The Problem With Jon Stewart - Making Cents of SVB’s Collapse With Mark Cuban and Sheila Bair

Episode Date: March 15, 2023

Could the Silicon Valley Bank collapse have been avoided? On this week’s podcast, we chat about how SVB’s risky investments lead to its eventual failure. We are joined by Sheila Bair, former chair of the FDIC, and Mark Cuban, entrepreneurial multihyphenate, to discuss where the regulation was for these banks, why we don’t bail out citizens like we do businesses, and what’s next for banks with similar investment strategies to SVB.Season 2 is now streaming on Apple TV+.CREDITS
Hosted by: Jon Stewart Featuring, in order of appearance: Mark Cuban, Sheila Bair Executive Produced by Jon Stewart, Brinda Adhikari, James Dixon, Chris McShane, and Richard Plepler.Lead Producer: Sophie EricksonProducers: Zach Goldbaum, Caity Gray Assoc. Producer: Andrea BetanzosSound Engineer: Miguel CarrascalSenior Digital Producer: Freddie MorganDigital Producer: Cassie MurdochDigital Coordinator: Norma HernandezSupervising Producer: Lorrie BaranekHead Writer: Kris Acimovic Elements Producer: Kenneth HullClearances Producer: Daniella PhilipsonSenior Talent Producer: Brittany MehmedovicTalent Manager: Marjorie McCurryTalent Coordinator: Lukas ThimmSenior Research Producer: Susan Helvenston Theme Music by: Gary Clark Jr.The Problem With Jon Stewart podcast is an Apple TV+ podcast produced by Busboy Productions. https://apple.co/-JonStewart

We wait a little bit before we take off. Absolutely. No, go ahead. I'm good. Sorry. So, John, just a heads up. Mark is calling in from an airplane. Oh, dang it.

Okay. He may be in and out. Hey, listen, Mark. Don't worry about it. We'll... We're all good. I'll deliver. I'll come through.

I got you. All right, everybody, welcome to the podcast. It's the problem with me, John Stewart, the actual problem. The show is currently on Apple TV Plus for season two, and this week's episode, oddly enough, is about the Fed and inflation, and former Treasury Secretary Larry Summers shows up for an interview, and it goes great because he and I get along really well. I don't know if you guys have heard Silicon Valley Bank, which caters to, I believe it's Silicon Valley in the way that the Bank of America caters to America, and Citibank,

of course, caters to cities. Well, it has failed, and it has collapsed billions and billions of dollars, and as you know, the Fed has come in and backstopped all the depositors, and we're hoping that the contagion doesn't spread because we can only talk about things as they relate to pandemics, I guess, from here on out, whether it's a virus or a lack of liquidity. But we're very excited today. We've got two great guests talking to former chair of the FDIC and author of the Children's book series, Money Tales, providing financial literacy lessons to children.

Sheila Baer, thank you for joining us. Yeah, my pleasure. Thanks for the invitation. And of course, entrepreneur and co-founder of Cost Plus Drugs, Mark Cuban. He is, and this may or may not be a metaphor for the entire situation, he is flying above us as we speak in a plane. So Sheila, I'm going to start with you. The FDIC is something that was put in place during the Great Depression to stop bankruns.

It still is in existence today. The federal government has stepped in and said it will actually backstop all of the deposits. So the question is this, what is the FDIC? If the government just says, like, amen, all the money that's in the banks, we will back up. Then what is the FDIC? Yeah. Well, they haven't said that. They said at least for those two banks, they're going to cover all the uninsured deposits.

But you're right. I mean, if there's really a problem with deposit runs, just helping two isn't going to take care of the broader system problems. And if anything, it could make it worse for the others if you get two backstop, but others are out there that not helped. But I assume if you backstop these two, you're going to be hard pressed to then not backstop regional banks and everything else. Well, that's true.

