Hush Money; Bank Runs; Plus Military Academies - Transcripts

March 17, 2023

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This week: Asha and Renato discuss the real possibility of Alvin Bragg indicting Trump; the collapse of Silicon Valley Bank; military academies. Youtube Subscribe to our podcast Follow Asha on Twitter: Asha's Substack: Follow Renato on Twitter: Follow Asha on Instagram: Follow Renato on Instagram: Learn more about your ad choices. Visit


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pain of the US education system. We'll see you there. So Renato, does the

Manhattan DA have a strong case against Trump? It's complicated. I'm Renata Mariotti. I'm a former federal prosecutor, a practicing lawyer, and a

legal analyst. And I'm Asha Ringappa. I teach national security law at Yale University. I'm a former FBI special agent, and I'm a legal and national

security analyst. And we're here to help you understand topics that can't be

boiled down to a soundbite or a tweet. So Renato, finally. I think the writers are looping back to season one or two, as the plot line now is back to the Stormy Daniels hush money payment, which we'll get into the details, but which looks like will be the basis of an indictment against Trump by the Manhattan DA's office. And this is just one of the many walls closing in on Trump. And we've talked about Fulton County in several episodes. But I don't know if we've ever delved very far into the Manhattan DA's office, mainly because

this case seemed to be more abandoned for a while. I have to say I did not have an office. Alvin Bragg and my bingo card is the first person to prosecute a former president. I mean, it really looked like for a period of time that he took himself out of the game, right? In other words, you know, he had he inherited a case that people within his office described as very strong. I mean, and that, by the way, is not unusual for prosecutors to think that their case is amazing and their supervisors to disagree. But, you know, he decided, I think rather, whether famously or infamously, depends on your perspective, not to proceed with that case. And so I think a lot of people thought that, you know, they were focused on Fulton County or the Justice Department. And then suddenly, it seems like out of nowhere, it looked like the such money case is about to be indicted. I have to say, I'm really surprised by this. And I think it raises a lot of questions. And I think there's a lot of challenges for the Manhattan DA in this case.

So it's a bit of a headscratcher, why they, in my mind, why they turned down that prior case, which seems

stronger to me and are instead bringing this one. Yeah, so I've heard this case referred to as the zombie case because it was dead and then brought back to life, I guess, is the idea. So the previous case you are referring to is about, is a kind of a state version of, or a state prosecution on the tax fraud and

insurance fraud issue. And that wasn't going anywhere. Well, it was about, I mean, there was a whole book published by one of the prosecutors who resigned. Right. And in fact, the case was taken up by Leticia James, who's the Attorney General of the state of New York, as a civil case. So we have a good sense of the evidence and what the case looks like. That's also a difficult case to make.

And just for our listeners, that case is about the misrepresentation, the overvaluing of assets for purposes of bank loans and, I think, insurance

liability, right? And then undervaluing it for tax liability purposes. Yeah, I mean, exactly. And one thing that, you know, and there was a little more to it than that, but, you know, the gist of the case, Asha, was he's a tax chief. And what I really like is a trial lawyer and somebody who's prosecuted cases and been on the defense side against the government and criminal trials. What I like about that case is it sort of, it goes with, confirms what the jury already thinks about Trump. In other words, whatever random group of people you're gonna find in New York, most of them are not gonna find it hard to believe that some billionaire is cheating on his taxes. Okay, that is gonna sort of be their, well, I'll call her prior coming in. They're gonna presume that that's true. But, you know, this whole hunch of money thing, like, I think it's gonna confuse a lot of jurors and be like, why is this even a crime? There's this whole argument that, like, it wasn't, because this has got to be a campaign contribution, which we'll get to. We can talk in more detail in a minute.

But it doesn't fit that as well in terms of, I think there's a lot of things where the average person in Manhattan who's on a jury is gonna be like, you know, what's up with this case? And I think, you know, that makes it a lot weaker. And I think it draws a lot of questions. I think there's a lot of questionable decisions that have been made by Bragg and this is the latest in the line.

