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Debt limit plan proposed by Kevin McCarthy in Wall Street

Alice Blake on April 24, 2023

Debt — On Monday, House Speaker Kevin McCarthy previewed a plan he hoped House Republicans could pass in the coming weeks.

McCarthy made a speech during the New York Stock Exchange that could raise the debt ceiling, saying:

“So here is our plan: in the coming weeks, the House will vote on the bill to lift the debt ceiling into the next year, save taxpayers trillions of dollars, make us less dependent on China, curb our inflation, all without touching social security and Medicare.

The plan

McCarthy’s proposed plan would serve as a marker of GOP demands in the middle of an impasse as two parties continue to argue on how to resolve the issue.

For now, there is no bipartisan agreement, and Democrats are still arguing that the debt limit should be lifted with no strings attached.

The Republican bill is not expected to pass in the Senate.

According to McCarthy, the GOP’s plan for a one-year debt limit increase would roll back domestic, non-defense spending back to levels seen in 2022.

McCarthy also said they would attempt to pass the GOP plan in the coming weeks.

The crowd

At the New York Stock Exchange, Kevin McCarthy touted the GOP proposal, saying:

“Simply put, it puts us on a fiscally responsible path in three ways: it limits, saves, and it grows.”

The House Speaker’s assurances came as a small group of protestors stood in front of the building, calling him out for plans to cut Medicare funding.

McCarthy repeatedly slammed President Joe Biden, criticizing what he believed was Biden’s unwillingness to negotiate.”

Without exaggeration, American debt is a ticking time bomb that will detonate unless we take serious responsible action,” said McCarthy.

“Yet, how has President Biden reacted to this issue? He has done nothing. So, in my view and I think the rest of America, it’s responsible.”

The White House responds

On Monday, the White House criticized Kevin McCarthy for the GOP demands.

Andrew Bates, the White House deputy press secretary, released a statement, saying McCarthy is “engaging in a dangerous hostage taking.”

Bates also said McCarthy failed to clarify what the House Republicans are proposing and would vote on, arguing that the House Speaker only referenced a vague, extreme MAGA shopping list.

However, White House officials will closely monitor if McCarthy could deliver on his promise: passing a bill in the coming weeks to raise the debt ceiling and curb spending.

A senior White House official said if the House Speaker achieves his plan, Biden would be open to meeting McCarthy.

The Republican dilemma

Although he is optimistic, it is a challenge for Kevin McCarthy to get 218 votes, and he can only stand to lose four votes.

“I know there’s a place where we can come to an agreement,” said the House Speaker.

“It’s just hard when people think that there’s not $1 that you can cut out of government spending today.”

Although McCarthy didn’t specify areas that the GOP plan to cut spending, he expressed wishes to tie a GOP energy package called HR-1 to the debt ceiling debate.

The plan passed the House last month.

It is looking to increase American energy production and grow the economy by rolling back on all of President Joe Biden’s climate policy.

Calling out Biden

Kevin McCarthy used quotes from former Vice President Biden regarding the debt crisis of 2011.

“He said, ‘You can’t govern without negotiating.’ Well, what changed, Mr. President? I agree with the former sensible Joe Biden,” he said.

“I agree with the former sensible Joe Biden. He knew that our government is designed to find compromise. I just wish the current extreme Joe Biden would listen to the former Joe Biden.”

The line prompted the only round of applause from the audience throughout his speech.

Recently, the administration reiterated their position in a statement from Andrew Bates, saying:

“There is one responsible solution to the debt limit: addressing it promptly, without brinkmanship or hostage taking – as Republicans did three times in the last administration and as presidents Trump and Reagan argued for in office.”

Kevin McCarthy urged Wall Street to pressure the current administration to undergo spending cuts.

“If you agree, don’t sit back, join us,” said McCarthy.

The House Speaker also said he wasn’t monitoring stock market conditions as he went into debt ceiling negotiations.

“Markets are reacting to work we’ve done, so I shouldn’t be monitoring you,” he told traders.

“I should monitor what we’re doing, and that’s exactly what I do.”

He also noted that markets are going up because the president ignored the markets for 75 days.

However, McCarthy didn’t elaborate on its connection to stocks going higher.