We did that, and they may need to do that. I kind of sense that there is a bit of an overreaction here. I think the banking system is basically okay. I think regional banks, community banks, basically are okay. There are a few more out there that have some problems. They have a lot of uninsured deposits. So as you said, we've insured deposits up to $250,000. The FDIC has got a perfect record on protecting insurance, so nobody worries about that, and

they shouldn't worry about that. But if you rely heavily on uninsured, depending on how low all those customers are that the money could run. So if we get in a situation where fear starts driving behavior by uninsured deposits, not necessarily fundamentals about how good the bank is, but fear, then they are going to have what's called liquidity failures. If you take all your money out of a bank that can't make raised cash enough to make the withdrawal request, then you're going to close the bank.

It's somewhat self-destructive behavior. But I think that could be the problem right now, but you're right. The Silicon Valley Bank had, I think, 90% of its deposits were uninsured, which is an enormously high number comparatively. Normally, it's, I guess, 40% to 50% and risk offset. That's right. The big regional banks had the traditional ones out. This is also a rapid growth company.

So it was new, it was tech-oriented, it had a volatile, so the traditional regional banks out there, they have a lot of insured deposits. The uninsured they have are institutions that have done business with them for a long time. They do credit lines, they do all sorts of different things for them. So they're not going to run. And so I do think people need to keep their heads on this. But if it starts getting out of hand, the government needs to backstop it all. It can't just backstop a couple and think this is going to take care of itself.

But if anything, that could make it worse. Mark Cuban, you're very familiar with this tech culture, this Silicon Valley culture. You're a tech bro from what I have understood from reading your Wikipedia page. You're not a tech bro. Mark Cuban, you had money at this bank. I don't know if you pulled it all out, but you did. I want to ask you about this. This feels like a failure of the government to hold our banking system to account.

We put into place measures after 2008 that set liquidity goals for banks that had different kinds of stress tests for any bank up to $250 billion. The banks and the politicians rallied to strip those to banks that had $50 billion. Silicon Valley Bank was between the $50 and $250 billion. So there was no real regulatory stress test and oversight like you would for some of these larger banks. Why is what feels like normal regulation so difficult for banks between $50 billion and $250 billion to undertake?

So one, I am not a tech bro. So let's get that clear. I'm not a fan of Silicon Valley. Two, I agree with you that rollback of 2018 was a mistake. And the entire economy of the United States of America is built on trust in our institutions, in our legal institutions, and on our banks. The minute and short or uninsured people feel and companies feel they can't trust our banks, we lose our place as the reserve currency.

We lose our place as the destination for commerce. But three, and here's kind of the linchpin of the whole thing, in every business, big bank, little bank, podcast companies, you name it, every CEO makes decisions, right? Those decisions are based on probability, where they'll say, the chances of this happening are big or small. And I think what happened for the CEO at Silicon Valley Bank was, I think they probably thought to themselves along with their board, we do have a risk with all these uninsured accounts, but it's only really a risk if there's a run on the bank.

And there's only really a risk if it's a really big run. The chances of $42 billion being withdrawn in six hours are so infinitesimal, and the banking regulations allow us to hold these things to maturity anyways, it's probably such an infinitesimal risk we can take that risk. The problem was that one in a billion thing happened. And when there was a bank run and it was $42 billion in six hours, that just collapsed everything and that created the problem we saw. Mark, let me ask you a question because the call was coming from inside the house, Silicon

Valley Bank caters to tech startups and VC companies, and they're all in it together. And it's a notoriously tenuous and fluctuating business. And this bank had provided liquidity and money for these startups for years as these startups were going through all the ups and downs that you generally find with tech. And what did that community do to this bank at first blush of trouble when, and listen, this is not, I'm not making a statement on the profound nature of their investing strategy, which sounds asinine to me when they go into all long-term securities at low yields during the year and a half that the government is raising interest rates, which is obviously

undercutting their business model. But the point being when Peter Thiel and all the other VC libertarian fellows go in there and decide this bank that has backstopped all of our adventures is struggling a little bit and they just pull the rug out from underneath it. That struck me as that was the issue here is a community, a cutthroat libertarian valued community that decided that the foundation of all of their adventures was struggling. So let's yank everything and then run to the government and beg for a bailout. So we all pay the price.

