Confirmed: Global floods, droughts worsening with warming
Isabella O’Malley – March 13, 2023
People travel by boat in a flooded street in Trizidela do Vale, state of Maranhao, Brazil, May 9, 2009. The intensity of extreme drought and rainfall has “sharply” increased over the past 20 years, according to a study published Monday, March 13, 2023, in the journal Nature Water. (AP Photo/ Andre Penner, File)The remains of dead livestock and a donkey are scattered at a camp for displaced people on the outskirts of Dollow, Somalia, Sept. 21, 2022. The intensity of extreme drought and rainfall has “sharply” increased over the past 20 years, according to a study published Monday, March 13, 2023, in the journal Nature Water. (AP Photo/Jerome Delay, File)People wade through flood waters in the town of Moree, Northern New South Wales, Australia, Feb. 3, 2012. The intensity of extreme drought and rainfall has “sharply” increased over the past 20 years, according to a study published Monday, March 13, 2023, in the journal Nature Water. (AP Photo/Brad Hunter, Pool, File)A bridge’s columns are marked by the previous water line over the Atibainha reservoir, part of the Cantareira System that provides water to the Sao Paulo metropolitan area, in Nazare Paulista, Brazil, on Jan. 29, 2015. The intensity of extreme drought and rainfall has “sharply” increased over the past 20 years, according to a study published Monday, March 13, 2023, in the journal Nature Water. (AP Photo/Andre Penner, File)People walk by cracked earth in an area once under the water of Lake Mead at the Lake Mead National Recreation Area, Jan. 27, 2023, near Boulder City, Nev. The intensity of extreme drought and rainfall has “sharply” increased over the past 20 years, according to a study published Monday, March 13, 2023, in the journal Nature Water. (AP Photo/John Locher, File)A Philadelphia police officer rushes to help a stranded motorist during Tropical Storm Isaias, Aug. 4, 2020, in Philadelphia. The intensity of extreme drought and rainfall has “sharply” increased over the past 20 years, according to a study published Monday, March 13, 2023, in the journal Nature Water. (AP Photo/Matt Slocum, File)People enjoy the sunny weather on dry river banks of Germany’s most important river Rhine in Cologne, Germany, after a long time of drought, April 27, 2020. The intensity of extreme drought and rainfall has “sharply” increased over the past 20 years, according to a study published Monday, March 13, 2023, in the journal Nature Water. (AP Photo/Martin Meissner, File)
The intensity of extreme drought and rainfall has “sharply” increased over the past 20 years, according to a study published Monday in the journal Nature Water. These aren’t merely tough weather events, they are leading to extremes such as crop failure, infrastructure damage, even humanitarian crises and conflict.
The big picture on water comes from data from a pair of satellites known as GRACE, or Gravity Recovery and Climate Experiment, that were used to measure changes in Earth’s water storage — the sum of all the water on and in the land, including groundwater, surface water, ice, and snow.
“It’s incredible that we can now monitor the pulse of continental water from outer space,” said Park Williams, a bioclimatologist at the University of California, Los Angeles who was not involved with the study.
“I have a feeling when future generations look back and try to determine when humanity really began understanding the planet as a whole, this will be one of the studies highlighted,” he said.
The researchers say the data confirms that both frequency and intensity of rainfall and droughts are increasing due to burning fossil fuels and other human activity that releases greenhouse gases.
“I was surprised to see how well correlated the global intensity was with global mean temperatures,” said Matthew Rodell, study author and deputy director of Earth sciences for hydrosphere, biosphere, and geophysics at NASA Goddard Space Flight Center.
The strong link between these climate extremes and rising global average temperatures means continued global warming will mean more drought and rainstorms that are worse by many measures — more frequent, more severe, longer and larger.
Researchers looked at 1,056 events from 2002-2021 using a novel algorithm that identifies where the land is much wetter or drier than normal.
That showed the most extreme rains keep happening in sub-Saharan Africa, at least through December 2021, the end of the data. The rainfall extremes also took place in central and eastern North America from 2018-2021, and Australia during 2011-2012.
The most intense droughts were a record-breaking one in northeastern South America from 2015-2016; an event in the Cerrado region of Brazil that began in 2019 and continues; and the ongoing drought in the American Southwest that has caused dangerously low water levels in two of the biggest U.S. reservoirs, Lake Mead and Lake Powell. Those remain low despite heavy rains this year.
Drought events outnumbered heavy rain events by 10%. Their geographic extents and how long they lasted were similar.
A warmer atmosphere increases the rate at which water evaporates during dry periods. It also holds more water vapor, which fuels heavy rainfall events.
The study noted that infrastructure like airports and sewage treatment plants that were designed to withstand once-in-a-100-year events are becoming more challenged as these extremes happen more often and with more intensity.
“Looking forward into the future, in terms of managing water resources and flood control, we should be anticipating that the wetter extremes will be wetter and the dry extremes will get drier,” said Richard Seager, a climate scientist at the Lamont Doherty Earth Observatory at Columbia University, who was not involved with the study.
Seager said it’s a mistake to assume that future wet and dry extremes can be managed the same as in the past because “everything’s going to get amplified on both ends of the dry-wet spectrum.”
According to the U.S. National Integrated Drought Information System, 20% of the annual economic losses from extreme weather events in the U.S. are from floods and droughts.
A drastic swing between extreme drought and unprecedented flooding, dubbed “weather whiplash,” is becoming common in some regions.
Water stress is expected to significantly affect poor, disenfranchised communities as well as ecosystems that have been underfunded and exploited.
For example, the United Nations has said that Somalia is experiencing its longest and most severe drought, an event that has caused the deaths of millions of livestock and widespread hunger. Venezuela, a country that has faced years of political and economic crises, resorted to nationwide power cuts during April 2016 as a result of the drought conditions affecting water levels of the Guri Dam.
As for solutions, using floodwaters to replenish depleted aquifers and improving the health of agricultural soil so it can absorb water better and store more carbon are just a few methods that could improve water resiliency in a warming world, the study says.
Associated Press climate and environmental coverage receives support from several private foundations. See more about AP’s climate initiative here. The AP is solely responsible for all content.
