Mar 20, 2023

New York Community Bank has agreed to buy a major chunk of failed Signature Bank, according to the FDIC.

Video transcript

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. All right, joining us now with more reaction is Caitlin Long, she's the CEO and founder of custodian Bank. So, you know, over the weekend thoughts on this U BS, the buyout of a credit suisse deal. Is there more banking sector jitters that is that a concern that will continue on? Oh, well, definitely we've seen signs of real stress in the interbank funding markets and the pledged collateral markets that came about the same time as well. They've been building but, but the the real stress came about the same time as the Silicon Valley Bank um situation. Everybody was very focused, of course on that because you actually did see people lining up around bank branches, but the uh the the global markets were having stress as well. So when you, when you look at these uh headlines and and of course, I'm gonna ask a bunch of provocative questions here because I know you, you like to give very, very stayed responses, Caitlin uh with the but uh you know, we we've of course talked to, to other people about this and they seem to hint that the, the at least the, the government's uh uh forced issues if you will with signature and silver gate. And uh uh obviously, um uh uh uh you know, Silicon Valley Bank may be there as well that this was kind of a operation choke point is what they're calling it 2.0 operation choke 0.2 0.0 that, that the government kind of thought of it as a way to, you know, like came up with this idea, we're gonna get rid of crypto from the banking sector and if it causes an economic, then banking crisis in the world, so be it. Um, where do you stand on that? Do you think that, that a government which can't seem to get my mail on time also coordinated this kind of attack? And, or is it just sort of taking uh advantage of an opportunity that, that poorly run banks gave them coordination of coincidence? Oh, no, it was absolutely coordinated. As you guys remember you have me on, it started with custodian and the coordination between the White House, the Federal Reserve Board of Governors and the Kansas City fed. And then Senator Dick Durbin came over the top that was in late January, January 27th and then it went to the other bank charter applicants. XOs Forgo. Uh And then of course, it went to the SEC uh where pretty much every, everybody got Wells notices over the ensuing couple of weeks and then of course, the takedown of the banks that was absolutely coordinated. There is an anti and by the way, we do have evidence for that. Uh I spent two days in Washington DC last week sharing details as well as the receipts, so to speak, uh with, with folks who, who need to know what kind of, what kind of, what kind of uh evidence is that uh documents, phone calls, testimony. I mean, like anything specific? Like, hey, we're gonna, we're gonna target signature, we're gonna target Silver Gate. These guys are involved in crypto. Oh, all right. You know what, look, if it causes a worldwide recession. No, not, no, not that, not that the targeting of the, of the bank charter applicants that we do have, we do have got an email and that was coordinated and it is absolutely illegal. What happened? Yeah. Well, ok, you have evidence of that, but do you, but is there any evidence that the, the people in the, in the administration and in the, in the executive branch specifically targeted the likes of signature and Silver Gate because of their crypto holding because of their involvement in the crypto industry and therefore, uh you know, risked ca causing this kind of chaos in the, in the overall banking sector. Uh just because one day they will come and said, no crypto doesn't look so good. Oh, absolutely. And, and as I have said, Washington DC is a sie, we've had people come forward to tell us who did it and why they did it. They were going after the crypto bank. Uh, it's all gonna come out guys. It is in our lawsuit filing. This is all gonna come out. Uh, it, absolutely, the names are not, but, but, but the fact that there were press leaks and that we do have evidence around it. Absolutely. Let's step back. There is an anti crypto wing of the Biden administration and, and 111 person came forward and explained to us exactly what happened. There was a power vacuum in the transition between the White House chief of staff old to new and the head of the National Economic Council which handles the president's economic policy, old to new and into that vacuum in early January moved this anti crypto wing and uh they're not just anti crypto, there is a group uh that is also anti tech. They, they, they want to bring down um big tech and, and that and break it up. Ok. And so you start to sort of see these patterns. Now, I don't have direct evidence of course, of anything related to Silver gate and signature. But what I do have is a lot of back channel evidence of how the bank regulators have put pressure on the banks that are currently serving the digital asset industry. And boy, there's a lot of smoke with that and and again, uh the way that we're going to as an industry, defend ourselves against all this is uh you know, Congress can, can call up the, the officials and embarrass them. That's not really gonna do anything. Congress. So what, what can happen? It's the internal auditors at these agencies that can hold the agencies, he's accountable and they absolutely have power. There is internal documents revealed. Do you, do you think eventually? Yes, absolutely. By the way, folks, everybody on the hill knew all about this. These are open secrets by now, there were certain things that I was able to help them fill in the blanks. But uh but, but these are open secrets. The folks on the hill know exactly what happened. There was absolutely a coordinated attack on this, on the on on banking, the crypto industry across the board, whether it's the applicants for bank charters who were, who were DeNovo, whether it's the banks that