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If Donald Trump is indicted in Manhattan and refuses to show up, he'll be extradited.
Ron DeSantis can't stop extradition from Trump's home in Florida, but he could slow the process.
Florida also has an extradition method that may allow New York prosecutors to sidestep the governor.
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The day may finally come.
The Manhattan district attorney's office offered former President Donald Trump the chance to testify before a grand jury, signaling it may soon bring a criminal indictment against him.
The district attorney's office spent years investigating Trump's finances and is now poised to bring charges over falsified records related to his payments to Stormy Daniels to keep her quiet ahead of the 2016 election about an affair she claims she had with him.
Trump, for his part, does not seem happy about the whole situation. On Truth Social and in public statements, Trump has said the investigation is illegitimate and disparaged Manhattan District Attorney Alvin Bragg, who is Black, as a racist. Trump has denied that there was ever an affair with Daniels, and said this week he has done "absolutely nothing wrong."
If an indictment is filed against Trump, the most likely scenario is that he would show up voluntarily for booking, legal experts told Insider.
Lawyers for the Bragg's office would tell Trump's lawyers, and they'd mutually agree on a time and place -- probably the district attorney's office at One Hogan Place in downtown Manhattan -- to book him, take his fingerprints, and shoot his mugshot.
"They'll take him upstairs, they'll put him in a holding area, they'll process him internally, and then he'll be brought in front of the judge several hours later and he'll be released on his own recognizance," Michael Bachner, a New York-based lawyer and former assistant district attorney in Manhattan, told Insider. "And that'll be that."
But there is always the chance Trump won't comply.
He's repeatedly attacked the Manhattan investigation over the years and was found in contempt of court for refusing to comply with subpoenas in a different case brought by the New York State Attorney General's office. It's easy to imagine him defying the legal process and remaining home at Mar-a-Lago in Florida.
"It would just be, in my opinion, like the epitome of stupid," Bachner said. "But I do agree that Trump has at times certainly exhibited conduct that many of us would characterize as stupid."
If Trump doesn't show up voluntarily, he'll be extradited. While the nuances of extradition may slightly differ between states, there's no legal way to defy it entirely. Interstate extradition is required by Article 4, Section 2 of the US Constitution. Forcing an extradition process also means Trump could spend hours or days in jail as the process plays out.
"The indictment and the charges are not going to go away," Tamara Holder, a Florida-based attorney and legal commentator, told Insider. "This is an early stage of a criminal proceeding, and it's very important that you present yourself to the court early on as somebody who's going to fight the case and not fight the extradition."
Florida law allows for two different forms of extradition. One path runs through Florida Gov. Ron DeSantis, who is widely considered to be Trump's archrival for the Republican nomination in the 2024 presidential election.
DeSantis can't stop Trump's extradition, but he could slow it down
The standard method of interstate extradition in Florida, according to Holder and Bachner, involves the governors of each state.
In that scenario, the Manhattan DA's office would present the indictment to the legal affairs office of New York Gov. Kathy Hochul. Hochul, in turn, would send a written extradition demand to DeSantis. Her letter would attach a copy of the indictment, proving that there's a warrant out for Trump's arrest in New York. DeSantis is then required to make sure the indictment is valid before ordering Trump's extradition from Florida.
DeSantis's role has given rise to the theory, first floated by Politico in 2021, that the governor could refuse to sign off on the extradition and give Trump harbor in Florida.
That simply isn't how it works, Holder and Bachner told Insider. The Florida extradition statute describes the governor's role as simply making sure the extradition demand meets all the legal requirements. That means all DeSantis has to do is make sure Hochul sends her a copy of the indictment and sufficient evidence that Trump's alleged crime took place in New York.
"The governor doesn't have the power to stop an extradition," Holder told Insider, adding: "The governor's only involvement is to look at the papers and make sure that the papers are proper to issue the warrant."
Florida's Governor Ron DeSantis. REUTERS/Octavio Jones
Dave Aronberg, the top prosecutor in Palm Beach County, which includes Trump's home in Mar-a-Lago, said as much in an interview with CNN in 2021.
He pointed out that the governor's power in extraditions is merely administrative.
"The governor's power to stop an extradition is really nonexistent," Aronberg said. "He can try to delay it, he can send it to a committee and do research about it, but his role is really ministerial, and ultimately the state of New York can go to court and get an order to extradite the former president."
DeSantis could, however, slow down the process. According to Bachner, he could ask his legal affairs office or a prosecutor to review Hochul's extradition demand and write a report on it before signing off on it. But if the extradition demand is legitimate, he'll have to sign it within 60 days, Bachner said. He could also delegate and let another member of the Florida executive branch sign off on Hochul's extradition demand, according to Bachner.
It's unlikely that DeSantis will look too closely under the hood of the indictment if it's issued, Bachner told Insider.
"If there's a fully voted indictment, they're not gonna start investigating the underlying facts of the indictment to determine whether it was sufficient or not," Bachner said. "Once there's an indictment voted, it would be shocking that a judge would not order extradition. Trump knows that."
That said, DeSantis may feel pressure from fellow Republicans in the state to protect Trump, according to Holder.
"This is a state where the Republicans really protect each other from these Democratic states like New York," she said. "And so I think it'll be really interesting legally to see what steps they're gonna take here in Florida to protect him outside of this statute if they can."
Donald Trump and Melania Trump attend a dinner with his family at Mar-A-Lago in Palm Beach, Florida. Nicholas Kamm/AFP via Getty Images
DeSantis's sign-off, however, could give a bipartisan valence to any indictment, undercutting Trump's argument that Bragg's investigation is politically motivated.
"If you have the governor in Florida sending him over, it's kind of just another reinforcement of the propriety of the indictment," Bachner said.
Even if DeSantis approves Hochul's extradition demand and issues a warrant for Trump's arrest, the ex-president still has a chance to stay out of cuffs, according to Bachner. At that point, he has the option of hopping on a plane to New York to turn himself in, Bachner said.
Trump could also contest the warrant in court, but would almost certainly fail to convince a judge the underlying grand jury indictment is invalid, Bachner said. Losing that battle also gives prosecutors the chance to request that Trump be held on bail before he goes to New York, according to Bachner, which would defeat Trump's goal of avoiding jail time.
Florida also has an obscure process that could allow the Manhattan DA to bypass DeSantis
The second form of extradition in Florida is called warrantless pre-requisition arrest. It's more vaguely defined and is traditionally thought to be used for a citizen's arrest of fugitives, but New York prosecutors could likely use it to arrest Trump in Florida, according to Bachner and Holder.
That extradition method only works for felony charges, according to Holder, which means it could apply to the charges Bragg is reportedly seeking.
In that scenario, authorities would arrest Trump in Florida and take him in front of a judge for a probable cause hearing to prove he was criminally charged in New York with a felony. A judge would then order Trump's extradition. Trump's Secret Service detail would likely travel with him, as Insider previously reported, but are unlikely to be involved in any arrest process.
Former U.S. President Donald Trump, who announced a third run for the presidency in 2024, hosts a New Year's Eve party at his Mar-a-Lago resort in Palm Beach, Florida. REUTERS/Marco Bello
It's unclear, however, who does the arresting. The New York Police Department, which normally conducts arrests for charges brought by the Manhattan DA, does not have jurisdiction in Florida.
"We're not really sure who goes and makes the arrest," Holder said.
The most likely scenario in this case, according to Holder, is that the Manhattan DA's office would ask the Palm Beach sheriff's office to make the arrest since they have jurisdiction in the area. It would likely be up to Manhattan prosecutors, though, to make an argument for extradition in front of the Florida judge.
Trump likely won't have to spend time in jail
After Trump makes an initial appearance in New York court, he'll have a bail hearing, where the judge sets the conditions of his release ahead of trial.
At that hearing, Manhattan prosecutors may ask to keep him in custody or set a high bail amount to ensure he comes back to New York for future court proceedings.
Donald Trump leaving Trump Tower in Manhattan. James Devaney/GC Images
Fighting extradition might increase the chances that New York authorities would see him as a flight risk. But in all probability, there's a low risk he would flee, Holder pointed out. Trump is arguably the most famous person in the world and is running to be reelected as president of the United States. He would have a tough time as a fugitive from US law enforcement.
"He's not being charged with violent crime and he's not a flight risk," Holder said. "He's the former president. The bond would be something low because they can guarantee his return to court."
The judge might also take away Trump's passport, which wouldn't mean much either, since Trump could just ask the judge for permission to fly overseas if he wanted to.
In addition to potential charges from the Manhattan DA's office, Trump faces a litany of other legal risks ahead of the 2024 election, including criminal investigations in Georgia and from Justice Department Special Counsel Jack Smith, not to mention a smattering of civil lawsuits.
Fulton County District Attorney Fani Willis, in Atlanta, may also be close to making a charging decision against Trump. She's weighing whether to refer the findings of a special grand jury, which investigated Trump's interference in Georgia's 2020 elections, to an ordinary grand jury, which can bring criminal charges. | DeSantis can't stop Trump extradition from FL to NY if indicted |
A political committee aligned with former President Trump was planning to file an ethics complaint against Gov. Ron DeSantis on Wednesday, accusing him of violating state laws and demanding that he be removed from office, fined, or censured, according to NBC News.
In the 15-page complaint to the Florida Commission on Ethics acquired in draft form by NBC News, the Make America Great Again PAC claims DeSantis is "already a de facto candidate for President of the United States under federal election laws" due to his book tour, reports of his putting together a campaign staff, and his affiliated committee taking in millions of dollars this year.
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The Commission of Ethics would not confirm or deny that the complaint was received, citing confidentiality laws.
"Adding this to the list of frivolous and politically motivated attacks," governor's office spokesman Bryan Griffin said in response. "It's inappropriate to use state ethics complaints for partisan purposes."
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The complaint cited the state's resign to run law, which legislators are considering amending during this session to make it clear that DeSantis would not have to quit as governor to run in the presidential primaries in 2024.
"Governor DeSantis's failure to declare his candidacy is no mere oversight; it is a coordinated effort specifically designed for him to accept, as unethical gifts, illegal campaign contributions and certain personal benefits," the filing states.
The filing also pointed to the national publicity DeSantis is receiving for his book, "The Courage to Be Free: Florida's Blueprint for America's Revival," which brought him to early GOP primary and caucus states Nevada and Iowa last week.
The complaint cites DeSantis meeting with "influential figures" and his team "vetting operatives" in key primary states; the creation last month of a new committee, Never Back Down, designed to urge DeSantis to run for president; and DeSantis' associated political committee, Friends of Ron DeSantis, taking in nearly $12 million in contributions this year alone.
The complaint argues that DeSantis violated four state statutes, including bans on solicitation and acceptance of gifts, gifts from political committees, and illegal lobbying payments, as well as the misuse of his public position and a ban on conflicting employment or contractual relationships.
Ron Filipkowski, an attorney and GOP operative, said that some in the DeSantis camp have interpreted that the resign-to-run law "doesn't apply until you secure the nomination. 'Qualify' is the word in the statute. However, the legislative history is clear that they mean when you file to run."
Any proposed amendment in the Legislature would clarify that DeSantis would not have to resign if he files to run in the primaries, he said.
"Now their plan is not to repeal the statute, but to amend it by adding a definition of 'qualify' to mean securing the party's nomination," Filipkowski said.
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Trump has been repeatedly attacking DeSantis since entering the presidential race in November, despite DeSantis not officially announcing a run yet.
Trump has blasted "Ron DeSanctimonious" for everything from his loyalty to his COVID shutdown in 2020, and his latest attacks have been on DeSantis' votes on Social Security as a congressman.
"He also fought against Social Security," Trump said at an event in Iowa. "... That's a bad one. A lot of people don't know that. But I think they'd been finding out over the last four weeks, one of the reasons that we're zooming in the polls, perhaps. ... Maybe it's other things, too."
DeSantis has not fired back at the same level of vitriol as Trump.