Yeah, so this is about the payments that were made to Stormy Daniels, who claims that Trump had an affair with her before he ran for president. I mean, a long time ago, I think.

Hold on. Hold on. Affair is a fancy word. I mean, was it really an affair or was it like a series of hookups? I don't even know, right?

Okay. Is that really relevant?

I actually think, well, I'm going to say I'm making the point because Trump's lawyer keeps saying he didn't have an affair. And I actually wonder, Asha, if part of his argument is like,

well, they didn't have an affair. It's like, it depends on what the meeting is. Right. Yeah, yeah, yeah.

Like, we didn't have an affair. Right. Yeah, yeah, yeah. Like, we didn't have an affair. They just like slept together a couple times. Like, I don't know. Right.

Right. Okay. Right. Right. Okay. So, okay. So, he had liaisons with Stormy Daniels, sexual liaisons. And I'm not sure exactly what precipitated it, if she was going to talk before the election or sell her story or something. But essentially, Donald Trump, allegedly, via Michael Cohen, paid Stormy Daniels $130,000 for her to remain silent and had her sign an NDA. And this was formalized in a contract, which was signed by the two of them, signed by one, what was it? David Davidson?

Well, you have a good memory. She had a point of a questionable lawyer who wasn't necessarily

looking out for her interests, right? Yes. And well, I remember this because I was actually in the green room ready to talk about the Mueller investigation and the Booker, this is on Anderson Cooper, and the Booker's ran in with like this, you know, whatever 20 page contract. And, you know, there was this breaking news, it was like literally had just broken. Nobody knew about Stormy Daniels. And they're like, can you talk about this? So I just looked at it. And, you know, I was like, I guess I'm going back to first year contracts, you know, and meeting of the minds. And, you know, is this a valid contract, etc, etc. So I remember that very well, because I remember it being not signed by Donald Trump, and, you know, that potentially having issues and stuff. In any case, the issue here is that Michael Cohen paid, provided the payments to Stormy Daniels, and he was reimbursed by the Trump organization in a series of installments, which were categorized in their books as legal expenses. Even though these were not for actual legal services that Cohen had provided, it was clearly a reimbursement for these payments.

And the checks that were provided to Michael Cohen were signed by Donald Trump himself. I mean, this wasn't a case where, you know, Alan Weisselberg was, you know, taking care of this, it looks like these were signed directly by Trump. And there's also an audio tape that Michael Cohen has, which, you know, they discuss the Stormy Daniels payment. And all of this came to light because Michael Cohen was prosecuted as a part of this campaign finance violation by the Southern District when he was swept up in the Mueller investigation. And in that indictment, there's a reference to individual one. And that individual one is clearly Donald Trump. And Michael Cohen, in his plea to the court, said that he was directed to make these payments by Donald Trump. And so there was for a long time a question of whether would the Southern District move forward on also prosecuting individual one, aka Donald Trump. And that never went anywhere. And again, in this zombie case, this has now been

rebirthed as a state case. Yes, wow, this amazing background and amazing memory of all the detail, what I will say a couple things that I think are important to note there. So first of all, one thing that I'll note is that, you know, Cohen's sort of famous statement, infamous statement about Trump in court saying that he was direct, he did it at the direction. And, you know, Donald Trump, that was, I think, ad lib. It was not something that prosecutors had put on the script for him to say. So that's the first thing because it was certainly not listed in the in the plea agreement. You know, there have been a lot of revelations because Jeff Berman, who was US attorney during that time, wrote his own book. And, you know, even the term individual one was something that within the DOJ, there was a lot of discussion of how to label Trump at that point. And there was definitely a lot of pressure. And I mean, I do think my understanding is Senator Durbin and others in the Senate Judiciary Committee are conducting oversight of this. But there have been there was definitely pressure that was put on this other district not to indict Trump or not, you know, to close that investigation. And so, you know, I do think there's more to the story potentially of why Trump was charged.