California cancels salmon fishing season: “It’s devastating”
Emily Mae Czachor – March 13, 2023
Officials in California have issued a ban on salmon fishing anywhere along the state’s coast for the remainder of the season, as the state’s yearslong drought is still taking its toll on the once-abundant fish population.
In a recent announcement, the California Department of Fish and Wildlife said salmon fisheries that were originally scheduled to open on April 1 would remain closed through May 15. The decision came as part of a broader effort, involving state agencies in Oregon as well as the National Marine Fisheries Service, to cancel ocean salmon fishing along much of the coast — from Cape Falcon, Oregon, to the U.S.-Mexico border.
For California, the ban aims to protect the Chinook species of salmon, which previously inhabited several of the state’s largest rivers and in recent years have been seen in dwindling numbers.
Thanks to multiple atmospheric river storms in California, rivers on land are roaring but the effects of years of drought are now being seen on the salmon population, CBS Bay Area reported. Last year, just 60,000 of the adult fish returned to the Sacramento River to spawn, officials said. This was a small fraction of the 196,000 fish expected there, and approached a record annual low for the area, according to the fish and wildlife department. Officials are also hoping that the fishing ban will prevent the Chinook population from decreasing further in the Klamath River, which is also threatened.
A Chinook salmon is placed in a tank for propagation at the Livingston Stone National Fish Hatchery March 18, 2008 in Shasta Lake, California. / Credit: Photo by Kimberly White/Getty Images
The Pacific Fishery Management Council has proposed additional policies to regulate salmon fishing off the coast of California through the spring of 2024, wildlife officials said. The proposals, which would ban commercial and ocean salmon sport fishing until April of next year, were approved by the council for public review at the end of last week.
This is the second time in history that California has canceled fishing season, CBS Bay Area reported, with the last ban taking place between 2008 and 2009 in response to another prolonged drought period.
“Fishery managers have determined that there simply aren’t enough salmon in the ocean right now to comfortably get a return of adult salmon to reproduce for 2023,” said John McManus, president of the Golden State Salmon Association, in comments to CBS Bay Area.
Jared Davis, who operates a charter boat for sport fishermen, told the station his entire summer has been wiped out.
“It’s devastating,” he told the station. “This is more than just an income issue for me. It’s an inability to do what I love. So, on a financial level and on a personal level, it’s devastating.”
Dwindling marine life populations prompted wildlife officials in Alaska to cancel the winter snow crab season in the Bering Sea near the end of last year. It was a first in the state’s history.
Judge in Abortion Pill Case Set Hearing but Sought to Delay Telling the Public
Katie Benner and Pam Belluck – March 13, 2023
A photo provided by the U.S. Senate Judiciary Committee shows Trump nominee Matthew Kacsmaryk during the nomination hearing to the federal judiciary at the U.S. Capitol in Washington, on Dec. 13, 2017. (U.S. Senate Committee on the Judiciary via The New Yo
The federal judge in a closely watched lawsuit that seeks to overturn federal approval of a widely used abortion pill has scheduled the first hearing in the case for this week, but he planned to delay making the public aware of it, according to people familiar with the case.
Judge Matthew J. Kacsmaryk, of the Northern District in Texas, told lawyers in the case Friday that he was scheduling the hearing for Wednesday morning. However, he asked them not to disclose that information and said he would not enter it into the public court record until late Tuesday evening.
One person familiar with the case, which is being heard in federal court in Amarillo, Texas, said such steps were “very irregular,” especially for a case of intense public interest.
Kacsmaryk, a Trump appointee who has written critically about Roe v. Wade and previously worked for a Christian conservative legal organization, told lawyers in a conference call Friday that he did not want the March 15 hearing to be “disrupted,” and that he wanted all parties involved to share their points in an orderly fashion, according to people familiar with the discussion.
The judge also said that court staff had faced security issues, including death threats, and that the measure was intended to keep the court proceedings safe.
The lawsuit, filed in November against the Food and Drug Administration by a coalition of anti-abortion groups and doctors, seeks to end more than 20 years of legal use of medications for abortion. The plaintiffs, led by the Alliance for Hippocratic Medicine, an organization that lists five anti-abortion groups as its members, have asked the judge to issue a preliminary injunction ordering the FDA to withdraw its long-standing approval of mifepristone, the first pill in the two-drug medication abortion regimen.
At the hearing, lawyers representing the plaintiffs, the FDA and a manufacturer of mifepristone will present arguments for and against an injunction. It is unclear if the judge will decide whether to issue an order that day or sometime later.
Such an order would be unprecedented, legal experts say, and — if higher courts were to allow an injunction to stand — would make it harder for patients to get abortions in states where abortion is legal, not just in those trying to restrict it.
Medication abortion is used in more than half of abortions in the United States. That proportion has been increasing as conservative states impose abortion bans or sweeping restrictions in the wake of the Supreme Court’s decision to overturn the national right to abortion last June.
The Washington Post earlier reported on the Friday call and upcoming hearing.
In asking the lawyers to keep quiet about the hearing, the judge did not issue a gag order, which would bar the participants on the call from sharing the information. Rather, he asked them to keep the information secret “as a courtesy.”
He said that the court would provide seating for the public and the press, but his plan to provide little advance notice seemed likely to have the practical effect of minimizing the number of people who would attend, according to people familiar with the discussion. Amarillo, in the Texas Panhandle, is several hours drive from other major Texas cities, and only a couple of those cities provide direct flights.
On Friday, the public court record showed subtle signs that something unusual had occurred. That morning, the first new entry in 10 days was added to the case’s docket: a notice of appearance for a Justice Department lawyer, a standard document usually added to a case in advance of an upcoming proceeding, but the docket did not show any proceeding.
In addition, there was a gap in the numerical listing of documents in the docket — document 124 was missing — suggesting that a recent entry had been sealed. People familiar with the case said the sealed document referred to the Friday meeting between the judge and the lawyers.
After the meeting, participants shared Kacsmaryk’s request with their team members, who noted that it was unusual to hold the status conference under seal and to keep the public from knowing about the hearing. The federal government generally objects to closed hearings unless there they are necessary to protect national security interests.