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"He used to say how great of a governor I was," he told Fox News last month. "Then I win a big victory and all of a sudden, you know, he had different opinions. So you can take that for what it's worth."
DeSantis also was criticized by Republicans, including U.S. Sen. Marco Rubio, for his written comments to Fox News host Tucker Carlson that the Russian-Ukrainian War was "a territorial dispute" and that protecting Ukraine was not in the U.S. national interest.
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"It's not a territorial dispute in the sense that any more than it would be a territorial dispute if the United States decided that it wanted to invade Canada or take over the Bahamas," Rubio told the conservative radio host Hugh Hewitt.
Trump, who told Fox News "both sides are weary and ready to make a deal" which would allow Russia to "take over" parts of Ukraine, gloated to reporters on Monday that DeSantis was copying him.
"[He's] following what I am saying," Trump said, according to CNN. "It is a flip-flop. ... Whatever I want, he wants."
As a member of Congress in 2014 and 2015, DeSantis pushed for military aid to Ukraine.
Orlando Sentinel staff writer Jeff Schweers contributed to this story. | Trump allies to file ethics complaint against DeSantis for 'shadow presidential campaign' |
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Florida Governor Ron DeSantis made a quiet dig at former president Donald Trump when answering a question about Mr Trump potentially being indicted and extradited from their mutual home state.
Mr DeSantis responded to a question about Mr Trump's claim that he will likely be indicted on Tuesday. He is largely expected to announce his candidacy for the Republican nomination for president some time during the summer, which makes him Mr Trump's most formidable challenger.
The governor responded by first by saying he had not seen any facts but noted that liberal billionaire financier George Soros bankrolled Manhattan District Attorney Alvin Bragg, who is currently probing Mr Trump's alleged payment to adult film actress Stormy Daniels to keep her quiet about an alleged affair.
"And so he, like other Soros-funded prosecutors, they weaponize their office to impose a political agenda on society at the expense of the rule of law and public safety," he said. Mr DeSantis also criticised Mr Bragg for being too lenient on crime.
In addition, the governor took a swipe at Mr Trump's supposed infidelity.
"Look, I don't know what goes into paying hush money to a porn star to secure silence over some type of alleged affair. I can't speak to that," he said. "But what I can speak to is that if you have a prosecutor who is ignoring crimes happening every single day in his jurisdiction and he chooses to go back many, many years ago to try and do something about porn star hush money payments, that's an example of pursing a political agenda."
Mr DeSantis has been seen as the most credible challenger to Mr Trump and often is the candidate closest to the former president in polling. He earned plaudits from conservatives for largely keeping the state open during the Covid-19 pandemic and his for aggressively opposing LGBTQ+ rights and education about sexuality and gender identity in schools.
Many Trump supporters criticised Mr DeSantis throughout the weekend for not making any comments about what action he would take to ensure Mr Trump, who lives in Palm Beach, would not be extradited to New York were he to be indicted.
"Radio silence from Gov. @RonDeSantisFL and Amb. @NikkiHaley," Trump adviser Jason Miller tweeted.
"Pay attention to which Republicans spoke out against this corrupt BS immediately and who sat on their hands and waited to see which way the wind was blowing," the former president's son Donald Trump Jr tweeted.
-Shweta Sharma contributed to this report. | Ron DeSantis breaks silence on Trump indictment with quiet dig at 'alleged affair' with Stormy Daniels |
Ron DeSantis sought to have it all sorts of ways Monday on Donald Trump's possible indictment, criticizing the prosecutor in charge of the case but also pointing out that it involves "porn star hush money payments."
The comments drew political attacks from Trump and his allies, who are trying to pressure Republicans for support at a time when he faces the prospect of being the first former president in history to be indicted.
At a news conference in Florida, DeSantis said he would not get involved in the case but did criticize Manhattan District Attorney Alvin Bragg for considering prosecution of a former president.
Bragg "chooses to go back many, many years ago, to try to use something about porn star hush money payments," DeSantis said. "You know, that's an example of pursuing a political agenda and weaponizing the office."
Trump aides interpreted the "porn star" reference as an attack and described his defense as less than enthusiastic.
"Are you kidding me? SAY HIS NAME!" tweeted Trump spokeswoman Liz Harrington. "What a total fraud he is. He takes a dig at President Trump who is being falsely accused and can't even say his name."
Trump himself weighed in by citing unverified accusations about DeSantis during his high school teaching days - and issuing a threat to the Florida governor. "Ron DeSanctimonious will probably find out about FALSE ACCUSATIONS & FAKE STORIES sometime in the future," Trump said on the Truth Social website. "I'm sure he will want to fight these misfits just like I do!"
Over the weekend, Trump said on his Truth Social platform that he expected to be arrested Tuesday in the case that revolves around payments to Stormy Daniels.
The Trump case:Is Donald Trump likely to be arrested soon? Will he be indicted?
What might happen:Is Donald Trump being arrested? Here are the possible charges in the New York investigation
There's no indication anything will happen Tuesday. The grand jury in New York heard Monday from Robert Costello, a Republican lawyer with ties to Trump's legal team.
While Trump ratcheted up political tensions over the case, he and supporters also demanded statements of solidarity from other Republicans, particularly those who are considering running against him for the 2024 presidential nomination. DeSantis was a prominent target of these demands.
On Monday, the Florida governor responded to a reporter's question about whether he would get involved in the potential extradition of Trump - a Palm Beach resident - to New York City.
"We are not involved in this, won't be involved in this," DeSantis replied. "I have no interest in getting involved in some type of manufactured circus."
The Trump reaction quickly followed.
"So DeSantis thinks that Dems weaponizing the law to indict President Trump is a 'manufactured circus' & isn't a 'real issue.'" tweeted Donald Trump Jr. "Pure weakness."
The former president himself did not respond.
Former Vice President Mike Pence, who also is considering a 2024 run, criticized Bragg's prosecution. Former South Carolina Gov. Nikki Haley, an announced candidate, has not commented on Trump's possible indictment in the New York case.
The Atlanta case:Trump lawyers seek to quash Atlanta grand jury report, recuse DA's office from inquiry
The Jan. 6 probe:Jan. 6 Capitol attack 2 years later: Trump still plagued by multiple investigations
Trump also faces possible legal charges in Atlanta and Washington, D.C., over efforts to overturn his loss in the 2020 election and the insurrection of Jan. 6, 2021. A Justice Department special counsel is also investigating Trump over the handling of classified material.
All the candidates also noted that the prospect of criminal charges remains, at this point, speculative.
"So I've seen rumors swirl," DeSantis said. "I have not seen any facts yet." | Trump's team hits DeSantis over comments on Stormy Daniels case |
PANAMA CITY, Fla. -- Florida's governor on Monday criticized a grand jury investigation into former President Donald Trump as being a "political spectacle," while simultaneously throwing jabs at Trump for paying hush money to porn star Stormy Daniels during his 2016 campaign.
Speaking in Panama City, Gov. Ron DeSantis accused Manhattan District Attorney Alvin Bragg of having a history of downgrading felony charges, ignoring crimes, and causing the borough's crime rate to go up.
"If you have a prosecutor who is ignoring crimes happening every single day in his jurisdiction and he chooses to go back many, many years ago to try to use something about porn star hush money payments, that's an example of pursing a political agenda and weaponizing the office, and I think that's fundamentally wrong," DeSantis said.
WATCH: Florida's governor speaks about grand jury investigation
Florida Gov. Ron DeSantis address possible Donald Trump arrest
Trump on Saturday claimed on his Truth Social account that he expects to be arrested Tuesday and issued a call for his supporters to protest any legal action taken against him.
In a series of social media posts, Trump criticized the grand jury investigation and Bragg.
Despite denouncing the probe Monday, DeSantis took the opportunity to hurl an insult at Trump over his reported affair with Daniels, whom the former president has denied having sex with.
"I don't know what goes into paying hush money to a porn star to secure silence over some type of alleged affair. I can't speak to that," DeSantis said, triggering laughs from the crowd.
When asked if Florida would get involved in any possible extradition of Trump to New York -- as the former president has been spending time at his Mar-a-Lago property on Palm Beach -- the governor said the state is staying out of the investigation.
WATCH: WPTV's Michael Williams discusses possible arrest of Trump with attorney, political science professor
Michael Williams moderates discussion on possible arrest of former President Donald Trump
"We are not involved in this. Won't be involved in this. I have no interest in getting involved in some type of manufactured circus by some [George Soros-funded] D.A. He's trying to do a political spectacle," DeSantis said. "I've got real issues I've got to deal with here in the state of Florida."
The Manhattan District Attorney's Office has not commented on the investigation, and even Trump's lawyer and spokesperson said there has been no communication from prosecutors.
Palm Beach Police Major John Scanlan said Monday the agency does not comment on "any strategic plan in advance of a possible event, other than we are prepared for whatever might happen."
Teri Barbera, a spokeswoman for the Palm Beach County Sheriff's Office, said in a statement to WPTV that deputies "will be assisting with traffic/supporters/protestors on the major roadways," but they will not be "serving papers."
The U.S. Secret Service is not commenting on specific protection plans for Trump. | Florida Gov. Ron DeSantis denounces Donald Trump grand jury investigation as 'political spectacle' |
TAMPA, Fla. (WFLA) -- Reports have surfaced since the weekend that former President Donald J. Trump, now an official candidate for the 2024 election, could be indicted on charges related to a so-called hush-money payment to porn star Stormy Daniels during the 2016 season.
As the politics of the moment grow more intense with former President Donald Trump facing a potential indictment, he's remained actively critical of prospective primary opponents on social media.
Trump, a current Florida resident, has made headlines for a variety of statements and situations in recent weeks, including in potential matchups for the Republican primary. Amid a growing field of candidates, and potential candidates, Gov. Ron DeSantis has been referred to as a potential contender for the election.
During a Monday news conference, the governor was asked about a potential arraignment and extradition of the former president, as charges in Manhattan could come as soon as Tuesday. Trump himself mentioned this possibility over the weekend, via his social media platform Truth Social.
DeSantis, however, demurred, saying he had no knowledge of communications between Florida law enforcement and their contemporaries in New York. Instead, the governor took the question and turned his commentary to "Soros-funded prosecutors" who he accused of using the office to push a political agenda, and saying that using "something about a porn star hush-money payment" to pursue charges against Trump was simply political.
"So, I've seen rumors swirl, I have not seen any facts yet so I don't know what's going to happen, but I do know this, that the Manhattan District Attorney is a Soros-funded prosecutor," DeSantis said Monday. "So, he like other Soros-funded prosecutors, weaponize their office to impose a political agenda on society at the expense of the rule of law and public safety."
Ending his commentary on the potential Trump indictment, DeSantis said Florida would not be involved in a political "spectacle."
Later on Monday, Trump took to Truth Social, reposting an image allegedly of the Florida governor in his younger years, at a party with underage girls while a teacher in Georgia. It was not the first occasion Trump has reshared the image, though each time he's shared it he hasn't explicitly accused DeSantis of entertaining underage students in romantic or inappropriate manners.
The Truth Social post from the former president on Monday said "Ron DeSanctimonious will probably find out about FALSE ACCUSATIONS & FAKE STORIES sometime in the future, as he gets older, wiser, and better known, when he's unfairly and illegally attacked by a woman, even classmates that are "underage" (or possibly a man!). I'm sure he will want to fight these misfits just like I do!" | 'Underage, possibly a man': Trump comments on DeSantis' sexuality as potential Stormy Daniels indictment looms |
Former President Donald Trump took his attacks on Florida Gov. Ron DeSantis to a new level Wednesday, as a super PAC linked to the 76-year-old accused his would-be rival of ethics violations tied to what it calls DeSantis' "shadow presidential campaign."
A draft of the 15-page letter by Make America Great Again Inc. calls on the Florida Commission on Ethics to investigate DeSantis, alleging that the 44-year-old has violated a slew of state statutes as well as federal campaign finance laws.
