, by the way), they don’t get paid. That’s the real suffering. The resolution of SIVB seemed about right, other than any desire I might have to stick it to Peter Thiel. I’m about to tell you a tale that is wild speculation, but fits facts that I know.

    But for purposes of full disclosure, I think I should mention that I once stood in the lobby of SIVB in Sunnyvale, along with a dozen other employees of a certain company who was on a downward spiral and whose finances were shaky. It was a Friday afternoon. We had just been given paper checks drawn on the company’s account at SIVB, and we were going straightaway to get our money. Most wanted cash. I took a cashier’s check. Not because SIVB was threatened, though.

    Anyway, my wild speculation is that SIVB was trying to do a recapitalization via all the VC’s that it had connections to. I think the president of SIVB overplayed his hand, and figured he had the VCs over a barrel. Peter Thiel took objection and pulled his companies and the bank failed. Thiel is the guy who funded the Hulk Hogan lawsuit against Gawker Media allegedly because Gawker had outed him earlier. So it isn’t necessarily out of character for him. I think the lack of a risk officer is probably a red herring.

    FT was reporting that the bank was attempting a recap with the VCs, so that’s not out on a limb. Also, we know the role Thiel played in general. So I’m speculating about motivations and particular actions, which I don’t know about.

    A recap should have been possible. The bank was solvent. Those T-bills would have been worth face value when held to maturity. But the plug got pulled at the worst possible moment.

    • Rayne says:

      You did not read this post because you clearly missed the part I wrote suggesting the FDIC insures dedicated payroll checking accounts to an amount equal to the highest one-month payroll in the previous 12 months so that business depositors can continue to meet payroll.

      Heck, you even missed the criticism here in comments I took for making that suggestion.

      Welcome to emptywheel.

  19. greengiant says:

    Thanks for the post and comments.
    Borrow short demand deposits and lend long 6 and 1/2 year average maturity in one tranch and heavy in “agency” mortgage securites in others is theft. It is a disaster waiting to happen. I have not read how much commercial paper was involved.
    Then the hundreds of millions in stock compensation, over 180 million dollars in the last year alone.
    Look up William K Black who helped clean up one savings and loan crisis and who taught how corporations are “captured” by thieves.
    In 2008 the Feds marked down the mortgage agency preferred shares from par as the agencies were insolvent.
    Another multi hundred billion dollars of common “wisdom” than proved corrupt.

    • Rayne says:

      You know the one corporation which hasn’t been mentioned in all of the discussion about SVB’s screwed up asset allocation with too much in long low-yield?

      “Neutron Jack” Welch’s General Electric. This is the shit he was doing to make GE look good, tweaking not its investments but its long- and short-term debt ratio. You’d think after that example we’d be looking more closely at asset and debt ratios and by we, I mean the SEC, banking regulators, and the legislators who write the regulations they’re supposed to follow.

      And of course because Welch followed Karl Rove’s advice and bought NBC, its subsidiary CNBC as well as the parent organization weren’t going to sic investigative reporters on this or publish any criticism of Welch’s robbing Peter to pay Paul.

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