The lawsuit claims that the FDA did not adequately review the scientific evidence or follow proper protocols when it approved mifepristone in 2000 and that it has since ignored safety risks of the medication. The lead plaintiff, the Alliance for Hippocratic Medicine, was incorporated in August in Amarillo, shortly after the Supreme Court overturned Roe v. Wade. Kacsmaryk is the only federal judge covering the Amarillo division in the court’s Northern District.
The FDA and the Department of Justice have strongly disputed the lawsuit’s claims and said the FDA’s rigorous reviews of mifepristone over the years had repeatedly reaffirmed its decision to approve mifepristone, which blocks a hormone that allows a pregnancy to develop. In a court filing, the FDA said that overturning its approval of mifepristone would “cause significant harm, depriving patients of a safe and effective drug that has been on the market for more than two decades.”
If the judge issues a preliminary order to bar access to mifepristone, the federal government is expected to immediately appeal and to seek a stay of the injunction while the trial proceeds. Legal experts said that even if the preliminary injunction remained in place, there were several legal options that could allow the manufacturers of mifepristone to continue supplying the drug and providers to continue prescribing it to patients.
If legal access to mifepristone is blocked, some abortion providers plan to provide only the second abortion medication, misoprostol, which is used safely on its own in many countries. Misoprostol, which is approved for other medical uses, causes contractions similar to a miscarriage and is considered slightly less effective on its own than in combination with mifepristone and more prone to cause side effects such as nausea.
In the lawsuit, the plaintiffs also seek to ban the use of misoprostol for abortion, but their request for a preliminary injunction focused on mifepristone.
Many patients would also likely still be able to order both mifepristone and misoprostol from telemedicine abortion services based in other countries.
Still, such a ruling would create confusion and difficulty for patients and providers nationwide. Legal experts said that it would also be the first time that a court had acted to order that a drug be removed from the market over the objection of the FDA and that if such a ruling stood, it could have repercussions for federal authority to regulate other types of drugs.
Russia is using one of Ukraine’s bloodiest battles to decimate the Wagner Group, after its boss started a feud with military leaders, experts say
Sinéad Baker – March 13, 2023
Yevgeny Prigozhin, the founder of Russia’s Wagner mercenary force, speaks in Paraskoviivka, Ukraine, in this still image from an undated video released on March 3, 2023.Concord Press Service/via REUTERS
Russia is using the battle for Bakhmut to kill off Wagner soldiers, according to a DC-based think tank.
The pro-Kremlin mercenary army has aided Russia’s military, but its leader has become more critical.
The military is likely trying to “expend” Wagner troops and weaken the group’s leader, the ISW said.
Russia is using the fight for the city of Bakhmut as a way to heavily weaken a mercenary force that once boosted its army but has become increasingly critical of its military leadership, according to the Washington DC-based Institute for the Study of War, or ISW.
The battle for the eastern Ukrainian city has become one of the bloodiest since Russia’s invasion began. And the Wagner Group, which has tens of thousands of mercenaries and former prisoners deployed in Ukraine, is heavily involved in the fighting.
In an update on Sunday, the ISW said that Russia’s defense ministry is likely using the battle to significantly reduce the Wagner Group, as a feud between them escalates.
Yevgeny Prigozhin, the group’s leader, who is also known as Putin’s chef, has become highly critical of Russia’s military leadership.
And the ISW said that Russia’s leadership “is likely seizing the opportunity to deliberately expend both elite and convict Wagner forces in Bakhmut in an effort to weaken Prigozhin and derail his ambitions for greater influence in the Kremlin.”
The think tank added that “Russian military leadership may be trying to expend Wagner forces – and Prigozhin’s influence – in Bakhmut.”
The ISW said that Putin’s use of the Wagner group had likely angered Russia’s traditional military leadership, “who were then tasked with sharing limited equipment and ammunition with Wagner mercenaries.”
Prigozhin and Russia’s defense ministry have also clashed over who could take credit for Russian victories.
The ISW said that Prigozhin was waging “a relentless defamation campaign” against Russia’s military.
Russian President Vladimir Putin has also started to distance himself from Prigozhin, with the Wagner leader saying that he had been “cut off” by Putin and that Russia’s military was denying ammunition to his group, calling it an “an attempt to destroy” Wagner.
The ISW wrote that Prigozhin had previously been able to recruit from Russian prisons, but had “lost that permission and access to that manpower pool at the beginning of 2023.”
The death toll in Bakhmut is high. Western officials estimate between 20,000 and 30,000 Russian troops have been killed or injured there, though Russia is still making progress in its attempt to capture the city.
The ISW said that given the high number of Wagner troops there, Russia’s leadership might not mind the high death toll.
“Russian military leadership may be allowing the Wagner Group to take high casualties in Bakhmut to simultaneously erode Prigozhin’s leverage while capturing the city at the expense of Wagner troops.”
At the same time, Ukraine also sees the brutal fighting in Bakhmut as an opportunity to deplete Wagner’s forces once and for all, according to The New York Times.
Ukrainians fighting in the city say it has been a “living hell” for months, while commanders on both sides have called the battle a “meat grinder.”
The UK Ministry of Defence said on Monday that half of the prisoners sent to Ukraine by the Wagner Group since the invasion began have likely been killed or wounded.
All 500 original members of a Ukrainian battalion were killed or wounded in fighting with Russia, commander says
Charles R. Davis – March 13, 2023
Soldiers hold Ukrainian flags over the coffins with Ukrainian servicemen Oleh Khomiuk and his son, Mykyta Khomiuk, who were killed in Bakhmut, during their funeral service at Independence Square on March 10, 2023 in Kyiv, Ukraine.Roman Pilipey/Getty Images
Ukraine’s defense is being hindered by the loss of experienced soldiers, The Washington Post reported.
One commander said all 500 original members of his battalion had been killed or injured.
Soldiers with significant combat experience “are all already dead or wounded,” the commander said.
The war in Ukraine is bleeding both sides, with each suffering more than 100,000 military casualties (killed and wounded) since Russia launched its full-scale invasion last year. But with Moscow able to draft fighters from a population that dwarfs that of Ukraine, there is growing concern that Kyiv is less capable of suffering sustained losses — and that this will jeopardize its ability to strike back this spring, The Washington Post reported on Monday.