The complaint refers to DeSantis as a "de facto candidate for president" and claims that the governor is "leveraging his elected office and breaching his associated duties in a coordinated effort to develop his national profile, enrich himself and his political allies, and influence the national electorate."
"Governor DeSantis' failure to declare his candidacy is no mere oversight," the complaint alleged. "[I]t is a coordinated effort to specifically designed for him to accept, as unethical gifts, illegal campaign contributions and certain personal benefits that are necessarily intended to influence his official decision to resign from office under Florida's resign to run law.
Make America Great Again Inc., a super PAC affiliated with former President Donald Trump, is asking Florida to investigate Gov. Ron DeSantis, alleging a number of ethics violations. AFP via Getty Images
"Governor DeSantis' ham-handed maneuverings," the complaint added, "have rendered him irreparably conflicted and have left the statehouse vacant."
The letter includes as evidence that DeSantis has "abused his office and abdicated his official duties in favor of pursuing his national political interests" the fact that the governor has "met with influential figures in early primary states," "is vetting operatives in early primary states," and "met with individuals who are likely to play key roles in his presidential campaign."
The letter asks that the commission impose one or more penalties including impeachment, removal from office, public censure, ballot disqualification and fines.
The complaint refers to the Sunshine State law that states: "No person may qualify as a candidate for more than one public office, whether federal, state, district, county, or municipal, if the terms or any part thereof run concurrently with each other."
Once allies, Trump has increasingly criticized DeSantis. Getty Images
That means that unless Florida's Republican-controlled legislature tweaks the law, DeSantis would have to resign his current office to run for the presidency.
While DeSantis has yet to officially enter the 2024 race, he is expected to do so once Florida's legislative session ends in May.
Taryn Fenske, a spokeswoman for DeSantis, said the letter can be added "to the list of frivolous and politically motivated attacks. It's inappropriate to use state ethics complaints for partisan purposes."
The Florida governor has been promoting his new book, "The Courage to Be Free," a national tour that has taken him to some of the early voting GOP states, including Iowa and New Hampshire.
Florida Gov. Ron DeSantis delivers a speech in Las Vegas on Nov. 19. Getty Images
Last week, DeSantis and former US Ambassador to the United Nations Nikki Haley -- the only other declared GOP presidential candidate -- made the trek to the Hawkeye State for multiple appearances.
DeSantis spoke last Friday to a packed house in Davenport and also appeared in Des Moines.
Three days later, Trump, who announced he was running for president Nov. 15, also held a rally in Davenport, where he took several shots at DeSantis.
Polls have repeatedly shown Trump and DeSantis as the top two contenders for the 2024 Republican nomination. | Trump allies say DeSantis running illegal 'shadow campaign' for president |
As MAGAworld rages about rumors that Donald Trump will be indicted, Ron DeSantis has stayed quiet.
He's now facing growing calls to defend the former president, who lives in Florida.
Still, it's unlikely that DeSantis can fully block Trump's extradition from the state.
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Florida Gov. Ron DeSantis is facing immense pressure from the far-right wings of MAGAworld to help former President Donald Trump evade a potential indictment in New York.
Trump on Saturday claimed without substantiation that he may get arrested on Tuesday. With that announcement came pressure on DeSantis from Trump-loving conservatives, who want the governor to defend Trump against the Manhattan district attorney's investigation. DeSantis, who's expected to run against Trump for president in 2024, has stayed mum.
But DeSantis' predictable silence has given MAGAworld figures the opportunity to condemn him.
Jason Miller -- a longtime Trump advisor -- highlighted DeSantis' lack of response on Sunday, while praising former Vice President Mike Pence for criticizing the Manhattan district attorney's investigation.
"Radio silence from Gov. @RonDeSantisFL and Amb. @NikkiHaley," tweeted Miller, who's also the founder of right-wing social network Gettr.
Donald Trump Jr., Trump's oldest son, didn't name DeSantis, but wrote on Sunday that people will remember the difference between Republicans who spoke up for Trump "immediately" and those who "sat on their hands and waited to see which way the wind was blowing."
Also on Sunday, far-right political activist Jack Posobiec tweeted: "It takes 10 seconds to send a tweet 'This prosecution of President Trump is a farce and does grave damage to our republic.'"
Posobiec told The New York Times that he was "taking receipts on everyone" who hasn't blasted a potential Trump indictment.
"For DeSantis to make that post yesterday, talking about the Hurricane Ian response and nothing from the personal account whatsoever about the arrest -- it was a message that was received," Posobiec told The Times.
Michael Cernovich, a right-wing political commentator, tweeted that DeSantis was making his "first unforced error by not denouncing this lawless act."
Far-right influencer Stew Peters tweeted that DeSantis should send the Florida National Guard to protect the former president at the Mar-a-Lago resort. Peters was echoing calls from fringe factions of MAGA world for people to form a "patriot moat" around Mar-a-Lago to prevent Trump's arrest.
"Anything less proves DeSantis is a fraud," wrote Peters on Sunday.
DeSantis can't do much to help Trump -- assuming he wants to
It's unlikely that DeSantis has any avenues to stop Trump's extradition even if he wants to, legal experts told Insider's Jacob Shamsian. But the governor could delay extradition for up to 60 days by asking for a review of the indictment, they said.
Meanwhile, Trump announced on Saturday that he expects to turn himself in on Tuesday, though his defense team hasn't received confirmation of whether he'll be indicted.
Once allies with DeSantis, Trump has over the last year increasingly launched personal attacks at the governor. He's been debuting insulting labels and nicknames for DeSantis, such as "Ron DeSanctimonious" and a "RINO Globalist."
To add further animosity between the pair, a pro-Trump PAC on Wednesday filed an ethics violation complaint against DeSantis, accusing him of "leveraging his elected office" in Florida to bolster his national profile.
DeSantis has avoided launching direct barbs at Trump, telling people in November to "chill out" about the former president's feud with him. But he's privately been rallying allies and building his war chest for a potential 2024 White House run, the announcement of which would put him openly at odds with Trump.
Representatives for DeSantis and Trump did not immediately respond to Insider's requests for comment sent after business hours. | MAGA blasts DeSantis for staying silent on Trump indictment rumors |
Florida Gov. Ron DeSantis sought to distance himself from former President Donald Trump's claim that he would be arrested Tuesday when he was asked about it at a news conference Monday.
"I don't know what goes into paying hush money to a porn star to secure silence over some type of alleged affair. I just can't speak to that," DeSantis said.
His answer elicited laughter from the audience of supporters in Panama, Fla.
This reference to the core of Manhattan District Attorney Alvin Bragg's investigation was just one swipe within DeSantis' full answer, in which he labeled any district attorney backed by billionaire George Soros as a "menace to society" who is ignoring local crime.
"I have no interest in getting involved in some type of manufactured circus by some Soros DA," DeSantis said. "We've got so many things pending in front of the legislature. I've got to spend my time on issues that actually matter to people. I can't spend my time worrying about things of that nature."
A grand jury in Manhattan has been probing a "hush money" payment allegedly made on Trump's behalf to adult film star Stormy Daniels days before the 2016 election. Trump was invited to testify before the grand jury last week, and in New York, the offer to testify often precedes an indictment.
But DeSantis' answer and some of the reaction -- or lack of reaction -- from other potential 2024 presidential candidates comes at a time when Trump is trying to gain some benefit from the investigation. His campaign has sent out multiple fundraising emails labeling the investigation as a "witch hunt" that will "threaten" his political movement.
"I will never surrender, and you will never surrender," Trump said in a video last Friday about the investigation.
"If media leaks are correct, this could be the last time I write to you before a possible indictment comes down," a Trump campaign fundraising email sent Monday claimed.
Over the weekend, MAGA Inc., a super PAC supporting Trump, sent out a press release pointing out his potential political opponents who have not yet reacted to his possible indictment. After DeSantis' response , MAGA Inc., issued a release highlighting other congressional Republicans who have voiced their support for Trump and criticized the investigation.
"DeSantis stands alone. Republicans are rallying around President Trump," their release read.
In response to DeSantis' remarks, Trump posted on Truth Social that DeSantis "will probably find out about FALSE ACCUSATIONS & FAKE STORIES sometime in the future, as he gets older, wiser, and better known, when he's unfairly and illegally attacked by a woman, even classmates that are "underage" (or possibly a man!). I'm sure he will want to fight these misfits just like I do!"
In the post, Trump referenced allegations that DeSantis drank alcohol with underage students during his time as a teacher in Georgia. DeSantis has before dismissed this line of attack from Trump and said in February when asked about this, saying "I don't spend my time trying to smear other Republicans."
Over the weekend, former Vice President Mike Pence called the investigation "another politically charged prosecution against" Trump and that "people have a right to express the frustration that they feel to see a liberal Manhattan DA poised to indict a former president."
"That being said, there can be no tolerance for the kind of violence that we saw on Jan. 6, or throughout the summer of 2020," he told reporters in Iowa on Saturday when asked about Trump's calls for protests.
But Pence, who has not declared he's running for president but was in Des Moines, Iowa, last Saturday for a foreign policy event, opined that Trump can "take care of himself" and suggested it's not a big issue for primary voters.
"I had one person here [in Iowa] who mentioned this issue to me. Everybody else talked to me about issues that are affecting their families, prosperity and security in this country. And that's what my focus will remain," he said.
Nikki Haley, the former South Carolina governor and U.S. ambassador to the United Nations during Trump's tenure, did not bring up Trump's claims during an appearance at the Palmetto Family Council conservative forum in South Carolina this Saturday. Haley is the most notable official challenger to Trump at this time.
Sen. Tim Scott, of South Carolina, who was also speaking at last Saturday's conference and could be a presidential contender, also did not comment on Trump's claim.
Vivek Ramaswamy, the biotech entrepreneur who has launched his campaign and has been visiting early presidential primary states, called on "GOP donor-class favorites" like DeSantis and Haley to join him in calling on Bragg to abandon the investigation.
Asked about Trump's appeal to his supporters to protest if he is arrested, Ramaswamy responded, "My leadership style is very different than Donald Trump's leadership style."
Justin Sayfie, a veteran GOP lobbyist who worked with former Florida Gov. Jeb Bush, says a potential indictment in this case would help Trump politically, because "it fits right into his narrative that has been from the beginning: 'I'm the outsider, and all the insiders want to keep me -- and us -- out of power.'" He added that DeSantis' answer this morning criticizing the Manhattan D.A. and "signal[ing] ignorance about the specifics of the matter" was "pitch perfect," but said whether it's a direct dig at Trump is "up for interpretation."
"I would advise any Republican running for president to follow that prescription. Because none of them can speak to the speak to the facts of the case. But when these prosecutions appear to be partisan in nature, that deserves to be criticized," he said.
Florida Atlantic University Dr. Kevin Wagner said there's no clear way for candidates and potential Trump challengers in 2024 to react to a potential arrest. He noted the claim "puts the focus back on" Trump, which could make it harder for other candidates, declared or not, to gain traction and "get noticed."
He said candidates will have to tiptoe the line on their reaction to a potential Trump indictment, both appeasing Trump's base and distinguishing themselves from him to other conservative voters.
"These are questions that we've never had to answer before," Wagner said. "What an unprecedented universe we live in."
Fritz Farrow contributed to this report. | Ron DeSantis, Mike Pence react to Trump's claim that he'll be arrested |
WASHINGTON - An epic Republican confrontation - Donald Trump versus Ron DeSantis - remains on hold, but seems to be drawing nearer.
Trump and his allies are escalating attacks on the Florida governor, including an ethics complaint lodged Wednesday. DeSantis still avoids replying in kind, though allies are starting to speak out against the aggressive ex-president and many wonder how long the Florida governor will retain his reticence.
"Whether he can maintain his discipline and ignore Trump long term remains to be seen," said Republican strategist Liz Mair.
In the meantime, Team Trump is trying to bait DeSantis with a lot of hooks.