But I will say this, you know, at the time, people were like, well, Cohen's charged, so definitely Trump will. And I even I said at the time that I thought, you know, charging Trump would be much harder because Cohen just so every so so are all everyone is listening understands, you know, if somebody, you know, they already had Cohen on other crimes. Cohen had this whole tax thing going in private tax problem with his modality, you know, taxi medallions. And he was essentially pleading guilty to this, really pleading guilty to everything to get a better deal and sentencing are better result at sentencing. It's it's very different when you're a prosecutor and the defendant is pleading guilty in rather, you know, versus a situation where the defendant has your lawyers and are going to fight this to the bitter end are going to go to trial. If you know the person's pleading guilty, the question is just, hey, do we are we confident that this guy actually did it? And do we have sufficient evidence to kind kind of meet what we need to meet at the sentencing, kind of satisfy the judge. But a trial, a contested trial, particularly in a case like Trump's is a very different story. And also, Trump wouldn't be unlike Cohen testifying about his state of mind. He would be contesting it. So always going to be a difficult case. Here, it's a little bit different, another kind of added complexity.

As you mentioned, Asha, it's a state crime. So it's a bit of a different crime and different things you have to prove and so on as well.

Very interesting. Yeah, and let's talk about the state crime because I think this is where it gets a little complicated. And I think it's worth kind of unpacking what is happening here. So, and you can correct me if I'm incorrect on any of these points. So right now, it appears that what the charge against Trump would be, would be a misdemeanor offense of falsifying a business record under New York state law. However, that misdemeanor can be bumped up to a felony if the falsification involves an underlying crime. And here, the idea is that the falsification of business records, basically the putting, the listing of these payments to Michael Cohen as payments for legal services rendered when they weren't and it was actually for reimbursement was in furtherance of a crime. I'm not really clear whether this is a state or federal crime, but the crime is a violation of campaign finance laws under either state or federal law. And because the payments involved that, that would then bump up this misdemeanor offense

to a felony. Yeah, that's essentially right. I mean, we don't know yet what the underlying second crime would be. I mean, we've gotten a lot of reporting in the falsification of business records, I think is a fairly obvious charge. But like you said, Ash, it's a misdemeanor. So the question is, what's the second crime? And at least the New York Times reporting was, it's an election law crime, which makes this like the Cohen case in the sense that essentially it's like this, I wouldn't say unprecedented because you have the John Edwards case, but this argument that this hush money payment, which was made in the final days of the 2016 election was in fact the campaign expenditure, an independent campaign contribution or unlawful campaign contribution to or unreported to the Trump campaign. And I think that adds a lot of complexity. I mentioned the John Edwards case, that's the only case that ever brought, that was ever brought based on that kind of theory. And John Edwards walked, he was found not guilty. And the reason why is the jury believed that, and I think there's a good argument here that there was a lot of reasons why he did not want the world to know about his affair with, I think it was Rael Hunter, I think her name, if I remember, my memory serves me correctly, real, something or another. But in any event, he didn't want to hurt his wife, had cancer, he did not want to hurt her, and he didn't want to embarrass himself, and so on and so forth.

And so I think that would be the strongest defense for Trump here. Of course, what we've seen as far from the Trump camp is not that defense, and there are reportings or rumors from the Trump camp that he's not willing to take the attack, but it definitely, I think, opens up

some very significant defenses to the Trump team. Yeah, and it's worth just noting why this is at least plausibly an illegal campaign finance contribution, which is an in-kind contribution. Well, I guess, yeah, right, because the in-kind part would be her silence, I guess, or something, or is it the money? I'm not really sure.

It's the money, because the money is being used

for campaign purpose, that's the idea, the 130K. Right, and the reason that we have campaign disclosure, campaign finance disclosure laws is to ensure that voters are aware of what kind of influences are coming in for the candidate, and then can take that into account in making their informed choice on who to vote for. So this is, the disclosure requirements are really about transparency, right, and giving voters as much information, and so the idea here is that Trump, by being able to conceal this from voters, but was benefited by it, because ostensibly, if people knew, if this had come out, like it could have, you know, I guess it would have potentially been to his detriment, so by concealing it, he gets a benefit from it, and that's sort of the theory of it being a campaign finance violation. I will say though, Renato, Michael Cohen was convicted this was as a campaign finance violation, right? And I understand what you're saying, that he was pleading to it, but I'm just saying like they did,

