Some banking insiders are buying RIGHT NOW. Here’s why we should pay attention…
A week before SVB Financial (SIVB) collapsed, some interesting news emerged from the embattled Silicon Valley bank.
Two of its top executives sold a significant amount of company stock.
Its CFO sold more than $575,000 in stock on February 27.
And there was about the $3.6 million sold by its CEO on February 27.
The chart above gives you a breakdown of sales by executives in the last 45 days. It looks quite shady, doesn’t it?
The story has attracted the attention of regulators and Congressmen. Some are calling for these executives to be jailed. Others suggest that they knew that the bank was failing.
Everyone slow down, please.
Today, I want to show you what really happened…
Ask a few questions…
And then show you the REAL CRIME in banking today.
Here Come the Talking Points
So, Rep. Ro Khanna (D-CA) is calling for SVB Financial’s CEO Gregory W. Becker to return the money and the gains he made from his stock sale on February 27.
Sounds like something no one should dispute, right?
“There should be a clawback of any of that money,” Khanna told the Washington Post. “It should be going to the depositors.”
I don’t disagree with clawbacks on ill-gotten gains. But that’s where the Congressman will need to do his job.
You see, the executive didn’t actually announce his intention to sell the stock on February 27. What most people don’t know is that there is a rule under the SEC called 10b-5-1.
It just sounds like a line of code somewhere. But it’s a law that was designed in 2000 to prevent insider trading.
The law effectively allows executives to defend themselves against these accusations by creating a pre-arranged schedule to sell stock.
So, Becker actually entered this plan on January 26.
Now, here’s where Khanna has to conduct an investigation.
The big question is whether Becker entered this schedule in good faith.
How far back was the company talking to regulators about the bank’s stability? How long back is there any material nonpublic information about this situation?
Did Becker know that the company would need to engage in a $2.25 billion capital raise just 45 days after his filing? That capital raise ultimately failed, and there was a massive run on the bank.
The SEC rule says: “The … plan to purchase or sell securities was given or entered into in good faith and not as part of a plan or scheme to evade the prohibitions and the person who entered into the … plan has acted in good faith.”
We’ll see once an investigation is complete.
Here’s the Real Story: Banking Insiders Are Buying
Rep. Khanna is certainly upset about the sales among executives.
But what about the recent wave of buying among banks?
Over the last week, executives have used this crisis’s significant weakness to load up on their company stocks.
As I mentioned yesterday, we’ve seen dramatic purchases at PacWest (PACW), SLR Investment (SLRC), Byline Bancorp (BY), Cullen Frost Bankers (CFR), and more.
Seriously… look at how much insider buying at financial institutions has occurred in the last 10 days. These are just the top 80 companies.
Do you think they know something?
These banks are likely aware that they will survive this crisis.
More importantly, we’ve seen the Fed provide roughly $300 billion in support through the lending window in the last week.
That number, according to JPMorgan, could total $2 trillion.
Should we not have some level of concern that people are getting rich from this crisis as well? Or do we just say – Hey, it’s a free market?
It’s not a free market. It’s not a crime, but it’s the consequence of centralized planning.
The government is backstopping all of these banks, and the people who can afford their stock in droves will only get richer. This is a serious issue of moral hazard that will likely go unaddressed.
Enjoy your weekend. Happy St. Patrick’s Day.
To your wealth,
Garrett Baldwin
Market Momentum is Red
Momentum is red today. I don’t anticipate the market to change until next week when the Fed meets. Be cautious. Maybe even go outside today. I’m taking my daughter to a baseball game. That should be a lot more peaceful than trying to navigate Friday’s trading day.