Ethics complaint filed against DeSantis
A Trump-affiliated political action committee, Make America Great Again Inc., announced it has filed a complaint with the Florida Commission on Ethics, claiming the governor is using his office to mount a "shadow presidential campaign" at odds with state and federal finance laws.
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This did draw a response from DeSantis' office, one that only alluded to Trump's frequent criticisms but did not name him specifically.
"Adding this to the list of frivolous and politically motivated attacks," said Taryn Fenske, the governor's communications director. "It's inappropriate to use state ethics complaints for partisan purposes."
Ken Cuccinelli, a former Trump administration official who has now created a political action committee that supports DeSantis, used one of the ex-president's favorite terms to describe the ethics complaint: "Sad." He added, "the President Trump I knew would never have played these types of establishment games."
DeSantis criticized for Ukraine comments
The Florida governor drew Trumpy criticism after this week's announcement that he doesn't consider Ukraine a "vital" nation interest. The U.S. should be careful about military assistance to Ukraine as it defends itself against Russia's invasion, he said in a statement to Fox News host Tucker Carlson.
DeSantis' position seems close to that of Trump. The former president told reporters this week that the governor is "following what I am saying. It is a flip-flop. He was totally different. Whatever I want, he wants."
Ukraine beef:Ron DeSantis position on Ukraine different from presidential hopefuls in Republican Party
Book tour:2024 preview? Ron DeSantis does a book tour to discuss his Florida record - not Donald Trump
The Ukraine issue also drew another Republican presidential candidate into the anti-DeSantis camp, former South Carolina Gov. Nikki Haley.
"President Trump is right when he says Governor DeSantis is copying him," Haley said. "First in his style, then on entitlement reform, and now on Ukraine."
Trump goes on offense against DeSantis
Since announcing in mid-November that he would seek the presidency again in 2024, Trump and supporters have attacked DeSantis on any number of issues, from Social Security to the boots he wears. Trump has sought to pin a mocking nickname on the governor, though none have seemed to stick.
During his recent visit to Iowa, Trump assailed DeSantis over one of the Hawkeye State's top issues: ethanol subsidies.
The Trump team has provided reporters with opposition research on DeSantis.
Trump has expressed regret that he endorsed DeSantis during his first run for governor in 2018: "If it weren't for me, Ron DeSanctimonious would right now be working probably at a law firm, or maybe a Pizza Hut, I don't know."
In a Truth Social message posted at 12:23 a.m. Thursday, Trump bestowed a frequently used insult on DeSantis: "RINO," which stands for Republican In Name Only."
Is Ron DeSantis running for president?
Rather than engage Trump, DeSantis and aides said he is focused on his day job, especially with the Florida Legislature in session.
DeSantis is expected to make a presidential announcement after the session adjourns in May.
In the meantime, DeSantis sloughs off Trump's attacks as "background noise," though he does make periodic allusions to the ex-president. DeSantis says he will ultimately be defined by his record as governor.
"When you have a record of achievement, people can call you names," he told Fox News this week. "But that's not going to trump the achievement."
It didn't feel like the use of the term "trump" was an accident.
Why DeSantis is ignoring Trump attacks
Many Republicans said there's no reason for DeSantis to engage Trump right now.
There's no evidence the attacks are hurting him, they said, and polls show DeSantis very competitive with Trump even though he has yet to announce a campaign.
"The horse race is one thing, but the underlying image and coalition metrics are another," said Scott Jennings, a Republican strategist and CNN commentator. "And I don't see any evidence that DeSantis is picking up detractors based on Trump's flailing."
How will Florida Gov. Ron DeSantis perform on the national stage?
At some point, DeSantis will have to engage Trump, perhaps in debates that are expected to be scheduled later this year.
By then, the former congressman and current Florida governor will have to answer another question: How will he perform on the national stage?
Will he be like George W. Bush, a sitting governor who won the White House in 2000, or another Jeb Bush, who fell to the Trump onslaught of 2016?
Mair said she doesn't know if DeSantis "will be able to continue in his current vein, or if he'll end up in a fight with him like almost everyone in 2016 did." | Trump attacks DeSantis. How long can the Florida governor ignore him? |
The Hellcat era is ending the same way it began back in 2015: with an obscene amount of horsepower, a devil-may-care attitude, and almost complete indifference toward handling. The 2023 Dodge Challenger SRT Demon 170--the last of Dodge's Last Call combustion muscle cars--is a 1,025-hp street-legal drag racer that rolls out of the factory with the claimed ability to rip off a 1.66-second 0-60 time and an 8.91-second quarter mile at 151.2 mph on a prepped dragstrip.
If those numbers hold up, the Demon 170 will be among the quickest production cars ever built, at any price. Its competition, as far as straight-line performance is concerned, amounts to the $111,630 Tesla Model S Plaid and a handful of supercars and hypercars, all of which channel their thrust to the ground through four wheels. Those cars make the Demon look like a bargain propelled by black magic. It starts at $100,361 (a cheeky $96,666 before destination and gas-guzzler tax) and dispatches its 945 lb-ft of torque through only the rear tires.
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A Power-Drunk Supercharged V-8
Dodge CEO Tim Kuniskis is adamant this new car isn't simply a modified Challenger Hellcat or an upgraded version of the 2018 Challenger SRT Demon. To make the point, he holds up a camshaft and says, "This is what's left of the Demon engine." He's exaggerating, of course, but Dodge engineers replaced more components than they originally planned on just to keep the engines from self-destructing. The list includes new pistons, connecting rods, crankshaft, crank bearings, and billet main caps. To cope with the immense pressure in the combustion chambers, the cylinder-head bolts have been replaced with studs.
A new 3.0-liter supercharger draws air through a throttle body big enough to inhale your fist, and the fuel injectors can flow up to 164 gallons per hour--not that you could easily verify that. The Demon 170's fuel tank drains in less than seven minutes of full-throttle driving.
Unlike the 2018 Demon, the new car doesn't require the owner to prep it with a pair of pizza-cutter front wheels or a special engine computer or race gas to make the numbers. To deliver its full 1,025 hp and 945 lb-ft, the Demon 170's 6.2-liter V-8 needs only a tank full of E85, an ethanol-rich fuel that costs less than premium unleaded and is easily found at gas stations across the country. It'll run on premium gas, as well, but output falls to a mere 900 hp and 810 lb-ft.
Dodge leans heavily--maybe too heavily--into E85 as a branding theme for the Demon. The "170" in the name comes from E85 being 85 percent alcohol, or 170 proof in the world of liquor. The words "ALCOHOL INJECTED" are etched on the hood scoop's bezel, and the engine block and the eye in the Demon badge are yellow in a nod to most of the ethanol in E85 coming from corn. Buyers also get a bar set that includes whiskey stones and a decanter that will terrify their children.
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Is the Demon 170 Really as Quick as Dodge Claims?
We should mention that you're not likely to see the Demon's acceleration performance verified by the MotorTrend test team in the future. Dodge's times were achieved on a dragstrip prepped with VHT, a sticky, tarlike coating that improves grip. On an unprepared surface like we use, the 0-60 time will likely be in the low two-second range, and the quarter-mile result will be firmly in the nines. Kuniskis also stresses that Dodge's 0-60 and quarter-mile claims can only be matched under the best possible circumstances. You'll need a meticulously prepped track, perfect air, and a driver that has mastered the art of launching the Demon.
In other words, the Demon 170 is not a Porsche 911 Turbo S with robotic launch control that will knock out repeatable max-attack sprints to 60 mph all day long. Engineers have, however, included a few new tools to help drivers tame this hellbeast. The reworked transmission-brake launch procedure allows the driver to flat-foot the throttle in the starting box rather than feather it to keep the revs in a sweet spot. If the tires spin on launch, the driver can use the Demon's infotainment system to dial in a custom torque curve for the first 1.6 seconds of subsequent runs. There are also settings to soften the shifts from first gear to second and second to third if the tires are breaking loose during gear changes.
Although the car can technically run the 8.9-second quarter mile as you drive it off the dealer lot, you'll be hard-pressed to find a track that will let you do just that. Should you master the Demon's nuances and slip under a 9.0-second quarter mile, you'll need both a roll cage and a parachute to run at any NHRA-sanctioned event. It'll take a fabricator to build a proper cage, but customers will be able to buy the parachute directly from Dodge through its Direct Connection parts catalog. To purchase a Demon, buyers will once again have to sign and notarize an affidavit stating they assume all risks of driving a vehicle that is trying its damnedest to conjure the devil.
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Getting the Power to the Ground
A revised suspension is designed to transfer weight rearward more quickly rather than wasting time as the nose rises. Despite that change, Kuniskis promises the Demon still pulls a wheelie at launch.
The 170's tower of torque routes through an eight-speed transmission and hardened driveline. The driveshaft measures 0.4 inch larger in diameter and 30 percent stronger than the Hellcat Redeye's. The 3.09:1 rear axle is also 0.4 inch larger with shot-peened gears and a case that's pressure-cast to eliminate porosity, with the overall effect being a 50 percent increase in strength compared to the previous Demon. The rear halfshafts feature 43 splines (two more than those in the Redeye) and slide into heat-treated CV joints.
The Mickey Thompson ET Street R tires (size 315/50R17 in back and 245/55R18 in front) are supposedly so important to the Demon's track times that Dodge pushed back the launch of the car when the tiremaker ran into supply-chain issues and tried to bow out of the program. Optional $11,500 wheels combine aluminum spokes and a carbon-fiber rim with titanium bolts. The save 32 pounds compared to the standard aluminum wheels and spin up quicker because the weight is more centralized, giving them a lower moment of inertia.
The More Things Change, the More They Stay the Same
Unsurprisingly, the Demon 170 looks pretty much the same as every Challenger we've seen since Dodge introduced this generation in 2008. The biggest difference compared to the previous Demon is the 170 loses the front fender extensions. The old car needed those flares to accommodate its 315-millimeter-wide front tires. With narrower front rubber, the new car saves 16 pounds. Despite the weight-saving efforts, the additional engine and drivetrain fortifications have pushed overall weight up slightly to a claimed 4,275 pounds.
Like its predecessor, the Demon 170 comes as a single-seat car, but unlike 2018, it'll cost you more than one or two dollars if you're going to bring friends along for the ride. The package that adds a passenger seat and rear bench now costs $2,500. Buyers who pay for five seats also have the option to then delete the rear bench at no cost. A sunroof runs $10,000, a price we assume was picked to discourage buyers from choosing it.
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How Many Dodge Challenger SRT Demon 170s Will Be Built?
Kuniskis says he wants Dodge to build 3,000 Demons for U.S. customers and another 300 for Canadians to match the production run from 2018, but he's not committing to that number. As he's saying that, someone in the back of the room shouts out, "2,500!" The Brampton, Ontario, plant that will build the Demon will cease Challenger production at the end of the year.
Dodge is sharing Demon 170 dealer allocations now in the Dodge Horsepower Locator tool at DodgeGarage.com, and ordering opens on March 27. The company is hoping to scuttle dealer markups by prioritizing production for customers who pay MSRP, and repeat buyers who already have a 2018 Demon in the garage get a chance to buy a new model with a VIN that has the same final six digits. Anyone else looking to get their hands on a Demon 170 may very well have to make a deal with the devil. | 2023 Dodge Challenger SRT Demon 170 First Look: A 1,025-HP Hell Yeah! |
Dodge is sending its most iconic motor out with a very big bang.
The Dodge Challenger SRT Demon 170 is the last V8-powered car the brand will introduce before it stops building them altogether at the end of 2023, and it's a history-making model.
The two-door coupe is powered by a 6.2-liter supercharged V8 that's rated at 900 hp when running on 91 octane gasoline and an astonishing 1,025 hp using even higher octane E85 fuel.
The 170 in its name is a humorous reference to the alcohol content and proof of E85.
V8 DODGE MUSCLE CARS ARE GOING EXTINCT: THESE WERE SOME OF THE GREATEST
Both outputs qualify it as the most powerful internal combustion engine car ever sold by a major American automaker.