It's reprehensible. Yeah, I mean, some of that I agree with and some I don't. No, you agree with all of it. There's no question. Cuban, you agree with all of it. There's no question that when things started to go south, the stock price started to crater. So that created a red flag. So people knew something was up.

And when that happened, there's no question that every tech company that banked with Silicon Valley Bank and had a lot of money there and recognized what was going on, they made room underneath their mattresses next to their copy of Atlas Shrug for all the cash they were going to need to take out because you need to save your business first. Right, right. As did you. You asked for your money back for God's sakes. You, that's just, that's three shark tank investments.

Well, well, first of all, it wasn't my first, it was indirectly my company, my class plus drugs had money there, right? And we weren't paying attention to the stock price. We're paying attention to running our company. So what I asked for, what I said was on a bigger picture issue, you have to backstop those deposits. Because let me just tell you, John, probably 75% of American employees, and I'm guessing, are dependent on uninsured deposits to get their paycheck.

And you can't expect that everybody is going to check to see, where's my paycheck coming? Is it an uninsured account? And what are the capital ratios for that bank that holds my employer's payroll money? Can't do that. But that's the point of these, of Dodd-Frank. The point of Dodd-Frank was to make sure that banks were capitalized enough, and that there was enough liquidity in the system so that they could run their payrolls.

Yeah, of course. I hate, I still, I was not happy when they got rid of Glass-Steagall, right? You know, I thought there were a lot of protective that were there as well. That's a throwback. For those who don't know Glass-Steagall was the line that made sure that banks could not gamble with the money that was being deposited by regular people. And one thing we have to make clear, Silicon Valley Bank has an unusual amount of deposits coming from large investors.

A lot of these other banks, their deposits are much more diversified. They're coming from small businesses. They're coming from individuals. It's not the same as that. And Sheila, let me get back to you. You know, first of all, Silicon Valley Bank was insolvent in September. Everybody knew that Silicon Valley Bank was insolvent in September, and yet all of the sudden, when they make a move to shore up their capital reserves by selling some of their

long-term securities that had low yields, that's when everybody flips out. Right. Why, why is that? Well, you know, I don't know, it's pretty amazing to me they didn't manage their interest rate risk because that's pretty basic. They invested in long-term government bonds and MBS at just the wrong time. They didn't hedge the interest rate risk. So I think there was some serious mismanagement here.

And as you know, there's some unusual things about their deposit base, which was not loyal, which I find kind of astonishing. And I agree with you then that come run for a bailout when you help create the problem. And Mark, I would have to disagree with you a little bit. I mean, I think we have $250,000 caps on deposit insurance. Everybody knows that, you know, kids know that. It's at the teller window when they go into the bank with their parents. And we do that because we want some market discipline for uninsured.

We want you looking at your bank. We want you to be monitoring it and seeing how safe it is. Now, maybe you think that's, you know, that's unrealistic and people don't want to do that. But if that's the case, then let's have a program for uninsured and let's charge for it. You know, charge bags, bees. Oh, yeah. Yeah, of course. Yeah, definitely charge for it. But we don't have that right now.

