Famous stockbroker Jim Cramer criticized the Federal Home Loan Bank’s (FHLB) decision to bail out Silvergate. Silvergate received a $4.3 billion loan from FHLB to run operations after FTX collapsed. John Reed Stark said ‘freedom dies’ as US taxpayers subsidize cryptocurrency scams.
“I wish people knew how dangerous this has become!”
CNBC show Mad Money host Jim Cramer retweeted a post about Federal Home Loan Bank’s (FHLB) bailout of crypto-friendly bank Silvergate for $4.3 billion. He also described it as ‘dangerous’. In addition, he warned the public about “how dangerous this has become”, stating that this is “not business as usual”. In this context, Jim Cramer quoted John Reed Stark’s tweet and shared the following:
This is unusual! A crypto bank takes a bailout from the Federal Home Loan Bank to thwart a ‘bank run’. I wish people knew how dangerous this has become. This is not business as usual.
The original tweet was posted by John Reed Stark, President of John Reed Stark Consulting LLC. He also shared an article by the American banker at the same time, emphasizing that Silvergate received a $4.3 billion bailout loan from the FHLB to prevent a bank run. Stark added,
US taxpayers now officially subsidize crypto fraud/grift in the first US crypto-hook. This is how freedom dies.
Why bail out a private bank dealing with cryptocurrencies?
When the popular crypto exchange FTX crashed, depositors began withdrawing their money from Silvergate Capital Corp. But the California-based bank injected liquidity through its ‘quasi-government agency’. The funds injection helped stop a bank run.
The FHLB is a government agency that usually provides funding for home financing programs such as mortgages. Therefore, it was quite surprising that this agency gave Silvergate such a big loan, especially since cryptocurrencies are such highly volatile assets. Other banks and mainstream lenders have generally stayed away from it.
The bank’s company records have revealed funds it received from the FHLB in San Francisco in the fourth quarter of 2022, supporting Silvergate, La Jolla, to continue another flow of deposits. The bank currently has $4.6 billion in cash, mostly from advances from the FHLB, according to financial data shared by Silvergate in January.
While this move highlights the crypto industry’s presence in the mainstream banking system, the Home Lending banks themselves have some merit in criticizing the FHLB as their purpose is reviewed. This sentiment was echoed by some social media users who expressed similar concerns about using public funds to bail out a private bank dealing with cryptocurrencies. Many commentators question whether taxpayers’ money should be used as a reward for undertaking risky investments.
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