It's also the quickest production car in the world in accelerating to 60 mph, with the sprint certified at 1.66 seconds while it can cover a quarter-mile in 8.9 seconds at a trap speed of 151 mph.
The car is an evolution of the limited edition 808 hp 2018 Challenger SRT Demon, but Dodge CEO Tim Kuniskis told Fox News Digital that every major part in the engine except for the camshaft has been redesigned to handle the extra power. That includes its massive 3.0-liter supercharger.
The Demon 170 also gets a stronger drive shaft, rear axle housing and half-shafts to get the power to its standard equipment Mickey Thompson street-legal drag tires. The eight-speed automatic uses an updated version of the original Demon's TransBrake, which is a drag racing-derived feature that allows the driver to rev the engine while the vehicle is stationary without using the brakes by locking the eight-speed automatic transmission.
That sets it up for a launch that's hard enough to pop a wheelie, which is further enhanced by a computer-controlled suspension that has a Drag Mode setting to optimize the weight transfer as it jumps off the starting line.
The Demon 170 is delivered with just a cloth driver's seat but can be ordered with a full set and leather upholstery is an option. A safety cage and parachute will be available through the Dodge Direct Connection parts catalog, both of which are required by the NHRA if you want to try to break the nine second quarter-mile and 150 mph marks on a drag strip.
Kuniskis says you'll need some practice to get good enough to replicate the official performance numbers, but that it's possible to fill up with E85 at a gas station, head to the track and get it done.
You'll want to start with an empty tank, however, as the car monitors the fuel mix that's in it and adjusts its power to match. So it won't put out the full 1,025 hp unless its running on pure E85.
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Pricing for the Demon 170 has been set at an appropriately evil $96,666, not including destination charges and fees. Each will come with a serialized Demon-branded decanter and whiskey glass set as another tip of the hat to its E85-burning capability.
Production will be limited to 3,000 for the U.S. and 300 for Canada, but Kuniskis said the final count could end up being lower if any of the ongoing supply-chain issues cause parts shortages; the cars have to all be built by the end of the year when the Challenger and Charger assembly line is scheduled to stop building them.
After that, Dodge is replacing its V8-powered muscle cars with a production version of the electric Charger Daytona SRT Concept, which will be offered in a top-of-the-line Banshee model that could rival the Demon 170's power and speed, although those details have yet to be announced.
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"Now we will have a new benchmark, and it will be up to us to see if we can beat this one," Kuniskis said.
"The best challenge to have is to beat yourself." | Dodge Challenger SRT Demon 170 is brand's last V8 muscle car and most powerful ever |
Dodge has built the most powerful and quickest production-ready muscle car in the world, the new Challenger SRT Demon 170. Utilizing the marque's signature 6.2-liter supercharged HEMI V8 engine, the new car has been treated to tweaks and upgrades throughout the engine compartment to take the car all the way to 900 HP and 810 lb-ft of torque when running on standard E10 pump fuel, or a colossal 1,025 HP and 945 lb-ft on an E85 ethanol blend.
The results are astronomical for a road-legal car. It'll hit 60 MPH in 1.66 seconds, pulling 2.004 Gs from acceleration. In testing, the Demon 170 achieved a quarter-mile run in 8.91 seconds at 151.17 MPH, which is helped thanks to special programming and components found within the chassis, suspension, and body.
For example, the tires at the rear measure 17 inches by 11 inches, while "Drag Mode" suspension tuning propels the car forward while keeping the rear stuck down. Likewise, torque-shaping technology has been added to keep the car from spinning up its wheels, and adaptive dampers provide maximum weight transfer. All of this and more -- like "Line Lock" burnout modes -- help the car launch perfectly every time.
Those wanting even better results can equip the Demon 170 with carbon fiber wheels over the stock aluminum ones, saving over 31 lbs across all four wheels. As standard, the car is also made lighter than its predecessors with lightweight front brakes, hollow sway bars, passenger and rear seat delete, trunk trim and noise, vibration and harshness pad delete and lightweight interior carpets with a minimal audio system.
Enhancing the ownership experience, each of the 3,330 built will come with a numerically-detailed Demon 170 decanter set. All this can be yours for a demonically-priced $96,666 USD.
Take a closer look at the Dodge Challenger SRT Demon 170 above, and find out more on Dodge's website.
In other news, Ford has unveiled the Explorer EV cross-over SUV. | Dodge Challenger SRT Demon 170: 0-60 In 1.66 Sec |
PR Newswire
Mickey Thompson ET Street R and ET Street Front tires featured on Dodge brand's final "Last Call" vehicle
STOW, Ohio, March 20, 2023 /PRNewswire/ -- Mickey Thompson Tires played a key role from the ground up in the record-breaking performance of the new 2023 Dodge Challenger SRT Demon 170, revealed this evening by the Dodge brand in Las Vegas. Before undertaking the project, Mickey Thompson worked closely with Dodge engineers in developing a tire that could unleash record-setting power for the world's quickest 0-60 production car.
"Nobody puts power to the ground like Mickey, and nobody creates power like Dodge," said Dominick Montouri, President of Mickey Thompson. "Dodge values record-breaking performance as much as we do, and they truly broke every barrier with this vehicle."
A relationship born at the dragstrip, the two companies began development on a modified version on Mickey Thompson's popular ET Street R P315/50R17 months prior to the Challenger SRT Demon 170 project kickoff.
Mickey Thompson's ET Street tires turn the Dodge Challenger SRT Demon 170's 945 ft.lbs of torque into traction. Achieving 0-60 in 1.66 seconds, the 1025-horsepower Demon 170 completes a quarter mile in a record breaking 8.91 seconds at the track. The rear tire features a modified version of the popular Mickey Thomson ET Street R P315/50R17. The additional tread grooves improve on-street performance, allowing the Demon 170 to switch from the strip to the street without the need for tire modifications.
"60-foot times in the mid-120's in a production car doesn't happen without a balanced and optimized suspension," said Tim Kuniskis, Dodge brand CEO, Stellantis. "The Mickey ET Street R's hook so hard it allowed us to get much more aggressive with our suspension and trans-brake tuning."
Mickey Thompson also developed an ET Street Front 245/55R18 to create a staggered fitment designed to transfer power to the rear tires; allowing for reduced weight, lower rolling resistance and improved dynamic and handling balance to put the Challenger SRT Demon 170's power to the ground when it creates more than 2G's of force at launch. These tires were designed specifically for the Challenger SRT Demon 170. The ET Street Front 245/55R18 and the modified version of the ET Street R P315/50R17 are not currently available for purchase.
To learn more about Mickey Thompson Tires & Wheels, visit mickeythompsontires.com.
To learn more about the Dodge brand, visit DodgeGarage.com.
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About Mickey Thompson Tires & Wheels
Max-Trac Tire Co., Inc., DBA Mickey Thompson Tires & Wheels, markets racing and high-performance tires and wheels for street, strip, truck, and off-road applications. Now a subsidiary of Goodyear (NASDAQ: GT), the company was founded in 1963 by racing legend Mickey Thompson and is headquartered in Stow, Ohio, USA. For more information, visit www.mickeythompsontires.com. Connect on Facebook and Instagram .
About Dodge//SRT
For more than 100 years, the Dodge brand has carried on the spirit of brothers John and Horace Dodge. Their influence continues today as Dodge shifts into high gear with a lineup that delivers unrivaled performance in each of the segments where they compete.
Dodge drives forward as a pure performance brand, offering SRT Hellcat versions of the Dodge Challenger, Dodge Charger and Dodge Durango, as well as an R/T performance hybrid version of the all-new Dodge Hornet, representing the brand's first-ever electrified performance vehicle. Dodge delivers the dragstrip dominating 807-horsepower Dodge Challenger SRT Super Stock; the 797-horsepower Dodge Charger SRT Redeye, the most powerful and fastest mass-produced sedan in the world; and the 710-horsepower Dodge Durango SRT Hellcat, the most powerful SUV ever; and best-in-class standard performance in the compact utility vehicle segment with the Dodge Hornet. Combined, these four muscle vehicles make Dodge the industry's most powerful brand, offering more horsepower than any other American brand across its entire lineup.
In 2022, the Dodge brand ranked No. 1 in the J.D. Power APEAL Study (mass market), making it the only domestic brand ever to do so three years in a row. In 2020, Dodge was named the " #1 Brand in Initial Quality ," making it the first domestic brand ever to rank No. 1 in the J.D. Power Initial Quality Study (IQS).
Dodge is part of the portfolio of brands offered by leading global automaker and mobility provider Stellantis. For more information regarding Stellantis, visit www.stellantis.com .
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SOURCE The Goodyear Tire & Rubber Company | MICKEY THOMPSON TIRES UNLEASH |
The Dodge Challenger SRT Demon 170 is too quick for its own good. The 1,025-horsepower E85-powered muscle car can hit 60 mph in just 1.66 seconds and run a quarter-mile in just 8.91 seconds at 151.17 mph. That's all well and good if you have a private dragstrip, but at a National Hot Rod Association-regulated track, you're going to need a roll cage and a parachute.
And the Demon 170 does not come standard with a roll cage or a parachute.
A safety cage and a parachute are both optional extras. However, because it runs a quarter mile in less than nine seconds and those items are not included as standard, it'll be banned in its stock form. That's after the NHRA recently relaxed rules around the times that 2014 model-year and newer cars can run. Cars like the old Dodge Demon and the Tesla Model S Plaid could not legally race without modification at NHRA drag strips until last year when the association said nine seconds was now the fastest newer cars could go, reduced from 10 seconds. At 8.91 seconds, The Demon 170 is nearly one-tenth too fast.
Dodge
Indeed, it's as fast or quicker than almost anything you're going to see on the street or anything in its price range. At a bound-to-be-marked-up MSRP of $96,666 before destination fees, it's cheaper than its closest electric competitors, the Lucid Air Sapphire and the Tesla Model S Plaid. The Lucid costs a massive $249,000, and the Tesla is $109,990 (before destination). It is faster than the Tesla at an official 9.23-second time, but Lucid claims the Air Sapphire can do a quarter mile in less than nine seconds. It does not specify an exact figure, however. In terms of ICE competition, the Bugatti Chiron Super Sport will conquer the quarter in around 9.4 seconds.
This all comes with caveats. The Demon 170 effectively has slick rear tires and its 1.66-second 0-60 time was recorded on a prepped track. In other words, it probably won't do that time on the street. Its electric competition, equipped with all-wheel drive, likely can achieve closer to their stated performance figures without a rubbered-in surface. That being said, the drag strip is the only really safe place to test this kind of performance. | 2023 Dodge Challenger Demon 170 Is Already Banned From NHRA Quarter-Mile Drags |
CNN --
With Dodge's legendary V8-powered muscle cars going out of production at year-end, engineers wanted the last non-electric Dodge Challenger to make a statement. Sort of a very fast, very loud, statement: A final salute to the fuel-burning era. Buyers just might want to attach a parachute.
The Demon 170 will be able to go from zero to 60 miles an hour in just under 1.7 seconds under ideal circumstances, according to Dodge. (Ideal circumstances would include a professional driver and a properly prepared drag strip.) A possible add-on is a parachute mounting system -- parachute not included -- to aid in drag-strip stops. It will be sold separately under Dodge's Direct Connection-brand, and is designed to bolt onto the back of the car.
The unveiling of the 1,025 horsepower Dodge Challenger SRT Demon 170 has been long anticipated, and long delayed. Engineers kept blowing up engines during development testing, said Tim Kuniskis, chief executive of Stellantis's Dodge brand. To deal with this engine's "massive, massive cylinder pressures" a lot of work had "to be done to make sure that the inside parts stay inside and not outside," he said.
To produce this much power, the engine relies on a supercharger, a mechanical air pump that forces air into the engine allowing more fuel to be burned and more power to be produced. The supercharger used on this car produces much higher pressures than the ones used on the already-powerful Dodge Hellcat SRT Demon model.