So now you come in and say, we're going to guarantee all these uninsured. Now, there are companies that you can go to to gain extra insurance. You can get private insurance. You can get private insurance on this liquidity, but the government is not going to backstop it. But what happens though is there's this thing called cash relief programs, ICS programs that just game the system, right? So they do these deals where they'll say, hey, you can insure up to a billion dollars,

but we're going to take your $250,000 and put it in, you know, hundreds of banks, and they'll do deposit swaps. It's just the clinging of the system, rather than just dealing with the obvious that $250,000 is not enough. And I disagree with Sheila because if you're a small entrepreneur and you have inventory and you have payables and you have payroll, your account is going to go up over $250,000, even if you're tiny. And then there's downstream risks where you might work with a payroll processor,

like happened with Silicon Valley Bank, where there's one payroll processing company that might deal with thousands, thousands of smaller companies, or Etsy sellers as an example. And their accounts are always going to be over $250,000. And someone selling Etsy jewelry, they're not going to know where the money's being held. I don't disagree with you. At least in times of volatility, the FDIC should have the authority

to provide unlimited, at least for transaction accounts. That's really what we're talking about, that, you know, we did that. I pushed for that. Right. We're talking about liquidity for payrolls. We're not really talking about deposit accounts or investment accounts. That's right. We're not talking about, you know, three and a half billion dollars of, you know, somebody's money, you know.

So we did do that. And I think the FDIC should do it again. Unfortunately, I'll tell you what happened. I pushed for that. We got a program in place called the Transaction Account Guarantee. It was very successful in keeping uninsured money at banks. We were having a particular problem with community banks losing deposits, of course, to JPMorgan Chase and Citigroup and all the too big to feel banks.

Then, per lobbying by the money market fund industry, Congress took the FDIC's authority away to institute that kind of program with that express approval from them. So I do think the regulators need to go back. There's a streamlined process to get approval for that kind of program, but they do have to go back to Congress. But at least that authority should be restored to the FDIC. So they provide this on an emergency basis.

And maybe, you know, some countries do provide unlimited insurance for transaction accounts. And I don't think it would be a bad idea at all. I think it's a great idea. And it gets us to something that I'd like to maybe macro out on. Let's zoom out on this. And it's very clear to me that the only people that bear risk in our system are small depositors, small businesses, people that rely on payroll. If you are large and you have billions of dollars and you can lobby the government,

there is no risk to your shenanigans. The only risk to your shenanigans is that you can catastrophize our entire economy. And then, urkle it. Did I do that? And immediately the government steps in and bails you out. So, Mark, let me ask you this. The whole ethos of Silicon Valley is risk. We take risks because we are bold innovators, entrepreneurs that are bringing the—

we're going to Mars for fuck's sake. We're doing everything we can do. There is no risk. If the government will back everything that you do as a— you can disrupt other industries, but nobody can disrupt you. If all the laws of thermodynamics and gravity and nature that apply to every individual that is late on their mortgage payments or is going to lose their house or have their pension funds crap out, but none of that applies to 100% of the money

that investors throw around in Silicon Valley, what kind of system is that? So, here's what I would tell you, John. Yes, sir. If rather than Peter Thiel and all the tech bros were saying, pull your money from Silicon Valley Bank, if it was Occupy Wall Street, who came out and said, we convinced everybody to pull their money from Silicon Valley Bank, they would be getting credit for the ultimate eat the rich event. This literally was the ultimate eat the rich event, and I'll explain to you why.

Every single penny of equity in Silicon Valley Bank and Signature Bank and 60%, 70% of stock valuations and 100% of bonds in Silicon Valley Bank is gone. $100 billion is probably a low estimate for the amount of money that was lost by shareholders and bondholders in this bank run as the result of this bank run and what happened to Silicon Valley Bank? So, it wasn't like lost in what way, Mark, but lost in what way? So, if you owned a share of stock in Silicon Valley Bank, where you owned, at one point, it had a $60 billion dollar market cap on plus their debt, billions of debt, owned any of that debt or any of those shares of stock, that money is gone, never to be seen again.

Literally, if somebody owns 5% of Silicon Valley Bank, billion dollars worth to make the numbers easy, they are no longer a billionaire. Even if another bank comes in and buys their assets, which, by the way, I would assume their assets are still quite viable, that their assets are probably close to what they're... They've got good assets, that's right. But in the UK, I think, HSBC bought the UK Silicon Valley business for 1 euro. So, that tells you what has worked. That's right. It did, yeah. So, literally, over $100 billion in net worth was lost in this event. By the way, that was a Jim Kramer recommendation. He said that's a buy. I just want to clarify too that they bought up for 1 euro, but they're backing all the liabilities.