that was how this was characterized. Absolutely he was charged with that, and that was, but it was a slightly different, it was a different statute, obviously it's a federal statute, but the same theory, yes, absolutely. And at the time, it was aggressive, not the only time in history that the Southern District of New York has taken a very aggressive legal position. But like I said, it's a lot easier

to do when the other side is laying down. So here's my question about the Alvin Bragg approach. Does he need to, what does he need to prove? In other words, does he need to prove the underlying crime also beyond a reasonable doubt each element? Or does he need to demonstrate just that the elements were present of an underlying crime but only prove the falsification piece to a jury? Do you know what I'm saying? I'm confused on that.

He has to. If there's anything that enhances the sentence, he has to prove beyond a reasonable doubt.

So he has to prove the underlying crime, too.

So why not just charge the underlying crime? Yeah, he may. I mean, that's a good question. He may charge the underlying crime as well. That I'm not sure about. I will just say that all of this is, wouldn't say weak, but it's not the sort of case you would usually charge. It's complicated. We could say it that way, but it's a questionable case to charge, and I think he might be better off with the falsification of records because that's closer to Trump. In other words, if the crime is the campaign finance, maybe Trump knew something about that, maybe not. One of the biggest problems for Trump on the campaign finance side federally was going to be he didn't knowingly and willfully violate the campaign finance laws because he would have a good argument that he had no idea that this would be regarded as campaign finance violation. So would Cohen, by the way, but Trump's might have been better because he wasn't a lawyer. But here, that goes away if somebody else committed the crime.

If I were a prosecutor, I would say, well, in that case, why all the secrecy and attempts to conceal? If I really didn't believe that this was a campaign finance violation, I would have just written a check to Stormy Daniels and just given it to her. Why all the subterfuge and pretending these are legal services, there's an attempt to conceal the payments, which goes beyond like, Melania is not going to be looking at the business records. It's not like she's going to be like, what is this 130, she's off shopping. You know what I'm

saying? So I would say that the secrecy and concealment undercuts that defense. That is their best evidence, by the way, Ashia. You've come up with, off the cuff, you've come up with the best argument that the Manhattan DAs come up with, at least based on reporting, which is essentially Melania is not looking through the business records of Trump organization. I think it's a good argument. The counter argument would be that it's embarrassing to hook up with some Playboy model, I think she was, when you're married and to have this come out and to have to pay her $130,000 to keep it silent. It is something that most people wouldn't want the world to know. And so you want to do everything possible to hide that fact, would be what his lawyers are going to say. I think what focusing on the books and records, the falsification of business records does, it makes it easier for the Manhattan DA, because they can have Michael Cohen come in and he can say he was violating campaign finance laws. And he pled guilty to that. And that's what he was doing. And Trump, by falsifying the business records, was just essentially aiding the Cohen crime.

And they don't have to, the jury, it's less of a, it's less of a heavy lift regarding trying to prove up that Trump committed the underlying crime.


That's a good point. I'll just say, I think, because we talk about this sometimes in terms of what's the easiest case for a prosecutor to prove? And then that's a legal question. And that's sort of the policy or moral question, which is, what is the harm that's being vindicated? Right? We've talked about this, you and I think personally, I'm not sure if we've talked about it on this podcast with regards to January 6th crimes, that there are certain crimes like obstructing an official proceeding, whereas I'm very pro prosecuting for incitement to insurrection because that's like what we saw happen. And that was really the crime that we want vindicated. I mean, not that the other ones aren't, but it's like, there's something so reprehensible about that particular thing. And I think that the legal case notwithstanding, it does make sense to me to create a theory that addresses the campaign finance aspect of this, because that's really the harm, right? It was an attempt to dupe the public or to prevent them from knowing a material fact that could have impacted their vote. We don't know if it would have or not, but also because it fits into a broader pattern of him cheating in elections, right? Going back to, you know, Russia, are you listening to the Ukraine quid pro quo to obstructing an official proceeding and trying to prevent the certification on January 6th?

