Credit Suisse wipes out 16 billion bonds from savers (but safeguards Saudi and Qatari shareholders) – Corriere.it

The image that remains of the collapse of Lehman Brothers are those bankers already on the street, with their cartoons in hand. The image that will remain of this crisis is perhaps that of a single banker: Greg Becker, now former CEO of Silicon Valley Bank, photographed in shorts, T-shirt and flip-flops in Hawaii just days after the bank he was to head went bust. The Daily Mail scoop, immediately picked up by the New York Post. Of course there is nothing illegitimate if Becker, who is now unemployed and owns a $3.1 million mansion in Hawaii, decides to take refuge there for a few days after the worst drama of his professional life. If anything, it is more questionable that he himself sold shares in his bank for 3.5 million dollars a few days before announcing the capital increase, to cover the losses that would have triggered the crash.

But the symbol behind the image refers, once again, to a two-speed banking crisis. There are those who are largely responsible for it, yet they always seem to come out rich and well protected (even if an investigation by the US Department of Justice looms in Becker’s case). Then there are the others, those exposed to the consequences and destined to pay the price for mistakes that are not theirs. a politically explosive mixture: in America, the wave of populism that would have brought Donald Trump to the White House also starts with the Tea Party, resulting from the 2008 banking crisis. Once again the banking crisis is already turning into a double-speed phenomenon both in Switzerland, with the sale of Credit Suisse to UBS, and in the United States. The short circuit in America as savers are seeing these days: if a bank like Svb fails, billionaire venture capital titans like Marc Andreessen or Peter Thiel have their multi-million deposits guaranteed with public money down to the last penny; but if a run hits a small rural bank in the Midwest, then a local farmer risks having all his and his company’s deposits over $250,000 wiped out.

Of course there is a logical explanation for this difference in treatment and, in recent days, Treasury Secretary Janet Yellen offered it to Congress. In the case of Svb a decision by the authorities in Washington determined that all depositors were to be protected, even billionaires, in the name of a systemic exception: not doing it to Silicon Valley Bank would have had systemic consequences. On the other hand, thousands of smaller banks, which serve smaller customers, are not systemic and are not the exception for them. Trump could not have dreamed of a sharper weapon for his anti-litigation rhetoric. The Treasury, the Federal Reserve and the big US banks worked all weekend to find a solution for the next failing bank, the First Republic. But the problem is already elsewhere. The association of medium-sized banks has written to the regulators asking that their deposits also be guaranteed in full with public money. It would effectively ensure liquid savings of all Americans, for 19 trillion dollars. Today it seems impossible, so the request will fall on deaf ears. But since it is now public, one can only wonder how tens of thousands of depositors in smaller banks will react from tomorrow: they will want to take their money to systemic banks, triggering new bank runs and other disruptions.

The bailout of Credit Suisse will also have repercussions. The operation eliminates the value of subordinated bonds (A1) for 16 billion euros, even before wiping out all the capital of shareholders as would have been normal. It’s hard to dispel the thought that for delicate geopolitical reasons they wanted to preserve, at least in part, the bank’s first two shareholders: the Saudi National Bank and the Qatari sovereign wealth fund. Thus the precedent was created that subordinated bondholders may be less protected than shareholders. From this morning, the bonds of many European banks will find themselves in an open sea. But not calm.