You're standing behind all the deposits, which involves risk. So, the 1 euro, I think it's a little misleading that it is a valuable franchise. No, but it's not though. It's not misleading, because the shareholders got nothing. So, HSBC took on debt and took on obligation, and they could benefit the HPSC shareholders. But if you owned it, the value to the equity valuation is gone. It is gone. There's no value. You can't even buy a share of Silicon Valley stock. I agree with that. I agree with that. Yes. I just wanted to make sure that they were putting money up in terms of backing the deposits. So, that wasn't just the only financial pressure they were taking. Right. Their commitment was bigger. Yeah, their commitment was bigger than

at all. No, no, no. I understand that the shareholders have taken a hair cut, a loss, and that they're last in line. Yeah, but that hair cut is... Yeah. Yeah. So, it's not little. They're not even in line, right? So, it's not like there was this big saving, or we bailed out the shareholders, and all the tech bros came out okay. They got crushed. There is... Well, I think that's a little misleading, because these are not average depositors. So, the people that are going to be getting their money back, because it's now fully guaranteed by the United States, there are people there that had hundreds of millions of dollars. I mean, you've got Roku that had, I don't know,

$500 million in there. These are not mom and pop investors and mom and pop depositors that put in a little bit of money saving it for a rainy day. This is like when you read about those PPP loans that people would get that would say, I have a billion-dollar business and I got a $300 million PPP bailout. Like, I'm not as concerned about all the shareholders. Yeah, but it is bigger than that. Yeah, okay, the shareholders are different, but the depositors, right? Yeah. The entire banking system. There are giant depositors there. But they were giant. Yeah, this wasn't a bunch of mom pause trying to get money for their payroll. Yeah, that's what I'm trying to get at. Yeah, exactly. But that's not the point, right? The point is that the entire

banking system of the world. Oh, did we lose him? Yeah. Son of a bitch. He just said the entire banking system of the world and then we lost him. Holy shit. Now what do we do? Mark Cuban just created a bank run. The entire banking system of the world. I'm sure he's going to say it was perfectly safe and sound. And then all we heard was, this is your captain speaking. Mark Cuban has just said something about the world banking system. Let me ask you, Sheila, this was not, this bank, when you're talking about the entire bank system of the world, this was not a systemic risk to the banking. This was an unusual situation that was a, in some ways, an industry outlier. It was a VC bank that was funding all these VCs. The truth is, it wasn't even in that terrible a

shape. As far as, it was a shitty investment strategy that they employed. Apparently, nobody in their risk management department. And again, I don't work for a giant bank and I don't understand exactly the hierarchy of their org chart. But I would assume there's somebody in the meetings who said, Hey, man, did you guys see in the paper today? The Fed raised the interest rates again. I think 75 basis. Hey, what are, where's all our shit? Where's all our stuff? What are we getting now? Like 1%? Yeah, it's true. Somebody should have asked the chart. I don't understand it. The CEO of the company was at the San Francisco Fed. I mean, none of this snuck up on them. This was a, they keep saying, Oh my God, six hours, $42 billion disappeared for a year and a half. These guys knew

what was happening to their investment strategy. It wasn't diversified. It was long-term assets. It was a very low interest gain and they just pivoted poorly. No, that's true. It is pretty astonishing. But I think your point about this being an unusual situation is good because I think people are just starting to think more broadly. There's this huge problem in the system. There's not, I don't see that at all. You know, the communications around this in a way the regulator is saying this was systemic, such small banks. It was just settling the people. Okay. You know, what else, what else is going on? So I do think they may end up having to do broader guarantees. They probably will just because I think the fear factor is kicking in. But this is an unusual bank