The gravity of the situation is illustrated by the experience of Ukraine’s 46th Air Assault Brigade. A commander of a battalion within the brigade told the Post that he’d lost every one of the 500 people he commanded back in February 2022, leading them to be replaced with fresh recruits far less capable on the battlefield.
The 46th Air Assault Brigade is part of the Ukrainian force battling Russia — and the Wagner mercenary group — over control of Bakhmut in the east of the country. In an assessment published over the weekend, the Institute for the Study of War suggested that the Kremlin is using Wagner’s mercenaries, some recruited from Russian prisons, as cannon fodder amid the fierce fighting in Donetsk, calculating that their loss of life is more palatable to the Russian public than the loss of conventional forces.
The man who commands the Ukrainian battalion, identified by the Post only by his call sign, Kupol, indicated that Kyiv does not have the same luxury.
“The most valuable thing in war is combat experience,” he said, describing the difference between a soldier with six months of experience and one who was freshly trained as “heaven and earth.”
“And there are only a few soldiers with combat experience,” he told the Post. “Unfortunately, they are all already dead or wounded.”
In his own battalion, Kupol said there had been a complete turnover in personnel since the invasion. Off the 500 men he commanded last year, 400 have been wounded and another 100 killed, according to the Post. Their replacements are not ready for war, he added.
“They just drop everything and run. That’s it. Do you understand why? Because the soldier doesn’t shoot. I ask him why, and he says, ‘I’m afraid of the sound of the shot.’ And for some reason, he has never thrown a grenade,” he told the Post. “We need NATO instructors in all our training centers, and our instructors need to be sent over there into the trenches. Because they failed in their task.”
With demands for a bank bailout, Silicon Valley shows its ‘small government’ mantra was just a pose
Michael Hiltzik, Los Angeles Times– March 13, 2023
For decades, the dominant mantra of Silicon Valley’s powerful has been that government is just a drag on their innovative spirit. Get regulators off our backs, they’ve argued, and we’ll improve people’s lives to an indescribable degree.
Not at the moment. The same investors and entrepreneurs who argued for less government and less regulation in the past successfully lobbied for a government bailout of Silicon Valley Bank, which failed Friday as a result of astoundingly imprudent business practices.
Driving their demands were the financing issues facing thousands of SVB corporate and individual customers who collectively had more than $150 billion of their cash on deposit at the bank under conditions that left it largely uninsured against the bank’s collapse.
This specific industry could exceed$30 billion by 2025 The Federal Deposit Insurance Corp. insures individual and business deposits up to $250,000 per depositor. Many of the bank’s depositors had cash balances at SVB of hundreds of millions of dollars each.
Dispensing with that limit, the Federal Reserve, Treasury Department and FDIC announced Sunday that all SVB depositors would have access to all their money on Monday. Previously, the FDIC said it would make only the insured balances available Monday, with the balances to be repaid later and possibly not entirely.
The three agencies said no taxpayer funds would be spent on the rescue. The repayments will come from the sale of SVB’s assets, which include treasury securities, with any shortfall covered by an FDIC assessment on its member banks. The agencies may have concluded that there were enough assets on the bank’s balance sheet to cover all deposits, once the assets are sold.
This isn’t a “bailout” by the government, since SVB’s shareholders may yet be the losers; they’re not covered by the regulators’ relief program.
As it happens, the government has turned out to be the savior of Silicon Valley’s small-government libertarians in this crisis. The FDIC is one of many programs launched during Franklin Roosevelt’s New Deal that preserve Americans’ livelihoods and way of life during a crisis, and that conservatives have been trying to undermine since the 1930s.
As we reported last week, the sudden collapse of SVB resembled almost all bank runs of the past — the accumulation of huge sums of deposits that could be withdrawn on demand, backed by long-term investments that could retain their value only if held to maturity.
On Thursday, the bank announced that it needed to raise more than $2 billion in new capital, largely because long-term securities it had put up for sale had lost billions in value as interest rates rose over the last year or more.
The announcement spooked venture investor Peter Thiel and venture firms, which advised their portfolio companies to pull their cash out of the bank.
The result was an incredible $42 billion in withdrawals initiated that day, a torrent that rendered the bank almost instantly insolvent.
California regulators and the FDIC shuttered the bank Friday morning. When that happened, the shaky foundations of the bank’s business model were exposed to daylight, and the cries for a government bailout of its customers swiftly followed.
The context of these events was a fundamental change in the economics of the high-tech and biotech companies the bank served. As interest rates moved higher, its clients had more difficulty raising funds from private investors and therefore relied more on their cash balances at the bank. Their markets shrank, intensifying the rate at which they were burning cash.
It’s not unusual for a crisis to turn people’s most cherished beliefs on their head. The old joke says a conservative is a liberal who’s been mugged, and a liberal is a conservative who’s been sent to jail. An old military saw has it that “there are no atheists in foxholes,” an insight that investment commentator Barry Ritholtz expands to read, “there are also no Libertarians during a financial crisis.”
One other immutable principle of American capitalism is at play: The goal in business to privatize profits and socialize losses. In other words, when things are good, companies will keep their profits for distribution to shareholders. When things turn sour, the cry is heard for government to step in with bailouts and subsidies.
What’s overlooked in this case is that Silicon Valley Bank’s problems were in part the consequence of a Trump-era deregulation movement in banking that was fully backed by the banking industry and the management of — yes — Silicon Valley Bank itself. More on that in a moment. But first, let’s call the roll of small-government advocates who got their wish for a big-government bailout.
Start with billionaire hedge-fund operator Bill Ackman, who has advocated for self-regulation by the crypto-currency sector and has pushed back against efforts by the Securities and Exchange Commission to regulate one of his investment funds. Ackman went all-in for Donald Trump after Trump’s election in 2016, gushing that the U.S. has been “undermanaged for a very long period of time. We now have a businessman as president.”
In a lengthy tweet Saturday, Ackman flayed banking regulators for “allowing [SVB] to fail without protecting all depositors,” which he called “a-soon-to-be-irreversible mistake.”