The result is a vehicle quicker than some high-performance all-wheel-drive electric cars like the Pininfarina Battista and the Tesla Model S Plaid.
The Demon 170 is not electric, though, and it's also rear-wheel-drive only, with an eight-speed transmission. (An all-wheel-drive electric car, with better traction and a single-speed transmission, could require less specialized conditions and less highly skilled driving to achieve its quickest zero-to-60 time.)
There are trade-offs for the Demon's performance, though. Kuniskis described the car's fuel economy as "terrible," without giving any specific numbers. He did say that, at full throttle, the car could completely drain its tank of racing fuel in about five minutes and 45 seconds. That figure is largely theoretical, since it would be hard to find anywhere to drive the car at full throttle for that long.
The Demon 170 will produce its maximum horsepower using racing fuel, called E85, that's up to 85% alcohol. That's where the number 170 in the car's name comes from. If E85 were liquor it would be "170 proof" -- a liquor's proof number is double its alcohol percentage. (Drinking racing fuel is not recommended and can be fatal.) With the more ordinary sort of fuel you can get from a street-side gas station, which is mostly gasoline, the Demon 170 can produce up to 900 horsepower, according to Dodge.
Dodge Challenger SRT Demon 170 can run a quarter mile in about 8.9 seconds. Stellantis
"This is a serious car. This is a race car," said Kuniskis. "You know, it's not going to be a smooth-riding drive-it-to-church car." Buyers will need to sign a notarized disclaimer stating that they understand this is not a normal car intended for everyday driving.
It's the last of a series of so-called Last Call special edition Dodge Challenger and four-door Dodge Charger models that Stellantis is producing to mark the end of these V8-powered models. Both cars will go out of production at the end of this year.
Prices for the Demon 170 will start at $96,666, not including an expected gas guzzler tax that could be as much as $7,700. Dodge dealers are also selling a convertible version of the Challenger during this, its last model year.
Dodge had originally expected to just modify the Dodge Challenger Demon engine, which is capable of producing up to 840 horsepower. But those repeated, and sometimes spectacular, failures during testing, proved that substantial changes were needed to achieve a four-figure power output goal. Lots of things needed to be made stronger and, ultimately, the Demon 170 ended up sharing very few mechanical parts with the original Demon.
The 2023 Dodge Challenger SRT Demon 170 can reach 60 miles per hour in under two seconds. Stellantis
Introduced in 2008, the modern Dodge Challenger shares much of its engineering with the four-door Dodge Charger and Chrysler 300 sedans. (Those models are also going out of production.) The two-door Challenger, though, is closely modeled on earlier Dodge Challengers from the classic muscle car era of the early 1970s.
While it's often thought of as a competitor to the Ford Mustang and Chevrolet Camaro, the Challenger is a bigger, heavier car and Kuniskis admits it doesn't corner and handle as well as those smaller models. Its performance appeal is raw straight-line speed and power, or -- for customers who buy cheaper V6-powered Challengers -- at least the appearance of it.
The Demon 170 does not have the wide fender flares of the original Demon, nor does it come with a set of ultra-narrow front tires -- called front-runners -- for drag racing. That's because this new car's suspension has been changed so that, during hard drag-strip starts, its front doesn't as easily rise up, shifting weight to the back tires.
The Demon was famous for being able to relatively easily "pop a wheelie," with its front wheels entirely leaving the ground during very aggressive starts. In the Demon 170, the front rises more gradually. Since less energy is wasted lifting the car's nose, more can be used moving the car straight down the track, said Kuniskis.
Options for the 2023 Dodge Challenger SRT Demon 170 include a Direct Connection Parachute Mounting System. Stellantis
The Demon 170 is offered with optional ultra-light wheels. The centers of the wheels are made from aluminum, while the outer rims are made from carbon fiber. There's no need to change the wheels or tires before running it on a drag strip, Kuniskis said, unlike the original Challenger Demon. Of course, that means, while the tires are perfectly legal for street use, they might not be ideal for all driving conditions.
"Do not drive them in the cold, do not drive them in the rain, do not drive them in any moisture -- but yes, they are street legal," said Kuniskis.
A maximum of 3,300 Demon 170s will be built -- 3,000 for the United States and 300 for Canada. But production will have to stop when Stellantis's Brampton, Ontario, Canada factory, where the Challenger is built, shuts down at the end of this year. If all 3,300 cars haven't been built by then, said Kuniskis, then that's it. That's all there will be.
Dodge is already working on a new, fully electric muscle car that's expected to be available in 2024. | Last Dodge Challenger makes 1,025 hp, has optional parachute attachments |
When things are working as designed, the fuel sprayed into your car's engine doesn't explode, it burns. That may seem like a subtle distinction, but it's an important one if, say, you want to make 1,025 hp from a 6.2-liter supercharged V-8, as the 2023 Dodge Challenger SRT Demon 170 does.
To make that much power, Dodge's new street-legal drag racer crams buckets of fuel and air into each cylinder, squeezes hard, then strikes the match. Cylinder pressures in the Demon 170 peak at 2,500 psi, 50 percent higher than in the 797-hp Challenger SRT Hellcat Redeye. All that pressure--and the heat that comes with it--makes the engine more prone to the early and explosive ignition that causes pressure and temperature to spike beyond the normal extremes an engine tolerates. This is engine knock, and if you let it go on long enough, your internal combustion mill eventually becomes an external combustion engine.
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Modern engines use knock sensors to detect detonation and dial back the power before things go kablooey. That's great for preventing expensive repair bills, but it won't help you lay down an 8.9-second quarter mile in a 2023 Dodge Challenger Demon 170. To consistently deliver full power, you need to prevent knock from happening in the first place.
This is where fuel comes into play. The higher a fuel's octane rating, the greater its resistance to knock and the more power an engine might make. Dodge required 100-octane race gas (and a special ECU) to unlock the full output of the 840-hp 2018 Challenger SRT Demon. The new Demon 170 instead uses E85, a blend of gasoline and ethanol, to make 1,025 hp and 945 lb-ft of torque. With an octane rating ranging from 100 to 105, it offers similar or better knock resistance, and it's much cheaper and far easier to find than race gas. Thousands of gas stations across the country sell E85 from the same pumps that dispense regular unleaded, and thanks to government subsidies, E85 often costs less than premium gas.
The name E85 is a misnomer, by the way. It suggests the fuel contains 85 percent ethanol, but the ASTM standard for E85 allows as little as 51 percent and up to 83 percent ethanol. (Feels a bit like finding out Santa's not real, huh?) Sensors on the Demon 170's fuel rails sniff out how much alcohol is in the fuel right before it reaches the injectors, and the engine controller adjusts parameters such as boost pressure and ignition timing accordingly. The V-8 makes full power with 65 percent or more ethanol. It will also run on 91- or 93-octane gas, though output falls to 900 hp and 810 lb-ft of torque.
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Hot rodders, drag racers, and tuners have been using E85 as an alternative to race fuel and pump gas for as long as the fuel has been readily available. Major automakers, on the other hand, have been selling flex-fuel sedans, SUVs, and pickup trucks capable of running on E85 since the mid '90s to earn EPA greenhouse gas credits. The life cycle carbon emissions of burning E85 are about 40 percent lower than using gasoline when the ethanol is derived from corn, and regulations have incentivized building flex-fuel vehicles even though research suggests the vast majority of their buyers never use anything other than gasoline.
The downside of E85 is it contains less energy than gasoline, so it takes about 25 percent more fuel to deliver the same power or cover the same distance as it would using gas, which eats at and sometimes erases the cost advantage. When asked what fuel economy the Demon 170 achieves, Dodge CEO Tim Kuniskis had a single-word answer: "Terrible."
If any automaker was going to use a low-carbon fuel to power a drag racer's fantasy, it had to be Dodge. For years, the brand's corporate parents have purchased credits from competitors and paid massive fines to regulators as they have failed to meet U.S. fuel-economy and zero-emission-vehicle mandates. The Demon 170 is one of the last combustion-powered cars Dodge will build before it gets serious about hitting those regulatory targets. | Here's Why the 2023 Dodge Challenger SRT Demon 170 Runs on E85 Fuel |
The Dodge Challenger SRT Demon earned its place in the history books as the world's most powerful muscle car and the world's fastest production car with a 0-60 mph (0-96 km/h) time of 2.3 seconds. Its 840 hp (626 kW / 851 PS) supercharged 6.2-liter engine was also the most powerful V8 in a production car and it enabled the Demon to have a record breaking quarter-mile time of 9.65 seconds at 140 mph (225 km/h).
That's just scratching the surface, but the Demon was a street-legal drag car and Detroit muscle personified. That's part of the reason why the model can command nearly $200,000 at auction today.
While the Demon was thought to be one of a kind, Dodge is preparing to say goodbye to the current Challenger and embrace an electrified future. However, this is no retirement party as the model is heading off into the sunset with a big smoky burnout and a finger in the air.
Meet The Challenger SRT Demon 170
The Demon might be dead, but its death has paved the way for the all-new Challenger SRT Demon 170. It's an absolute beast and the performance specs are mind-boggling, especially for a street-legal factory car.
Without further ado, let's rattle off some numbers:
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* 1,025 hp (764 kW / 1,039 PS) and 945 lb-ft (1,280 Nm) of torque on E85 * 900 hp (671 kW / 913 PS) and 810 lb-ft (1,097 Nm) of torque on E10 * 0-60 mph (0-96 km/h) in 1.66 seconds * NHRA-certified quarter mile time of 8.91 seconds at 151.17 mph (243.28 km/h) * Highest g-force acceleration of any production car at 2.004 g's * $96,666 (excluding destination)
We'll give you a second to let those numbers sink in as they're absolutely insane. However, while the 0-60 mph (0-96 km/h) time of 1.66 seconds would seemingly annihilate everything including the Bugatti Chiron and Rimac Nevera, Dodge confirmed that's with a rollout when we asked. This means that the time includes the car rolling for a short distance before the official acceleration time starts. While this slightly affects the time compared to a measurement from standstill, it's still an impressive feat.
An Almost All-New Engine
The Challenger SRT Demon 170 is lightning quick and that's thanks to a completely reimagined 6.2-liter V8. The changes are so extensive that Dodge said it's almost an all-new engine as the camshaft is the only significant part that carries over untouched.
The V8 draws inspiration from the one used in the original Demon and "shares DNA" with the Hellephant C170 crate engine. As a result, a number of components are upgraded and this includes a 3.0-liter supercharger, which delivers nearly 40 percent more boost pressure (21.3 vs 15.3 psi) than the Challenger SRT Hellcat Redeye Widebody.
The supercharger pulley has also been upgraded, while the fuel rails and injectors are capable of delivering 164 gallons (621 liters) of goodness every hour. Dodge notes that's more than the average shower head in America and that might make you want to take a cold shower.
Elsewhere, there's a larger diameter throttle body, upgraded fasteners, and nitride-coated intake valves. The engine also sports upgraded valve guides and seat materials for ethanol compatibility, higher-strength connecting rods, new main and rod bearing materials for increased load capability, and new spark plugs that deliver "optimal combustion with ethanol fuel."
While that's just a brief overview of the engine upgrades, the car comes with a recalibrated powertrain control module that optimizes fueling and spark timing for both premium and ethanol-blended fuels. Speaking of the latter, a sensor determines the ethanol percentage in the fuel and that number is shown on the instrument cluster.
The engine's output adjusts automatically based on the ethanol percentage and "when a 20 percent threshold of ethanol is detected, the gas pump icon located in the cluster will appear as white." When the ethanol content exceeds 65 percent, the fun begins as the icon turns blue to inform drivers the full 1,025 hp (764 kW / 1,039 PS) and 945 lb-ft (1,280 Nm) of torque is at their disposal.