and an unusual failure and not one that's reflective of most mid-sized regional banks at all. But I think you said something that struck me, which is, well, this isn't, it's not a systemic failure. But in some ways, it's not a systemic failure of the system that has been set up by the Fed and by the Congress to service the financial industry. It's not a failure of that system, but it is a failure of our system, which doesn't backstop foreclosures. It doesn't backstop. You know, why in God's name, you know, there used to be a thing called moral hazard. And in the 2008 financial crisis, Tim Geithner, you know, he and I were talking about the bailouts. And I said, I don't understand why the federal government didn't

bail out the mortgages that were underwater, because if you did that, it would have been a lot cheaper. And you wouldn't have had, you know, AIG being made whole, and you wouldn't have had all the bailouts happening at the geometric level that had happened. You could have, if it was all mortgage derivatives, if you just bring some of those mortgages above water, suddenly the derivatives are cured and they're no longer toxic. So why didn't they do that? And he said to me, moral hazard. Oh, brother, I swear to fucking God, he said moral hazard, we could not reward, we could not reward homeowners for making bad decisions on loans. And I said, you bailed out an entire industry that made bad decisions on mortgage derivatives.

I said, why, why wasn't that moral hazard? He said, well, we had to land the plane. Yeah, guys, I'm back. Oh, if you guys still got me, I'm back, I'm back. Was that, was that turbulence, Mark? Was that, or were they bringing out the food service? You're in coach, right? You're in, what are you on Southwest? Is this a jet blue? I'm in the last row facing the wrong direction. Mark, you missed. Yeah, you missed it. It was good. You missed the whole moral hazard rant, for God's sakes. Yeah, I actually heard it. I actually heard it. Let me just add my two cents. I would tell you that the Fed is very much,

Fed and regulations are very much responsible because one, the Fed talks, you know, Fed speak is so much mumbo jumbo that one day the market is up 500. The next day it's down 500 trying to interpret the Fed. And so banks have that same problem trying to determine how and where they make their deposits or earn their income. And two, there's regulations. Oh, for God's sakes, we lost them again. All right, Shil. So we'll get on that regulation situation. He said, you know, it's a failure of the Fed and it's a failure of regulations. I would also say it's a failure of Congress and the lobbyists because actually all the pressure that's on these banks in terms of regulations is eased. All they do is spend their

time and money getting regulators off their back. Yeah. No, that's right. We want to criticize regulators, but there's relentless lobbying against them all the time to ease up. Yeah, it is. It's on stop. And then when they do bailouts, they're celebrated, you know, all these rich guys in Silicon Valley, oh, we got to bail out our regulators. Wonderful. But they're not, you know, they're not rewarded when they have to, when they try to crack down. That's a big, big part of the problem. John, I'm sorry, I had a hard start. This has been great. I wish I could stay a little longer. No, Shil, I very much appreciate it. Is there any other final word you'd like to deliver on the FDIC's role, the regulator's role on the SVB situation and where it's going?

So I think it's just for people, you know, the FDIC, if you've got insured deposits, don't worry, the FDIC has got a perfect record and most banks are completely safe and sound. If you're dealing with a bank you've dealt with for a long time, it's been around a long time, you know, you're fine. So don't, don't anybody panic. Or in the words of Fox's Ainsley Earhart, everybody run to your bank right now and take all your money out. Because the world is on fire. Shil, thank you so much. Thank you, John. It was great. Shil, a bear. Do we have Mark anymore? Is he gone still? Yeah, I'm still here. I'm back. Mark, did you hear any of what we were talking about in terms

of, she said this isn't a systemic failure. And I said, oh, it's a systemic failure in that the system is designed through regulators and lobbying and all that to bail out these larger banks and ignores the smaller investor and the small creditor and the small business owner and the homeowner. That is my point. Yeah, I don't disagree. Yeah, I don't disagree. You know, I heard the part about the moral hazard and that's always a fine line to work, right? And again, with this specific situation with Silicon Valley Bank, I think there was moral hazard. There were people who, you know, the CEO and management potentially lost tens of millions of dollars bondholder sharehold. So I think there was moral hazard, but I think they were trying