He added, “Already thousands of the fastest growing, most innovative venture-backed companies in the U.S. will begin to fail to make payroll next week. Had the gov’t stepped in on Friday to guarantee SVB’s deposits … this could have been avoided and SVB’s 40-year franchise value could have been preserved.”
Then there’s David Sacks, an intimate of Thiel and Elon Musk, who were his partners in establishing and growing PayPal. Sacks and his friends have promoted a worldview that opposes progressive laws and regulations, including those aimed at reining in economic inequality.
Appearing on Megyn Kelly’s Sirius XM satellite show June 7, the day of the successful recall vote against San Francisco’s progressive district attorney, Chesa Boudin — a recall movement Sacks helped to finance — he called Democrats “useful idiots for the Chinese Communist Party.
“By this weekend Sacks was squealing: “Where is Powell? Where is Yellen? Stop this crisis NOW. Announce that all depositors will be safe.” (His references are to Federal Reserve Chair Jerome H. Powell and Treasury Secretary Janet L. Yellen.)
Venture investor Brad Gerstner called in a tweet for the Federal Reserve to “act now to make sure depositors are 100% protected.” In a second tweet, he asserted that the savings of thousands of small investors are at risk “just [because] the system failed.”
That drew a horselaugh from veteran investor Jim Chanos, whose experience as a short-seller has given him a uniquely percipient feel for Wall Street foibles. “The chutzpah here beggars belief,” Chanos replied on Twitter.
Chanos observed, accurately, that it was venture investment firms that actually launched the run on SVB on Thursday, when they suddenly urged their companies to pull their deposits from the bank, triggering the $42-billion outflow. “And they now want the Taxpayer to bailout their investments…?! Capitalism, Silicon Valley-style.”
It’s not only the entrepreneurial brotherhood demonstrating that, to quote what has become known as Miles’ Law, “Where you stand depends on where you sit.”
Consider former Treasury Secretary Lawrence H. Summers, who last year was heard disdaining President Biden’s student loan relief as inflationary. His argument was that the $10,000 to $20,000 in proposed relief “consumes resources” better used to help those who don’t attend college, and invites colleges to raise tuitions.
By Friday, however, Summers was saying that it’s “absolutely imperative” that “all depositors be paid back and paid back in full.” Interestingly, the same cadres who argue that student loan borrowers should have known what they were getting into when they took out their loans were able to overlook that Silicon Valley Bank depositors should have known that deposits beyond $250,000 are uninsured and therefore not guaranteed to be paid back.
(Miles’ law was coined by then-federal budget official Rufus E. Miles Jr. in the 1940s, after he noticed that after his most hard-nosed budget examiner took a job at one of the agencies he had criticized, the examiner became that agency’s most devoted defender against the unwarranted critiques from the budget office.)
Libertarian-minded Silicon Valley types have been trying to blame the bank’s collapse on the Fed. Cryptocurrency promoter Balaji Srinivasan, for example, complained that “Powell said that he wouldn’t raise rates in April, June, July, and Oct 2021 … People trusted him … And that’s how the Fed caused the crisis.”
That’s absurd, of course. The Fed began its sequence of interest rate increases in March 2022 and brought them higher by 4.75 percentage points from then through January this year. At every step the central bank made its intentions crystal clear. By early 2022, people “trusted” that the Fed was on a long-term rate tightening campaign. Absolutely no one had a right to be surprised.
Two key factors in the SVB disaster can’t be overlooked: The incompetence of the bank’s management and the improvidence of its customers.
The value destruction taking place in the bank’s holdings of long-term securities was written in bright red on its ledger books. With the prospect of interest rate increases continuing through 2022 and into this year, its management had no excuse for failing to unwind its holdings well before now instead of waiting.
Under regulations implemented in accordance with the Dodd-Frank banking reform law of 2010 safety-and-soundness standards were tightened for banks with more than $50 billion in assets.
Those larger banks were required to submit annual disclosures to the Fed, meet stricter liquidity and risk management requirements, and undergo “stress testing” that would reveal how they would fare under extreme financial scenarios.
Mid-sized banks launched a vigorous lobbying campaign to raise that threshold. In testimony submitted to the Senate Banking Committee in 2015, Greg Becker, the chief executive of Silicon Valley Bank, called for raising the threshold as high as $250 billion.
Becker’s statement bristled with the buzzwords and catchphrases beloved of Silicon Valley entrepreneurs. He asserted that without the change, the regulations would be so burdensome that “SVB will likely need to divert significant resources from providing financing to job-creating companies in the innovation economy.”
Becker referred to “SVB’s deep understanding of the markets it serves, our strong risk management practices, and the fundamental strength of the innovation economy.”
As it happens, SVB plainly didn’t understand how the markets it serves were vulnerable to lock-step flight from its deposit accounts, had weak or paltry risk-management practices, and failed to recognize that the innovation economy has its ups and downs.
The industry’s lobbying yielded fruit. President Trump raised the Dodd-Frank threshold in 2018. At the signing ceremony, Trump labeled the regulations “crushing.” He said, “Those rules just don’t work.”
Actually, they would have worked well for Silicon Valley Bank, which exceeded the $50-billion asset threshold in 2017 and never reached the $250-billion level, having topped out last year at $211.7 billion in assets. Had the old rules remained in place, it would have become subject to stricter oversight no later than 2018. Regulators might have noticed its rapid growth and the shortcomings of its risk profile. But they never had the chance.
Finally, the customers. SVB evidently required some of its Silicon Valley borrowers to do all their banking through the bank as a condition of their loans. According to its annual disclosures, the bank paid an average of 2.2% on savings and checking accounts last year; that’s higher than most commercial banks, but not high enough to compensate for the risk of uninsured cash deposits.
Some companies have reported uninsured balances of hundreds of millions of dollars sitting at SVB. It’s not unusual for businesses to have sizable balances in bank accounts exceeding the insurance cap. But prudent companies spread their deposits around, so they’re not mortally exposed to the failure of any one depository institution.
Multiple options exist for parking cash, such as investing in short-term government securities, money market instruments and corporate commercial paper. None of these is government-insured, but they offer diversification and a cushion against a single bank’s implosion.