A Driveline Built To Last
A powerful engine is sure to draw attention, but it doesn't matter much if you can't put that power to the ground without the car grenading itself. In the Demon 170, the engine is connected to an upgraded eight-speed automatic transmission that sends power to a beefier rear prop shaft. The latter is 30 percent stronger than the one found in the original model thanks to increases in tube diameter and wall thickness as well as the use of larger CV joints.
The rear axle has been fortified and features a housing that is 53% stronger thanks in part to Hot Isostatic Pressing. It also boasts a larger 9.4 inch (240 mm) ring and pinion as well as a new input flange to accommodate the larger CV joint.
They're joined by 43 spline rear half shafts, which benefit from a revised heat treatment process and offer "optimized stiffness for acceleration performance."
Bespoke Drag Radials And Available Carbon Fiber Wheels
The upgrades don't end there as the Challenger SRT Demon 170 is the "first-ever factory production car built with staggered drag radial tires and fender flares." As part of this effort, Dodge and Mickey Thompson spent months creating bespoke rubber for the ultimate muscle car.
The front wheels measure 18- by 8-inches and wear ET Street tires that are optimized for the drag strip. Out back, there are smaller and wider 17- by 11-inch wheels wrapped in ET Street R drag radials.
The latter aren't your run of the mill rubber as they feature added grooves for improved on-street performance. They also have a nylon body for greater power transfer compared to traditional polyester sidewalls. Dodge went on to say the lighter front wheels help transfer weight to the rear and deliver a significantly higher coefficient of traction, when compared to street tires used on similar surfaces.
Speaking of the wheels, they're made from forged aluminum. However, customers can order optional carbon fiber wheels that have a forged aluminum center, titanium hardware, and a large weave pattern for a more noticeable appearance. Dodge says the front carbon fiber wheels save 20.12 lbs (9.1 kg) of weight, while the rear shave off 11.98 lbs (5.4 kg) compared to the standard Redeye Widebody.
As for the aforementioned fender setup, the rear has Widebody fender flares while the front doesn't. Dodge says this helps to save 16 lbs (7.3 kg) of weight.
On the topic of weight savings, the car is 157 lbs (71.2 kg) lighter than the Hellcat Redeye Widebody. This is due to a number of weight saving measures including the elimination of trunk trim, NVH padding, and a rear seat delete. The model also has lightweight carpeting, a minimalist audio system, lightweight front brakes, and hollow sway bars.
Line Lock, A Power Chiller And TransBrake 2.0
As the ultimate muscle car, the Demon 170 has a few tricks up its sleeve. Among them is TransBrake 2.0, which is billed as a new and improved version of the system that debuted on the original Demon.
Owners can press a dedicated button and be taken to a TransBrake Performance Page, which enables them to "configure and select from multiple launch-torque profiles to match the engine power delivery to specific track conditions." Drivers can select between high, medium, and low grip surfaces as well as vehicle launch settings best fit for the conditions at hand.
While it's a bit hard to explain everything, Dodge says the "TransBrake allows engine throttle to be increased up to 2,350 rpm and generates greater powertrain energy with maximum torque converter multiplication, an up to 110 percent increase in engine stall torque compared to brake torque and produces up to 15 percent more torque at the rear tires during launch."
Besides TransBrake, drivers will find a Torque Reserve function, Launch Control, Line Lock, and Launch Assist. The latter aims to reduce wheel-hop by maximizing tire contact during launches.
The SRT Power Chiller is also making a return and it uses the air conditioning system to cool the supercharger intercooler, lowering the air induction temperature by up to 45deg F (7.2deg C). The model also has a Race Cool Down feature, which provides cooling even after the engine has been shut off.
Moving onto the suspension, the Demon 170 has adaptive-damping Bilstein shocks and a slightly higher rear ride height. The model also sports 'softer' springs and sway bars as well as a revised rear suspension camber that increases the contact patch under load.
Drivers will be able to select between three different modes known as Auto, Custom, and Drag. Auto is designed for the street, while Drag is made for the strip as it optimizes traction as well as the suspension, transmission, and steering for maximum performance.
A Familiar Design That's Easy To Overlook At First Glance
Despite being the most over-the-top muscle car ever created, the Demon 170 doesn't really standout aside from its Air-Grabber hood, Air Catcher headlights, and mismatched fender flares. In fact, if you pulled up from behind, you'd probably never notice there was anything special about the car until the light turned green.
That being said, the model sports new Demon badges with a "170 neck tattoo." The Demon also has a yellow eye as a reference to ethanol.
The car will be available in 14 different colors including heritage hues such as B5 Blue and Plum Crazy. Customers can also order an optional Satin Black hood or a more extensive treatment that sees Satin Black applied to the hood, roof, and rear decklid.
While the exterior is familiar, the cabin is bare bones as the special edition eschews a front passenger seat, rear seats, and insulation. This results in a relatively basic interior that features a minimalist two-speaker audio system and a houndstooth driver's seat with a Demon 170 logo.
That being said, the car has a handful of special touches including unique instrument cluster graphics and a badge featuring the last four digits of the vehicle's VIN. They're joined by an Alcantara-wrapped sport steering wheel with carbon fiber accents as well as an illuminated SRT logo.
Customers willing to sacrifice weight savings for comfort can get an optional premium leather interior package. It adds heated and ventilated front seats with black Alcantara and Laguna leather upholstery. They're joined by a heated steering wheel and an 18-speaker Harman Kardon premium audio system. Customers can also get Demonic Red Laguna leather, if they're looking for a splash of color.
Pricing Starts At $96,666
The Dodge Challenger SRT Demon 170 will be limited to 3,300 units and pricing starts at $96,666. The order books open on March 27th and this is one car you certainly don't want to miss.
We'll have more to say about pricing, perks, and options in a separate article, but Dodge CEO Tim Kuniskis said the company "Pulled off all the governors to reach a new level, a new benchmark of 'factory-crazy' production car performance." He went on to say the final Last Call special edition celebrates the end of the HEMI muscle car era and we think they did it in spectacular fashion. | Dodge Opens The Gates Of Hell With 1,025 HP Challenger SRT Demon 170 |
The clouds in car heaven will soon be filled with tire smoke.
Dodge is discontinuing its V8-powered car models at the end of 2023 and launching the electric Charger Daytona SRT next year.
The performance-oriented brand is sending off the engine configuration with a "Last Call" model being revealed in Las Vegas on Monday night that's expected to be the most powerful and quickest American muscle car ever.
Dodge hasn't released any details about the car ahead of the event, but several teaser videos it has posted online suggest it will be able to run on high octane E85, accelerate through a quarter-mile in less than nine seconds and hit a top speed of 215 mph.
THE DODGE CHALLENGER IS AMERICA'S BEST-SELLING SPORTS CAR ... AGAIN
It marks the end of a V8-powered era that started in the 1950s and has included historic engines like the 426 Max Wedge, 440 Six Pack and of course the legendary Hemi motors.
"Those were workhorses for Dodge, industrial vehicles, trucks, cars, everything," Dodge historian and valuation expert Dave Wise told Fox News Autos.
Dodge Hemis arrived in the early 1950s with 140 horsepower. Today Dodge sells one without a car called the Hellephant that's rated up to 1,100 horsepower, which has been featured in amazing custom builds commissioned by the likes of comedian Kevin Hart and Dodge head designer Ralph Gilles.
The Hemis take their name from the hemispherical shape of their combustion chambers, which allow for less heat loss, higher operating pressures and larger valves for the pistons to breathe through that add up to more power per cubic inch.
The first Dodge Hemi was known as the Red Ram and debuted in the 1953 Coronet as an upgrade from the standard inline-six-cylinder. It had a 241 cubic-inch displacement and was rated at 140 hp. Modified versions went on to become a favorite of stock car racers, including Lee Petty.
Dodge and its sister Mopar brands, Plymouth and Chrysler, stepped things up in 1964 with the introduction of the 426 Hemi, which was nicknamed "The Elephant" and originally developed with NASCAR in mind, but went on to become a favorite on the growing drag racing scene.
"That really put Mopar on the scene," Wise said. "They just continued to level up their performance and street credibility."
The cars got wilder as the decade wore on, none more than the 1969 Charger Daytona designed for NASCAR homologation with an aerodynamic nose cone and high rear wing that was so good it led to rules changes to make it obsolete.
It wasn't much of a commercial success. Just 503 production cars were built that year and only 70 had the Hemi, but the survivors are among the most sought-after collector cars today and one sold for a record $1.43 million this January.
"The largest consumption of Hemi muscle cars was in the Rust Belt and they sold in much smaller numbers than the Fords and GMs, making them rare today," Wise said.
Increasingly strict emissions regulations and rising fuel prices led to the Hemi's demise in the early 1970s, but it made a triumphant return to Dodge cars in 2005 with the launch of the Magnum station wagon, which featured a modern 5.7-liter version.
The Charger sedan followed in 2006 and brought with it a 6.1-liter V8, while the lineup was expanded with the 2008 Dodge Challenger coupe, which is the same basic car that's on sale today.
Dodge decided to blow the world away in 2015 with the launch of the Challenger SRT Hellcat, which was powered by a 707 hp 6.2-liter supercharged V8 that made it the most powerful mass-produced American car ever up until then.
It upped the ante in 2018 with the limited edition Challenger SRT Demon, which had an 808 hp version of the engine that could also produce 840 hp when running on race gas
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Rumor and speculation about the new car's engine ranges from a 909 hp version of the Hellcat motor to a factory-equipped Hellephant, but the truth won't be known until it is unveiled at Las Vegas Motor Speedway at 6 p.m. local time.
As for the electric cars that will follow it, Wise, whose family has run a company dedicated to Mopar restorations and sales for over 70 years, isn't sure the old guard will come along for the ride, but says Dodge is on the right track.
"It's a generational thing. Dodge fans in their 50s and older are probably mostly dyed in the wool gas car fans, but electric performance is outstanding and I think it's here to stay," Wise said.
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"Nearly my entire family worked for Chrysler, and we've always been around muscle cars, but my daughters love electric." | V8 Dodge muscle cars are going extinct: These were some of the greatest |
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Dodge turned the automotive world on its ear when the manufacturer launched the 840-horsepower SRT Demon in 2018. In addition to brute power, the drag-race-focused Challenger used transmission tricks and drag slicks (OK, so the radials did actually have tread on them) to deliver a muscle car that served up a nine-second quarter-mile straight from the factory. No mods necessary.
Now, Dodge has turned the dial up to 666 to give the V-8-powered Challenger--now in its final year of production--a whopping 1025 E85-fueled horsepower!
Even on premium E10 gas you can buy at the pump, when running a more conservative tune due to the lower octane rating, the 6.2-liter Hemi in the Demon 170 churns out an impressive 900 horsepower and 810 lb-ft of torque thanks to a host of performance upgrades.
(c) Provided by Hagerty Media 2023 dodge demon 170 hellcat
What kind of performance can we expect from this drag-strip beast? Dodge promises 0 to 60 mph in 1.66 seconds and quarter-mile elapsed times of just 8.91 seconds, making this the first factory production car to dip into the eights.
"To celebrate the end of the Hemi muscle-car era, we pulled off all the governors to reach a new level, a new benchmark of 'factory-crazy' production car performance," said Tim Kuniskis, CEO of the Dodge brand.
The Demon 170 picks up where the last Demon left off but uses a 3.0-liter supercharger that's based on the unit used on the larger, 426-cubic-inch (6.9-liter) Hellephant crate engine. The Demon 170's 105-mm throttle body pulls in air and the supercharger crams it into the cylinders at 21.3 psi, 30 percent more airflow than the Hellcat Redeye. That explains why the Demon 170 makes its peak horsepower at 6500 rpm, rather than at 6300, where the Hellcat Redeye maxed out, even though both models' engines use the same camshaft.
That cam is pretty much the only thing the two engines share, since every other aspect of the Hemi was upgraded to handle the extra cylinder pressure--up to 2500 psi when using full E85 fuel.