were, that were actively serving the industry and the things that are happening behind the scenes. But even bankers have come forward to me to tell me about the things that they've had to deal with from their bank regulators in terms of the pressure that they're getting to stop serving this retaliation against custodian for being so vocal uh about this. Uh you know what, look, we have our lawsuit outstanding, of course. And uh I think stay, stay tuned. It. Um It is being launched. Oh it was filed in June. Ok. Since June, your source on Capitol Hill is in George Santos. Is it because it is, we got, we got a lot to talk about here. This is not, it's not what you think it is. No, no, no, no, no. So you don't think that this is just mismanagement at banks that they had some interest rate, risk mismanagement and uh and it's spreading now to the rest of the banking sector. I mean, or go ahead, go ahead. Well, I mean, initially, folks were saying this is a target on crypto, but now we're seeing this go on to other banks, first republic uh credit. So it's, it's a global problem. And so it's, it's, it's far beyond just crypto right now. So is it that it just got out of their hands or they're just sort of realizing now that we've got a way bigger problem on our hands? The, and that's what, that's exactly what I've been saying is, is that there, there are in this wing there, this wing has been very vocal in protecting consumers. Ok? No one can argue with that. Uh and going against the banks for so-called junk fees and, and the junk fees, um especially hit, uh you know, folks of lower income and, and so there is a goal on the part of and it's out they're in their speeches on the part of these banks or bank regulators to rein in the banks that they view as predatory to the lower income income consumers. And what they would like to do is to have national banking, some sort of version of postal banking in the United States. Ok. Um, so now by going after the crypto industry, which was clearly filled with fraud, filled with criminals, you've heard me say before, huge swaths of this industry still need to burn down, needed to, of course, at the peak and, and, and still need to, but they, but there was definitely predatory behavior. No question. They are throwing the baby out with the bathwater. And to your point though, Christine, I think they didn't realize just how fragile the traditional banking system is. And, and, oh boy, did they get more than they bargained for by doing that? We also spoke to a former Nydfs uh uh representative last week, Maria and DFS currently is saying this, that, you know, this is due to leaders and a crisis of management, et cetera. And so it has nothing to do. It's, this is not a crypto issue and just along those lines, you disagree. Well, no, no, absolutely. There's no question that the banks made themselves vulnerable across the board. Um And, and, and I think last time I was on, I talked about the fact that in at the peak of the crypto market, Silver Gate had 13.3 billion of demand deposits that could be withdrawn in the span of minutes and 1.4 billion of cash. Ok. It is not a shocker that when you only have 1.4 billion of cash and 13.3 billion of deposits could be withdrawn in the span of minutes that when everybody goes and comes and gets their money back that they, that, that, that, uh, that, that would blow up. Ok. That was poor management. Absolutely. And here's the thing, I think the bank regulators, they definitely have egg on their face, right? You saw Jay Powell up on Capitol Hill for his semi annual testimony, testifying that the banking system was stable literally a day before it all started blowing up. And then uh the head of supervision bar uh literally said the morning of the Silicon Valley bank run that fed supervised banks don't have bank runs because they're subject to uh prudential supervision. Uh Those two statements will go down in, in history as poorly timed. OK. Lynn II, I mean the question I wanted to ask before here is this is this situation that we see with Silver Gate and, and, and signature and, and what have you is that poorly run banks are the only ones that are willing to deal with crypto? No, no, no, no. Oh my, no. Because the entire community and regional banking sector has this held to maturity issue where interest rates went up very fast and they're not marking to market their portfolio. And if they did um substantially. So parts or all of their shareholders equity would be written away. And that's I saw this morning there there's a request for um more than 100 20 banks to get in line and get the same treatment of full deposit guarantees. This this is spreading. All right. So we we are hearing latest news that New York community bank has agreed to buy a major chunk of uh failed signature bank. According to the FDIC, the former, the 40 former branches of signature will operate under New York Community's subsidiary flags to bank starting today. We should note that these are the non crypto related deposits. What what do you think will go on from here? Caitlyn as uh they do, they start selling off these assets of these crypto friendly banks. Well, that one's done and uh wound up with a bow. The only assets that are left are of course the crypto deposits and, and, and well us dollar deposits from crypto firms to be specific. No, you no digital assets. But the interesting question, it's a rhetorical one is if nobody can get banking services, then how is the FDIC going to going to unwind those 4 billion of deposits? Where is that money going to go if the customers can't open a new bank account somewhere? Mhm Your source, by the way, wasn't Joe Biden or, or Pete? But was it no? All right. They each have their own access to grid just All right, we'll end it there. Caitlin. Thank you as always for joining us this morning, that was custodian Bank, Ceo Caitlyn Long and Caitlin. We'll see you in Austin, Texas at consensus. It's not too late to buy your tickets at consensus dot coindesk dot com.

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