With the debacle apparently resolved, the bank’s clients and their employees can enjoy the peace of mind that comes with a well-regulated banking system. Even at the businesses whose leaders lobbied to make banking less safe for everyone.
Michael Hiltzik is a columnist for the Los Angeles Times.
Opinion: Beyond saving Silicon Valley Bank’s depositors, here’s what needs to happen next
Simon Johnson – March 13, 2023
Before Thursday, Silicon Valley Bank was regarded as being in “sound financial condition.” But on that day it experienced attempted withdrawals of $42 billion, about a third of its U.S. deposits. By close of business, the run on the bank made it incapable of paying its obligations as they came due. On Friday, the California Commissioner of Financial Protection and Innovation took possession of the bank’s property and business.
The Federal Deposit Insurance Corp., which insures deposits up to a limit of $250,000 per individual account or for a corporation at a single bank, was immediately appointed as the receiver. In some ways, SVB was unusual. Around 97% of its deposits (by value) were uninsured. This is because the bank catered primarily to the tech community, with many of these companies and nonprofits (perhaps up to 37,000 of them) parking their operating cash there.
Its collapse raised critical questions: What protection should be provided to depositors at SVB with uninsured amounts? Will there be problems for similarly situated banks? And what official action would be appropriate to head-off any potential cascade of bank failures?
Some preliminary answers were provided Sunday night by Treasury Secretary Janet L. Yellen, Federal Reserve Chair Jerome H. Powell and FDIC Chairman Martin J. Gruenberg: All bank depositors with SVB and with Signature Bank, which was closed by New York authorities on Sunday, will be fully protected. The Federal Reserve will also make available additional funding to ensure banks have enough liquidity to meet the needs of all depositors trying to make withdrawals.
The hope is that this rapid response will stop any further panic that could drive more bank runs. It appeared to be working on Monday, when all depositors’ funds in SVB became available. The stocks of midsized regional banks, however, plummeted as equity investors worried about the sudden collapses of SVB and Signature Bank.
Going forward, the FDIC will also manage SVB’s remaining assets, which are of high quality, including government securities and mortgage-backed securities guaranteed by government sponsored enterprises. The recovery value of these assets will be high, and they can be sold immediately.
Preventing bank runs is the immediate fire to put out, but the underlying problem that weakened Silicon Valley Bank — and may also leave other banks susceptible — has yet to be addressed.
In this case, a significant factor was how SVB was affected by the Federal Reserve and its macroeconomic priority to bring down inflation. Somehow this message did not filter down to corporate leaders at the bank.
SVB was brought down because it and its Fed supervisors did not pay attention to what Powell said would happen — that the Fed would raise interest rates if inflation stayed stubbornly high, as it has. Instead, SVB’s assumption that interest rates would remain low appeared to drive its investment strategies.
For many years, SVB was well regarded, apparently successful and had the best possible connections to banking regulators. The chief executive, Greg Becker, has been on the board of the San Francisco Fed since 2019 (he was removed from that board on Friday). Mary Miller, former undersecretary for domestic finance at the U.S. Treasury Department, was on the board of SVB.
For a while, nothing seemed amiss. And when startups received a flood of funding during the pandemic and immediately after, deposits at SVB rose by about $100 billion, more than doubling its balance sheet. SVB leadership used these funds to buy long-term U.S. government-backed bonds that are free of credit risk (they never default).
Unfortunately, as the bank’s management and its Fed supervisors should have known, such assets are not free of interest rate risk — meaning that as the Fed raised interest rates over the last nine months, the market value of SVB’s portfolio declined. Eventually, the value of its assets fell so much that concern about solvency arose, and SVB was unable to find enough cash to match the attempted $42-billion withdrawal on Thursday.
The bank’s miscalculation of risks, based on over-optimism of future interest rates, was a central problem, creating a vulnerability that helped trigger the bank run. But Fed supervisors also apparently failed to see the interest rate risk inherent in SVB’s big bond buying spree or to do anything about it (e.g., to require the bank to hedge that risk).
As a result, the Federal Reserve and other officials feel pressed to provide additional support to the banking system. There has been widespread concern since Friday about a run on other midsized banks, leading to other insolvencies — hence the move to guarantee all deposits at SVB and Signature.
In 2008, the regulation and supervision of big Wall Street traders broke down, resulting in a major financial panic, millions of jobs lost and the Fed loosening monetary policy as much as possible to prevent even worse outcomes.
In 2023, it is the supervision of regular commercial banks that has broken down. The failure of a $200-billion bank should not bring down the financial system. But a breakdown in supervision is another matter.
Fearing a major financial panic, the Fed and other authorities seem willing to provide a de facto blanket guarantee for all bank deposits. (Total bank deposits in the U.S. are around $18 trillion, of which about $10 trillion are FDIC insured.)
To be fully effective, this extension of deposit insurance has to be permanent, and all such insurance should be paid for through appropriate contributions from banks.
Going forward, federal authorities and the taxpayer will ultimately be responsible for more of the downside risk associated with poor risk management at banks. Consequently, regulation and supervision will need to be strengthened in an appropriate manner. Many people said this after 2008, but not enough was done.
A well-regulated system is still the right goal. This time around, the Federal Reserve needs to overhaul and improve its bank supervision — and to make that consistent with its macroeconomic policy for interest rates.
Simon Johnson is co-chair of the CFA Institute Systemic Risk Council, former chief economist of the International Monetary Fund and a professor at MIT Sloan.
Fifteen Years After 2008, Why Do Banks Keep Failing?
Peter Coy – March 13, 2023
Credit…Illustration by The New York Times; images by CSA Images/Getty Images
The weekend rescue of uninsured depositors in Silicon Valley Bank and Signature Bank was absolutely essential and absolutely frustrating. We have to stop getting ourselves into these messes, people.
If the federal government hadn’t given a blanket of protection to all deposits, companies that had deposits in either of the banks above $250,000, the maximum that’s insured by the Federal Deposit Insurance Corp., would not have been able to pay their workers. Start-ups that bank with Silicon Valley Bank would have been imperiled. “It could have destroyed early-stage biomedical research in this country for a decade,” said Karen Petrou, the managing partner of the consulting firm Federal Financial Analytics, who sits on the board of a biomedical research foundation.