I think that in many ways, it's appropriate for the conduct that you are trying

to punish as a moral and kind of policy matter. Yeah, I think that that consideration is also something that prosecutors think about the way that we would think about as prosecutors usually is does this charge fit the conduct? In other words, there's often six different ways you could charge something. And one of the questions, there's a number of questions that are asked, you know, regarding, you know, largely regarding, you know, proof and how it's going to play out at trial and so on. But one of those questions is, does this capture the conduct well? And I think that's really what part of what you're getting at there. I will say that prosecutors just give some context to everybody listening, prosecutors are often a little bit less concerned about that than the rest of us are, because they know it's sentencing, they can present all sorts of other facts to the judge, and the judge can take that into account. That's particularly the case in federal, I don't know, I'm not because I don't practice in state court in New York myself. I don't know whether that's different in New York, but generally federal, in the federal system, you can the judge can actually sentence even based on things the person was acquitted on. So you're the jury could find, I've been not guilty on a couple counts and the judge could consider it anyway. And so really just getting to the sentencing is what is the important thing for a lot of prosecutors. I will say, Asha, before we wrap this up, one thing I will say is, you know, one thing I've heard from people is, you know, this isn't the ideal first case.

This isn't the ideal first prosecutor. If you're going to bring charges against Trump, Trump might face multiple indictments, why would you want this one to be first? And I'll just say to everyone that like, our way our system works, prosecutors don't get to choose who goes first. There's all these different sovereigns out there and different units of government and they make their own decisions. And you know, in the R Kelly case, I thought one of the weaker cases went first in the Eastern District of New York, he got convicted anyway, but a lot of people behind the scenes, a lot of prosecutors were like, and defense attorneys were raising their eyebrows like, why are the Eastern District of New York rushed to bring a weak case ahead of these other units of government? And I think, you know, I think the same could be levied here. But ultimately, you know, another thing I hear from listeners sometimes is like, people, prosecutors need to be quote, brave, unquote, and aggressive, you know, this is not, this is not like, a Lion King, or something like that. It's not about like, courage in in battle against other animals or something. This is actually like bringing charges against somebody who has constitutional rights. And so it'll be interesting to see how this plays out. I will say, if Bragg ultimately brings a case that doesn't

prove out, you know, there'll be a lot of questions about it after. And one more thing before we wrap up. I had a question. Trump's latest lawyer, someone I've literally never seen before in my life, was on Fox and claiming that this that really the real victim here is Trump, and that he was that he was being extorted. So I'm just curious your your take on that as a potential defense. By the way, it does seem like if he's claiming extortion, he's admitting to sleeping with her.

Well, according to the lawyer, he did it. I mean, that's why the whole thing I think I said on Twitter, like it's a bold move gotten. See how it works out for him. Yeah, it was sort of like the whole thing was absurd because I don't really think there's a huge question of people's mind that Trump slept with Stormy Daniels. I mean, maybe amongst his followers or something. I don't know. But that that doesn't seem like the strong point. In fact, if I was representing Trump, which I'm not, you know, but if I was or I was a defense team, that would be part of the thing. You just admit up front like, sure, you know, so he slept with Stormy Daniels. Well, let's get to all the legal part, right. And so that was bizarre, but no, it's not going to help him at all because it's factually untrue, right? In other words, certainly Daniels did not come to Trump and say, look, unless you pay me X amount of dollars, I'm going to do this.

That very well could be extortion. But what happened was actually she went to the National Enquirer, had nothing to do, they had never approached Trump or his team at all. The Enquirer brought in Trump and they're like, oh my goodness, let's, we are so close to you and are so favorable to you, we want to save you from this, so we will get you inserted into this and intervene to help you and give you aid that frankly, we should not have done. And if people may recall, the National Enquirer itself, the company that owns them had its own non-prosecution agreement with the Southern District of New York in which they admitted to campaign finance violations as well. By the way, that's another like easy one, you know, prosecutor scheme, it's easy to get anyone to agree to a non-prosecution agreement if you're a prosecutor because that's what you want, right?