to game the system in a lot of respects and it backfired on them. And, you know, when I mentioned, if you heard me, the mark, the hold to market versus hold to maturity versus mark to market, that was a fundamental problem of what they did, right? Because the system allows them to say, even though the value of the bonds I purchased for income had declined 5, 10, 20%, I can pretend that as long as I hold to maturity, I'll get all my money back. And so the system allowed them to do that. And because of that, they were, the system, in fact, in essence, was encouraging them to take more long-term risk. Because they're saying you can buy a 10-year bond instead of a two-month bond because, you know, you may be able to earn more interest and we'll allow that to

happen. And we won't make you update your equity valuation, even though you effectively became insolvent, like you said. Doesn't bailing them out for their terrible investment strategy, though, now say to the system, let's say the old system encouraged some risk, right, to chase yields, especially for a VC community that's always chasing yields. You know, all they want is, you know, the unicorn companies and all that, and they're going to throw all their money. Well, now the system is saying, take all the risks you want. There is no limit to the shenanigans that you can pull because the federal government will always commit, I mean, they said that this is not a systemic risk to the banking system. Well, if it's not, then why do they need an

emergency-fed relief program? Well, it is a systemic risk. That's where I disagree with you, because again, the ultimate product for the US banking system is trust, right? If any single person makes, you know, you save, your life savings is a million dollars, right? You're 70 years old. You've worked your entire life. You've got a million dollars for your retirement. You just pulled out your IRA. You don't know banking, misogast at all, right? You put in and you happen to be next door to a Silicon Valley bank. But that's not this bank, Mark. No, it is, though. It is. The Silicon Valley bank is not that bank. No, I'm not saying it's 90, 100% of their customers. Right. But all it takes is one, two, five, 10, and you're that person who lived next door to the

Silicon Valley bank branch and you put your life savings in there. If people can't trust that their bank deposits are going to always be there, we've got real systemic problems. And so the response isn't... No question. The response is Congress has got to change the law. If a bank does A, B, and C, which makes it incredibly conservative, we will protect all your deposits, right? If you don't follow, let's just say Glass, Deagle, Equivalent Laws, we're not going to. Right. But you know how this is going to go. You've been around the block enough to know that Congress is lobbied not by the grandmother with her pension fund and the person that's going to get bailed out. They're lobbied by the billionaire investors, the millionaire investors, the people that go in there and get

them to relax those rules and to give them the breaks. If what you're suggesting to me is we need confidence in a banking system that teachers and policemen and firemen, that their pensions are going to be protected, I'm all for it. But the Fed doesn't step in and protect those people. It doesn't step in and protect individuals that have lost their houses due to the incompetence and bad investment strategies of the muckety mucks. It steps in and protects the muckety mucks. You're exactly right in terms of lobbying. That's just all horseship, right? The fact that our politicians will sell out everyday people so that my peers can make more money is ridiculous. It's ridiculous at every single level, right? So if you want trust in a system, if that's the

currency, then you've got to fix that part before you can gain any trust in the fact that a Silicon Valley bank that had incompetent investment strategies needs to be bailed out with taxpayer-backed money. Okay. Yes, but it's not a bailout. It's backstopping the depositors. I can't say it enough. One day, the CEO of Silicon Valley Bank walked in, thinking, you know what? I got fucking money. I got X amount of dollars in Silicon Valley Bank stock or bonds, and I'm set for life. And then a week later, he didn't have fucking money anymore. Mark, he had pretty close to fucking money because he sold his own stock for almost four million dollars before this thing went south. Two weeks before. Right. So these guys knew what was coming.