The damage could have been far greater. Depositors at other banks were beginning to panic, worrying that their banks would be next to fail and looking for safer places to stash their cash. We were looking at the early stages of a generalized bank run that would have done serious damage to the U.S. economy. Even a healthy bank can be destroyed overnight if all its depositors demand all their money at once. The only way to arrest the panic was for the government to assure all depositors that there was no need to yank from the bank.
Even after the emergency intervention, markets remained unsettled on Monday. Bank stocks were down. Economists at Capital Economics reported “worrying signs of incipient strains in core money markets.” Interest rates fell as investors speculated that the Federal Reserve might curb its rate-raising campaign to relieve pressure on banks (a concern I wrote about on Friday). A scare such as this one has lasting consequences.
True, the government didn’t bail out everyone involved. Shareholders in the banks are wiped out and members of senior management were fired. That’s fair — and contrasts with what happened during the 2008 global financial crisis, when the government propped up shaky banks while leaving management and shareholders in place.
Whether taxpayers helped pay for the rescue is a matter of semantics. On Monday, President Biden told reporters, “No losses, and this is an important point, no losses will be borne by the taxpayers.” Still, the government — and by extension, taxpayers — is providing a valuable guarantee to the banking system. The fact that any government expenditures will eventually be recouped through higher insurance premiums doesn’t take away from that. Also, the Federal Reserve is promising to support troubled banks by buying bonds from them at face value rather than their current depressed market price. Not a bailout, exactly, but certainly a good deal.
The real question is why this keeps happening. After the global financial crisis, Congress passed and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Federal Reserve raised safety standards for banks, especially ones that are deemed “systemically important.” There’s a Financial Stability Oversight Council that’s supposed to take a broad view of risks in the system.
It clearly wasn’t enough. It didn’t help matters that bank lobbyists got Congress and regulators to roll back some measures that they regarded as onerous. For example, a 2018 law signed by President Trump — which was passed by Congress with bipartisan support — spared banks with $100 billion to $250 billion in assets from the highest level of scrutiny. Hard to say, but Silicon Valley Bank — which lobbied for the law — might still be with us if it weren’t for that law.
There are lots of things that could be done to improve banking supervision, require thicker capital cushions and so on, but for now I’d like to focus on the question of the day, which is what to do about uninsured deposits.
The theory in banking is that big depositors have the financial sophistication and the incentive to make sure that the banks where they keep their money are safe. Keeping deposits uninsured above a certain threshold is thus supposed to be a kind of market discipline, supplementing the supervision by state and federal regulators. But that was never a realistic expectation for most depositors, who have other things on their minds. Plus, because big depositors know that they’ll be protected when push comes to shove, they have no incentive to seek out safe banks.
This is hardly a new problem. In 1991, Jerome Powell, now the chair of the Federal Reserve, was a senior official in the Treasury Department who was assigned to deal with the collapse of the Bank of New England Corp. As he recounted in a 2013 speech: “We came to understand that either the F.D.I.C. would protect all of the bank’s depositors, without regard to deposit insurance limits, or there would likely be a run on all the money center banks the next morning — the first such run since 1933. We chose the first option, without dissent.”
Under the Federal Deposit Insurance Corporation Improvement Act of 1991, the F.D.I.C. is required to resolve bank failures in the way that incurs the least cost to the deposit insurance fund, even if that means wiping out uninsured depositors. But in practice, uninsured depositors almost never get wiped out because the F.D.I.C. arranges for a stronger bank to acquire the failed one, assuming all of its deposits. The Dodd-Frank Act of 2010 made an explicit exception to the least-cost test for cases of “systemic risk” — that is, if complying with the least-cost test “would have serious adverse effects on economic conditions or financial stability.” That’s the exception that the government invoked for Silicon Valley Bank and Signature Bank.
If market discipline works in theory but not in practice, one alternative is to bow to reality and explicitly insure all bank deposits. It would certainly lessen the number of panics such as the one that killed Silicon Valley Bank and Signature Bank, without giving banks carte blanche to behave irresponsibly. One person who favors that solution is Robert Hockett, a professor at Cornell Law School, who has written twopieces about the idea for Forbes recently. The F.D.I.C. premiums are higher for riskier banks, which makes sense. Given that the F.D.I.C. already takes risk into account, Hockett told me, the $250,000 limit is “vestigial, like the human tailbone.”
Insuring all bank deposits would make banks look more like public utilities, Petrou told me. She said she’d prefer relying more on market discipline, as originally intended. But that ship may already have sailed.
Elizabeth Warren: Silicon Valley Bank Is Gone. We Know Who Is Responsible.
By Elizabeth Warren– March 13, 2023
Credit…Justin Sullivan/Getty Images
Senator Warren is a Democrat from Massachusetts.Sign up for the Opinion Today newsletter Get expert analysis of the news and a guide to the big ideas shaping the world every weekday morning. Get it sent to your inbox.
No one should be mistaken about what unfolded over the past few days in the U.S. banking system: These recent bank failures are the direct result of leaders in Washington weakening the financial rules.
In the aftermath of the 2008 financial crisis, Congress passed the Dodd-Frank Act to protect consumers and ensure that big banks could never again take down the economy and destroy millions of lives. Wall Street chief executives and their armies of lawyers and lobbyists hated this law. They spent millions trying to defeat it, and, when they lost, spent millions more trying to weaken it.
Greg Becker, the chief executive of Silicon Valley Bank, was one of the many high-powered executives who lobbied Congress to weaken the law. In 2018, the big banks won. With support from both parties, President Donald Trump signed a law to roll back critical parts of Dodd-Frank. Regulators, including the Federal Reserve chair Jerome Powell, then made a bad situation worse, letting financial institutions load up on risk.
Banks like S.V.B. — which had become the 16th largest bank in the country before regulators shut it down on Friday — got relief from stringent requirements, basing their claim on the laughable assertion that banks like them weren’t actually “big” and therefore didn’t need strong oversight.
I fought against these changes. On the eve of the Senate vote in 2018, I warned, “Washington is about to make it easier for the banks to run up risk, make it easier to put our constituents at risk, make it easier to put American families in danger, just so the C.E.O.s of these banks can get a new corporate jet and add another floor to their new corporate headquarters.”