So we'll agree to whatever. And they had, because they had also done a catch and kill on another person that Trump had slept with MacDougall.

Yeah. Or was that somebody else? Or was that like some RNC guy who slept with him or with her? I don't recall, but there was definitely another case. No, it was him. Okay. I don't even know. I remember, because didn't she have a lawsuit against some other guy? It was like an RNC chair or big time?

She may have, but no, it was him, she may have, but it was another person, I forget her first name, a Playboy model and he, and she, I think that when National Enquirer directly bought her story and killed it after promising her, you know, they were going to like make her

a star or whatever and then killed it. Wow. Okay.

I remember this stuff better than I do, Ashley, you know, what can I say? Yeah. Yeah. Well, we'll see what happens. Yeah. You have to go back and watch season one to really catch up on, you know, all the details.

Indeed. Yeah. You voted. I did. You protested. Again.

You postcarded.

So many Sundays.

You posted on social media. Got some likes. And you're still reeling from all the terrible news.

Yeah, but what else can I do? I'm Kelly.

I'm Lila. And we're going to help you figure that out. Each week, we'll interview people on the front lines of political action about the things

they actually did to take action. What got them started, who helped them along the way and what they do differently if they

had it to do all over again. And in the process, we'll give you concrete advice about how to take the leap from freaking

out on Twitter to making a difference.

So what can I do wherever you listen to podcasts or tune in on So Renato, we've seen this collapse of Silicon Valley Bank. And I know that you are in the weeds of these types of regulations and kind of what would have precipitated this.

I'm wondering if you can break it down. Yeah, I mean, it's definitely a big deal. A lot of folks hadn't heard about Silicon Valley Bank. But it was actually one of the larger banks in the United States. It's about the size of American Express, which you have heard about. Very significant.

I mean, I think in the top 15 or 20 banks, largest banks in the United States.

Yeah, it was in the top 20. Yeah, very significant in terms of size. And the reason you haven't heard of it is because it mostly lent to other businesses. It was lending to startups in Silicon Valley. So it was an important part of that ecosystem, that culture. After the apparent collapse of Silicon Valley Bank, there was actually like a whole slew of significant Silicon Valley companies that published a statement saying like, if it could be saved, we'll keep doing business with them and stuff. It definitely was a big part of that community, which is a significant financial center in the United States. So that's why you maybe haven't heard of it before, but it was significant. So what happened? Here's an interesting one. A lot of times, there was a bank earlier this year that failed because of a bet on crypto, which like everyone listening back, well, of course, betting the bank's assets on crypto. But actually, what Silicon Valley Bank did was exactly kind of the opposite.

When there are deposits that you put in the bank, the bank is holding this money for you. And in order to give you interest on that and to be able to continue- They landed out. They not only landed out, but they do other things with your money. They invest your money to get a better return. Well, sometimes banks get into trouble when they lend too much or they take too much risks. Here what they did is something that a lot of you listening would think is like super prudent, which is to buy lots of long-term treasuries. Yeah. And so exactly, so that's the safest investment possible are like treasury bonds and so forth where you are going to get a guaranteed return back by the full faith and credit of the United States government. So unless the US government collapses, you're good. And so what's the problem? Well, they locked in very, very low interest rates over a long period of time and interest rates have gone up and up and up. So all their competitors were making, let's say, 8% and they were making one point something percent.

And so they were having trouble and they weren't performing well. Now you might say, well, so what? They've still got their money. So for most of us, right, we put our money into a bank account. If we make a percent or two, that's okay. Like at least you didn't lose your money. You didn't bet at all and lose. But what happened there was Silicon Valley Bank, and this is something that I think Hook said the things we've talked about in the past, Asha. Silicon Valley Bank put out a statement. So if you have to, what happened was they had all this money tied up in bonds.

They decided to have a stock sale to raise money. They landed out to help their accounts. I remember this, and this is where basically all of the people who had deposits there were like, all right, we're going to get our money out now. They're not in good shape. And there was a run on the bank.