On Monday, markets were trading slightly lower.

McCarthy concluded his speech by invoking the drawn-out speakership battle.

“I will never give up. I will never give up on you, we will not rest until the economy is healthy.”

Silicon Valley Bank blame game commences

Jerry Cooper on March 16, 2023

…

Silicon Valley Bank – The initial shock of the SVB collapse has faded away, and the blame game has begun as people look for the guilty.

The tech industry is blaming Silicon Valley Bank CEO Greg Becker.

Many blame Becker for allowing the company to become the second-largest US financial disaster in history.

According to an alleged SVB employee, Becker publicly disclosed the bank’s financial difficulties before discreetly putting up financial backing to weather the storm.

The actions created the environment for the fear that led to people withdrawing their funds.

“That was absolutely idiotic,” said the employee. “They were being very transparent.”

“It’s the exact opposite of what you’d normally see in a scandal. But their transparency and forthright-ness did them in.”

The buildup

Greg Becker and his leadership team said last Wednesday night that they anticipated to produce $2.25 billion in cash from $21 billion in asset sales, resulting in a $1.8 billion loss.

SVB has made no firm pledges despite its best efforts.

The news shook Silicon Valley, where the bank has been a major lender to technology innovators.

Numerous business owners were terrified.

According to California regulator papers, several corporations withdrew $42 billion on Thursday, while Silicon Valley Bank’s shares fell by 60%.

As Silicon Valley Bank closed that day, it had a negative cash position of around $958 million.

“People are just shocked at how stupid the CEO is,” said the SVB employee.

“You’re in business for 40 years and you are telling me you can’t raise $2 billion privately? Get on a jet and fly to Kuwait like everyone else and give them control of one-third of the bank.”

While Silicon Valley Bank has yet to comment, CEO Greg Becker is claimed to have apologized in a video statement to employees.

“It’s with an incredibly heavy heart that I’m here to deliver this message,” said Becker.

“I can’t imagine what was going through your head and wonder, you know, about your job, your future.”

Hysteria

Silicon Valley Bank officials, according to Jeff Sonnenfeld, CEO of Yale School of Management’s Chief Executive Leadership Institute (CELI), deserve to be admonished for their “tone-deaf, failed execution.”

In a joint statement, Sonnenfeld and CELI’s research director, Steven Lian, stated:

“Someone lit a match and the bank yelled, ‘Fire!’ – pulling the alarms in earnest out of genuine concern for transparency and honesty.”

Sonnenfeld and Tian said it was unnecessary to disclose the $2.25 billion unsubscribed capital offering on Wednesday night.

They noted that Silicon Valley Bank had sufficient capital in excess of regulatory requirements.

They also said that the $1.8 billion deficit was unnecessary to reveal.

The one-two blow, according to Sonnenfeld and Tian, sparked a massive frenzy, culminating in a rush to withdraw deposits.

They went on to suggest that the bank may have spaced the statements by at least one or two weeks, which would have lessened the impact.

On Sunday, President Joe Biden’s administration announced a rescue plan for Silicon Valley Bank depositors.

Biden also announced that the US government will undertake an extensive inquiry of all parties involved in the SVB catastrophe.

He released a statement saying:

“I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.”

The Fed’s involvement

According to Jeff Sonnenfeld and Steven Lian, Jerome Powell, the Chairman of the Federal Reserve and Biden’s choice to lead the Feds, and his colleagues bear some of the blame.

“There should be no mistaking that Silicon Valley Bank’s collapse was a direct result of the Fed’s persistent and excessive interest rate hike,” they wrote.

They stated that the Fed’s attempts to keep inflation under control affected two things:

The value of the bonds Silicon Valley Bank was relying on for capital
The value of the tech startups SVB catered

Silicon Valley Bank, on the other hand, had more than a year to prepare for and deal with the problems.

The anonymous SVB employee called the bank’s manipulation of its balance sheet “stupidity,” casting doubt on the CEO and CFO’s strategy.

But nevertheless, the employee, who is also a Wall Street veteran, believes the bank’s downfall was the result of mistakes and “naivety” rather than illegal activity.

“The saddest thing is that this place is Boy Scouts,” they said.

“They made mistakes, but these are not bad people.”

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