I wish I’d been wrong. But on Friday, S.V.B. executives were busy paying out congratulatory bonuses hours before the Federal Deposit Insurance Corporation rushed in to take over their failing institution — leaving countless businesses and non-profits with accounts at the bank alarmed that they wouldn’t be able to pay their bills and employees.
S.V.B. suffered from a toxic mix of risky management and weak supervision. For one, the bank relied on a concentrated group of tech companies with big deposits, driving an abnormally large ratio of uninsured deposits. This meant that weakness in a single sector of the economy could threaten the bank’s stability.
Instead of managing that risk, S.V.B. funneled these deposits into long-term bonds, making it hard for the bank to respond to a drawdown. S.V.B. apparently failed to hedge against the obvious risk of rising interest rates. This business model was great for S.V.B.’s short-term profits, which shot up by nearly 40 percent over the last three years — but now we know its cost.
S.V.B.’s collapse set off looming contagion that regulators felt forced to stanch, leading to their decision to dissolve Signature Bank. Signature had touted its F.D.I.C. insurance as it whipped up a customer base tilted toward risky crypto-currency firms.
Had Congress and the Federal Reserve not rolled back the stricter oversight, S.V.B. and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks. They would have been required to conduct regular stress tests to expose their vulnerabilities and shore up their businesses. But because those requirements were repealed, when an old-fashioned bank run hit S.V.B., the bank couldn’t withstand the pressure — and Signature’s collapse was close behind.
On Sunday night, regulators announced they would ensure that all deposits at S.V.B. and Signature would be repaid 100 cents on the dollar. Not just small businesses and nonprofits, but also billion-dollar companies, crypto investors and the very venture capital firms that triggered the bank run on S.V.B. in the first place — all in the name of preventing further contagion.
Regulators have said that banks, rather than taxpayers, will bear the cost of the federal backstop required to protect deposits. We’ll see if that’s true. But it’s no wonder the American people are skeptical of a system that holds millions of struggling student loan borrowers in limbo but steps in overnight to ensure that billion-dollar crypto firms won’t lose a dime in deposits.
These threats never should have been allowed to materialize. We must act to prevent them from occurring again.
First, Congress, the White House and banking regulators should reverse the dangerous bank deregulation of the Trump era. Repealing the 2018 legislation that weakened the rules for banks like S.V.B. must be an immediate priority for Congress. Similarly, Mr. Powell’s disastrous “tailoring” of these rules has put our economy at risk, and it needs to end — now.
Bank regulators must also take a careful look under the hood at our financial institutions to see where other dangers may be lurking. Elected officials, including the Senate Republicans who, just days before S.V.B.’s collapse, pressed Mr. Powell to stave off higher capital standards, must now demand stronger — not weaker — oversight.
Second, regulators should reform deposit insurance so that both during this crisis and in the future, businesses that are trying to make payroll and otherwise conduct ordinary financial transactions are fully covered — while ensuring the cost of protecting outsized depositors is borne by those financial institutions that pose the greatest risk. Never again should large companies with billions in unsecured deposits expect, or receive, free support from the government.
Finally, if we are to deter this kind of risky behavior from happening again, it’s critical that those responsible not be rewarded. S.V.B. and Signature shareholders will be wiped out, but their executives must also be held accountable. Mr. Becker of S.V.B. took home $9.9 million in compensation last year, including a $1.5 million bonus for boosting bank profitability — and its riskiness. Joseph DePaolo of Signature got $8.6 million. We should claw all of that back, along with bonuses for other executives at these banks. Where needed, Congress should empower regulators to recover pay and bonuses. Prosecutors and regulators should investigate whether any executives engaged in insider trading or broke other civil or criminal laws.
These bank failures were entirely avoidable if Congress and the Fed had done their jobs and kept strong banking regulations in place since 2018. S.V.B. and Signature are gone, and now Washington must act quickly to prevent the next crisis.
Elizabeth Warren is a United States senator for Massachusetts.
Giant blob of seaweed twice the width of US taking aim at Florida, scientists say
Bradford Betz – March 12, 2023
Giant blob of seaweed twice the width of US taking aim at Florida, scientists say
A giant seaweed bloom – so large it can be seen from outer space – may be headed towards Florida’s Gulf Coast.
The sargassum bloom, at around 5,000 miles wide, is twice the width of the United States and is believed to be the largest in history.
Drifting between the Atlantic coast of Africa and the Gulf of Mexico, the thick mat of algae can provide a habitat for marine life and absorb carbon dioxide.
However, the giant bloom can have disastrous consequences as it gets closer to the shore. Coral, for instance, can be deprived of sunlight. As the seaweed decomposes it can release hydrogen sulfide, negatively impact the air and water and causing respiratory problems for people in the surrounding area.
Rafts of brown seaweed, Sargassum sp., pile up on the shore of Miami Beach, Florida, USA.
“What we’re seeing in the satellite imagery does not bode well for a clean beach year,” Brian LaPointe, a research professor at Florida Atlantic University’s Harbor Branch Oceanographic Institute told NBC News.
Brian Barnes, an assistant research professor at the University of South Florida’s College of Marine Science, told the outlet that the sargassum can still threaten critical infrastructure if it remains in coast waters.
“[I]t can block intake valves for things like power plants or desalination plants. Marinas can get completely inundated and boats can’t navigate through,” Barnes said.
The impending seaweed comes as Floridians along the state’s southwest coast have complained about burning eyes and breathing problems. Dead fish have washed up on beaches. A beachside festival has been canceled, even though it wasn’t scheduled for another month.
Florida’s southwest coast experienced a flare-up of the toxic red tide algae this week, setting off concerns that it could continue to stick around for a while. The current bloom started in October.
Red tide, a toxic algae bloom that occurs naturally in the Gulf of Mexico, is worsened by the presence of nutrients such as nitrogen in the water. The Florida Fish and Wildlife Conservation Commission warns people to not swim in or around red tide waters over the possibility of skin irritation, rashes and burning and sore eyes. People with asthma or lung disease should avoid beaches affected by the toxic algae.