There you go. You're rooting my punchline, but yes, you're already skipping ahead, but yes. So what happened was, so everyone understands why you raise money by selling stock. When you sell stock, you're selling a piece of the company. And so if me and you have a company, we own 50-50, and we can issue shares and dilute ourselves down to 40% each, and 20% can be owned by the people who own the shares. And we're selling them for something, for money, and that we can take that money and put it into the business, and that is a way of raising money. That's what Silicon Valley Bank was doing. So before you sell stock, you have to put out an announcement. Now a couple things about that. How much time you have to give before the sale in terms of your announcement depends on the type of stock. They could have sold preferred stock and given very little notice. They didn't.

They sold stock that would require a few days' notice. And the announcement they put out was super technical and very hard to understand. It was lots and lots of technical jargon without, at the very top, a very simple, to-the-point, common sense explanation of what was going on. Like, hey, we still got lots of money, but it's time to get treasured. We're doing okay. Yes. And so what happened was these gobbledygook numbers that made it seem like there was distress for getting circulated, and their clientele are all sophisticated business types in Silicon Valley who think that they know numbers just by looking at an announcement. And they're all online. And there is a very quick cascade effect through social media and so on. And so what was happening was suddenly there was a run, Peter Thiel, who actually I think he was a Trump supporter, a big Silicon Valley figure, one of the founders, I believe, of PayPal, if I recall correctly, or PayPal or eBay or something like that, but very significant founder of a Silicon Valley startup, was encouraging everyone involved in his VC firm to get their money out. Other VCs started following suit and encouraging their clients to do the same. And it just started, like you said, Ash, a run in the bank, which is super unfortunate

because usually runs on the bank, so to speak, are very, yes, exactly, try to be treasured.

We're doing okay. Yeah. Irrational. It's like people being afraid that their money isn't going to get out. So ultimately, that led to, I think, an otherwise avoidable problem for Silicon Valley Bank. This wasn't the sort of crazy case where they were betting on complex mortgage instruments or something.

It was actually a fairly straightforward problem that led to a very unfortunate end. So then why? I'm watching the news coverage and they're talking about rollbacks of regulations and the fact that there wasn't a person on the board overseeing risk. Why is there blame being placed on... Because what you're saying is this was a poorly handled situation, not a lack of regulation and oversight, or is it both?

Well, it's both. I mean, look, deciding to tie up a massive amount of bank's assets in long-term treasuries, not necessarily the best way of managing a lot of money. I think the result speaks for themselves. Other banks were making more money, it was a concern. I use the example, I was drawing the analogy to our own retirement. Most people who are getting close to retirement are happy to not lose their money, but that's not how large banks are supposed to operate. They're in a very competitive atmosphere and they're supposed to be making money, and they have options that we don't have to make lots of money, so not the best use of money. They didn't manage risk well, and they did have people who were doing that, despite Fox News trying to make this all about, you know, their take on it as a diversity and inclusion brought down the Silicon Valley Bank, right? But I think there was, you know, there was some, you know, Trump, there was a Trump era rollback of reporting requirements, which was, I think, kind of a different part of the story of why this may have occurred. I'm not really sure whether that is, in fact, why this happened either. But I think it's fair to say that banks want less regulation of themselves, and that ultimately, one thing that comes into play is that there's, I would say, an understanding that over time that a lot of these banks get bailed out. Now, I will note, you know, the deposit, so the depositors in this bank are getting made whole, however, and the Signature Bank, which is another bank that collapsed, are being made whole.

However, the shareholders and directors and all of them are not, so the shareholders are losing all of their money, which is the way it should be in a circumstance where you have a mismanaged company. But second of all, the money is getting paid not by taxpayers directly, but by this fund that banks, since the 2008 class, banks are required to pay into for situations like this. Now, obviously, what happens is banks obviously make that money back and feast all of us. You don't have free checking, or whatever it might be, because you're paying some fee to your bank. But nonetheless, that was part of the system.