These guys knew what was coming. Yeah, that'll get flawed back. No question about it. And they should, right? And that's part of the moral hazard for the marketing box, right? Right. There's no real moral hazard though for them, and they're the ones that we have to figure out a way to do the system. And if the currency of the system is trust, it should also be competence. 100%. And there should be some level of pain that is felt by those that have performed incompetently. I agree. I agree 100%. My guess is the SEC is going to go after them because they just literally changed the rules for the automatic sell programs that he used to sell his stock. So I would not be shocked if the SEC went after them. I would not be shocked if there was a clawback,

and both of those build moral hazard, which is really important for the banking industry. But we also need to hold the Fed accountable as well because the whole talk around, talking circles Fed speak creates a lot of these problems, right? Because they were trying to interpret what they thought the Fed was going to do in terms of interest rates and the rate of acceleration when they were making their decisions. Right. But they weren't riding a fine line though, Mark. I mean, they had, I don't know, 90-some percent uninsured, and they had all their money in long term. They basically were loaning money to the Fed to get their treasuries to just make one or two percent. And as interest rates went up over a year and a half, I mean, that's a train coming down

the track that you can see for miles. It wasn't though. No, it wasn't though, because if there was no bank run, we wouldn't be looking at Silicon Valley Bank and saying, oh my God, such bad decisions. They've lost all their money. They're going out of business. But we should be. My point is we should be, that there should be regulators that are watching that for systemic risk to the bank, not to the system, but to that bank. But they loosened the regulations so that they were not being stress tested in that way. No, we agree they're 100 percent. We agree they're 100 percent. Yeah. I'm just saying that if there was no bank run, none of this would have come to light and this problem would still continue. Oh, I'm sure. And listen, you're seeing it now in a ton of these

other banks. Suddenly, everybody's looking at Credit Suisse like, hey, man, you've got a lot of long-term mortgage-backed securities too. What's going on with that? Well, that's a whole another question too. Yes. And that's my whole problem with the Fed is they make these big banks liquid, they have them have no risk, and yet individuals are shit out of luck. And that was my biggest problem with the 2008 situation is that they made people whole, that tanked the whole system, and they allowed people to lose their homes for no reason. They just allowed it to happen, and it never should have happened. I can't argue with you at all. There you go. That's a good, now I'm going to let you go then. Now that we're at the no argument, privatizing profits, socializing

losses, that's how we do this. No, no, no, no, because there's no way shareholders should have got anything back in 2008. Shareholders understand the risk better than anybody. There are the ultimate risk takers, and so they should have gotten blown out, just like the Silicon Valley and signature bank shareholders did. And so there is moral hazard going forward for all the banking CEOs and boards, because they know they're going to lose the value of all their equity. And so you'll see a rush to conservatism right now as they try to fix this. But the Fed and the FDIC is going to have to help. And the idea that 250K is enough insurance is insane, because the idea that we're asking- Yeah, they've got to raise that. They've got to raise that limit.

Or offer insurance to big accounts. So at Broku, with $458 million once insurance, here's what it costs you. From the FDIC, here's the premium you pay, and they'll pay it. And they have to make them carry that insurance. They have to make them carry that insurance, and they have to raise that limit for individuals, not for companies, not for the large investors, but for the individual. They should not be holding that limit. Everybody has been backstopped in any bank failure, except IndieMac. And Lord knows, I don't know what the problem with that one was. But Mark Cuban, thank you for spending the time. I hope you're off on a spring break, jaunt with the kids. And you're going to enjoy yourself. I look forward to seeing you the next

time the Mavs are in town for my nicks. And we'll talk to you soon. Hope so, John. Thanks for having me on. It's always a blast. Thank you so much for spending the time with us. And Sheila Baer from the FDIC, former chair. Thanks so much to her. That is our podcast for the problem. The show is on Apple TV+. Join us this week. It's about inflation. And we've got an interview with Larry Summers that I really, truly believe I would like you to watch. So take it easy, everybody. Bye-bye.