And then they're selling, and they're trying to sell the assets of the bank to a buyer. I don't know who buys the stuff, but like a buyer, and then those proceeds would also make depositors who are not insured, because people are insured by the FDIC up to $250,000, but presumably there's a lot of people who had deposits greater than that.

And so those are the people who need to be made whole. Yeah, I will say that's one thing that people could look at. So the FDIC insurance was created in response to the bank runs of the 1930s, where people were going to the bank, lining up outside the bank, because your deposits weren't insured at all. But that limit has not gone up in quite some time, and $200,000 isn't what it used to be. So a lot of companies, actually, Asha, they have accounts at another bank, just with X multiplier of payroll at a second bank. So that this way, if their first bank, if their main bank collapses, they have another bank that they can use to withdraw money and keep the company running. A lot of companies do that. But that's sort of inefficient. And every time you're doing business with more banks, it just creates a lot of administrative complications. Yeah. So it's something that I do think we should look at. But I do think it's also fair to say that while I don't think anyone, well, I should say, and I'm sure there are people against it, but I do think that most people would before ensuring that the positives get their money back, I do think that there's an argument that there are other disasters and other groups of people out there that also deserve attention and maybe aren't getting a swift of action as the SVP folks are getting.

So Asha, you got a Navy sweatshirt on. I do not picture it to you as a sailor. So what's up with that?

Well, I got this in Annapolis last fall when I went back, when I went there to the Naval Academy for my boyfriend's 30th reunion. So he's a grad. He's a Marine. I can't say former Marine because apparently there's no such thing as a former Marine. So that's when I got this. And actually, my son just got into a summer program at the Naval Academy, so I pulled this out this morning. So he's interested in the service academies. And I encouraged him to go and they offer these summer programs before your senior year

so you can get an idea of what life is like.


Do you think that's going to happen?

I mean, do you think he's going to go and go to a service academy? I don't know. I mean, I think, you know, he seems very interested. So he got interested initially in West Point because he's in the Boy Scouts and they do a camp out once a year at West Point. And I think, you know, at the time he was like 13. I think it was like the first college campus that he had really like seen and they took a tour of it and he was like, this is so cool. And his dad went to the Air Force Academy. My boyfriend went to the Naval Academy. So he's kind of surrounded, you know, he's had these in his life. And I think what I've encouraged him to do is to really get a sense of, I mean, when I look at his room, I'm like, I don't know if you're going to make it through a service academy because, you know, you can't keep your room like this.

But on the other hand, you know, he does he listen to this podcast, it's not like a message to him.

Are you like telling this is this what you're trying to get a message across to yourself?

Are you like, maybe, maybe. But on the other hand, I think I do think that there are elements of it in which he would thrive. And, you know, as someone who did law school admissions for 12 years, you know, I was the Dean of Admissions at Yale Law School. So I got to see transcripts from basically all colleges and universities and across the United States. And I have a sense of the kinds of students that come from them. You know, the academies just they produce very, very solid people. You know, it's a solid education. It's very heavy on, you know, science and math, not surprisingly. And I think they build a lot of character and resilience. So and, you know, he's been in the scouts and he he likes he seems to really thrive in that environment. So, yeah, if he can if he can learn to, you know, do make his corners on his bed and keep his room tidy, I think I think he can.

It might be a great place for him. Not another not so subtle hit. So OK, I got to ask before we go, do you have a type of is this like a thing where you because your son's dad is an Air Force guy, you're with a naval ground up in a marine.

Is that like a thing that's for you, military guys? I don't think so. I think actually, like they might be the only two military people, though they've been the longest lasting. So maybe that that tells you something.

But, you know, I don't know. Juries out.

We're going to have to delve into your psychology more in future episodes. M. S. W. Media.

Hi, I'm Harry Lichtman, host of Talking Feds, a roundtable that brings together prominent figures from government law and journalism for a dynamic discussion of the most important topics of the day. Each Monday, I'm joined by a slate of Feds favorites and new voices to break down the headlines and give the insiders view of what's going on in Washington and beyond. Plus sidebars explaining important legal concepts read by your favorite celebrities. And Talking Feds wherever you get your podcasts.