(c) Provided by Hagerty Media (c) 2023 Stellantis
Upgrades start at the foundation. The 6.2-liter block, cast from iron from its beginning, was modified to accept new fasteners for billet-steel main caps, which increase clamping pressure* by 44 percent. Likewise, the cylinder heads were machined for head studs that provide 38 percent more clamping force.
(*Educational side note: Imagine changing a tire, and using a breaker bar to twist each lugnut back onto its bolt. As you tighten, or torque, a lugnut, you're stretching the bolt. As the bolt tries to contract to its original length, it's resisted by the nut, and voila: The clamping force that, in this example, holds wheel onto hub. More, larger, or stronger bolts can provide greater clamping force before failure.)
The Demon 170's engine also uses new connecting rods, and new rod- and main-bearings, to hold up to the intense cylinder pressure. The modifications allow the 6.2-liter Hemi to consume much more air--and fuel. Dodge noted the injectors flow 164 gallons of fuel per hour, more than your average U.S. shower head. That's to be expected, as the stoichiometric air-to-fuel ratio for E85 is around 9.7:1 compared to 14.7:1 for gasoline.
By the way, the "170" in the name is a callout to E85, as its 85 percent alcohol makes it 170 proof. Dodge teased the ethanol fuel with moonshine jugs shown in previous sneak-peek videos.
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The ethanol is key to making the Demon 170's full 1025 horsepower. There's no black key and red key like the last Demon. Instead, the Demon 170's horsepower output is based on the state of tune and changes depending on what kind of fuel it senses. When the vehicle detects at least 20 percent ethanol, a gas-pump icon in the instrument panel lights up white. When at least 65 percent is detected, the icon changes to blue and all 1025 horses are ready to play. Game on.
It's not going to be easy to get all that Hemi's torque to the ground. To keep the drivetrain from grenading after multiple wheels-up launches, Dodge beefed up the Demon 170's drivetrain with a new differential casting that houses a larger, 240-mm ring gear. Everything that bolts to the diff's center section is more robust as well, with new, 43-spline halfshafts and a driveshaft that's 30 percent stronger than the Challenger Redeye's.
(c) Provided by Hagerty Media Like its 2018 Demon predecessor, the Demon 170 uses a customizable TransBrake to launch hard off the line and a drag-tuned suspension that quickly transfers weight to the rear wheels. It also packs a "Power Chiller" that routes the air conditioning to the air-to-water charge cooler, lowering intake air temps by up to 45 degrees. (c) 2023 Stellantis
Dodge developed a Demon 170-specific set of 315/50R17 Mickey Thompson ET Street R drag radials and tasked them with the most difficult chore: maintaining traction. A narrower set of Mickey Thompson 245/55R18 ET Street front tires sit up front and are hopefully just along for the ride on most track passes. That strange, staggered wheel sizing means there are widebody fender flares on the rear but on not the front, which helps keep weight down. (And is a handy cue for car-spotters.)
The smaller front wheel and tire, plus the single set of flares, shed 17 pounds from the front compared to a Challenger Hellcat Redeye Widebody, but there are more weight savings to be had with the optional carbon-fiber wheel package from Lacks Enterprises.
(c) Provided by Hagerty Media The Dodge brand worked closely over many months with Mickey Thompson Tires to develop applications exclusively for the 2023 Dodge Challenger SRT Demon 170 that were crucial to the vehicle achieving maximum traction under extreme acceleration. (c) 2023 Stellantis
The lightweight 17x11-inch rear wheels ditch 11.98 pounds while 18x8-inch wheels save a total of 20.12 pounds off the front. With the optional wheels, weight is reduced by a total of 157 pounds when compared to the Hellcat Redeye Widebody, since the passenger seat, rear seats, trunk trim, and noise insulation were all tossed out of the Demon 170 in the name of speed.
All interior trim options, including the premium leather interior option that adds heated/ventilated seats and an 18-speaker Harman Kardon audio system, along with other luxury goodies, allow for the rear-seat delete.
(c) Provided by Hagerty Media (c) 2023 Stellantis
(c) Provided by Hagerty Media (c) 2023 Stellantis
(c) Provided by Hagerty Media (c) 2023 Stellantis
(c) Provided by Hagerty Media (c) 2023 Stellantis
(c) Provided by Hagerty Media (c) 2023 Stellantis
A maximum of 3300 Demon 170s will be built, with 3000 destined for the U.S. and 300 bound for Canada. Orders open on March 27, 2023. MSRP before destination and gas guzzler tax is $96,666. Any current Demon owners who secure an allocation for the Demon 170 will have the opportunity to get their Demon 170 with the same serial number as their original Demon.
As sad as we'll be to see the burly, Hemi-powered Challengers go away, you have to give it to Dodge for giving the Challenger and its 6.2-liter engine a proper sendoff. The Demon 170 has certainly raised the bar for whatever Dodge has planned to take over for V-8 powered muscle.
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Silicon Valley Bank was the only one that would give Liz Giorgi a line of credit. It was 2019, and Giorgi was launching a new business venture called soona, a virtual photography studio service. Twenty-seven other banks had turned her away. Giorgi remembers sitting down with bankers who asked clearly inappropriate questions: What does your husband do for a living? How much money does he make?
But Silicon Valley Bank (SVB) offered a solution. Being a resource for women founders was one of SVB's stated goals. It helped women-owned, venture-backed tech businesses like hers in a climate where businesses owned by people of color, women and LGBTQ+ people face significant barriers to accessing credit. That was true even for founders like Giorgi, who had already previously built a successful video production business that counted Facebook as a client.
"People think of this underbanked problem as these banks need to market to more women," Giorgi said. "No no no, this is a cultural problem that happens at an individual level ... and that creates these ripple effects across the entirety of the entrepreneurial ecosystem where the end result is women are underbanked."
Access to Innovation, one of SVB's programs, was centered around connecting women-, Black- and Latinx-owned businesses with start-up funding. Another, the SVB Fellows Program, connected entrepreneurs from those same groups with venture capital firms.
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The bank was focused on diversity within its workforce, too. For five years in a row, it had been recognized by the Bloomberg Gender-Equality Index for its performance in transparent gender data reporting and equity in the workplace. About 46 percent of its workforce and 38 percent of its senior leadership was women. Those diversity, equity and inclusion initiatives have drawn criticism from conservative lawmakers who say the bank was too focused on "woke" policies and that caused it to make mistakes, but so far there has been no evidence that those initiatives were connected to what would happen next.
The bank knew that "women entrepreneurs are a massive market opportunity and they were very bullish on trying to engage with our community in various ways," said Karen Cahn, the CEO of iFundWomen, a funding marketplace for women-led start-ups and small businesses.
But last week, SVB's appetite for risk and a serious miscalculation of the changing economic climate led to its demise. SVB failed to act quickly when a confluence of rising interest rates and diminished funding in start-ups, the bulk of SVB's business, led founders to start pulling cash from their accounts. To help mitigate that, SVB sold a portfolio of Treasury bonds at a nearly $2 billion loss -- and when news got out, panic ensued.
The vast majority of the accounts with SVB held more than $250,000, the most that the Federal Deposit Insurance Corporation (FDIC) will insure in case of a bank failure. About 90 percent of the bank's $175 billion in deposits were uninsured, according to FDIC filings, an unusually high proportion. Fearing the bank's collapse after the Treasury bonds were sold, depositors withdrew their money before they lost it. That sent the bank into free fall, and the federal government stepped in. On Monday, President Joe Biden announced that depositors will be made whole, whether or not all of their money was insured.
That was a relief to small-business owners who were worried they'd lose their money and their businesses, but the question now is what comes next? Where will they go if SVB was one of the few banks that would have them? Giorgi said she's heard from seven other women founders who are wondering, like her, where to look.
"One of the reasons that there are threads and text threads and Slack threads and female founders talking about this is because you want to be able to say, 'OK, I got this sort of offer from this bank, what did you get?'" said Giorgi, whose relationship with SVB helped turn her business into a 145-people operation with $54 million in venture capital funding in just three years.
Underrepresented founders "are mostly asking to be treated the same," she said. "And these situations are more painful simply because we aren't."
A new Federal Reserve survey released this month found that small businesses report significant challenges getting fully approved for the loans they're seeking from banks. The percentage of small businesses that received full funding dropped 36 percent in 2022 when compared with 2019, and the largest drop was for Black-owned businesses (41 percent). Asian-owned small businesses saw a 28 percent drop in approvals, and Latinx-owned businesses experienced a 17 percent decrease. The survey also found that 74 percent of women-owned firms had to rely on the owner's personal savings or funds from family and friends in the past five years, compared with 64 of businesses owned by men.
LGBTQ+-owned businesses report similar challenges: Nearly half of LGBTQ+ owners received none of the funding they applied for in the past year, according to an analysis of a 2021 Federal Reserve survey by the Center of LGBTQ Economic Advancement & Research. Thirty-three percent of respondents said lenders didn't approve financing for "businesses like theirs". The figure was 24 percent for non-LGBTQ+-owned businesses.
But it's those same groups that have been driving business creation. In 2021, 49 percent of new businesses were run by women, compared with 28 percent in 2019, according to a recent study by Gusto, a software company that provides payroll and HR management for businesses. The share of new businesses run by Black owners tripled to 9 percent in that timeframe, and the share of Latinx owners rose from 8 percent to 10 percent.
And yet, in 2022, women business owners got just 2.1 percent of capital investments in venture-backed startups, according to PitchBook, a venture capital, private equity, and merger and acquisition database. About 0.3 percent goes to women of color, iFundWomen found. And LGBTQ+ founders get less than 1 percent of venture capital funding, according to StartOut, a nonprofit that collects data on LGBTQ+ entrepreneurs.
Even at a bank like SVB, which worked primarily with venture-capital-backed firms, many women, people of color and LGBTQ+ people were shut out. Now, the bank's failure will affect all minority groups that already struggle to get venture capital funding, Cahn said, because those purse strings are probably going to get tighter.
"The funding opportunities in venture capital for women that were virtually nonexistent before are literally nonexistent now," Cahn said.
Vanessa Pham, the CEO and co-founder of Asian cooking sauce company Omsom, said that's one of her concerns in the days ahead.
"In any contraction everything gets harder for small business and emerging brands," said Pham, who runs the business with her sister, Kim. They're daughters of Vietnamese refugees. In a collapse like SVB's, "I know that will impact us in many ways, both in terms of consumer spending and meaningfully on operations and financial access."
When news broke of SVB's failure, Pham said her first worry was that they would fall into an ecosystem where it would be up to investors and creditors "to decide who gets to live." Omsom had all of its capital in an SVB account.
Businesses owned by people of color and women are viewed as riskier from the onset, in large part because of historic inequality that forces those businesses to start from a place of lower capital and less access. For women, it's in part because they are paid less than men -- the gender pay gap hasn't budged in 20 years -- and so they are more likely to have less money saved, to have fewer assets like a home. Those challenges are compounded for people of color, and women of color especially, for whom the pay gap is wider, homeownership rates are lower, and banking relationships are less established.
Still, Pham has had more access than many women of color, she said. She studied at Harvard and worked as a management consultant at Bain & Company. She went to SVB because she knew they worked well with other venture-capital-backed start-up businesses.
For her, getting through the collapse of the bank happened through community. The Pham sisters posted an open letter to SVB on Instagram that went viral.
"This poses a major existential threat to many small businesses (especially those creating physical goods)," the sisters wrote on Saturday. "When large institutions and gatekeepers make big changes, it is oftentimes the smallest and most marginalized groups who feel the impact the heaviest."
In response, investors, vendors and customers showered them with support, including by buying their products. A friend helped Omsom establish a line of credit with JPMorgan Chase. Pham's now working on establishing more banking relationships.
"I would say there is a lot of grassroots community building going on where we are supporting each other in very tangible ways," Pham said.
There are logistical challenges in finding new banking partners, and particularly ones who understand how to assess risk for tech start-ups, said Randell Leach, CEO of Beneficial State Bank. When there's a clear asset the bank can repossess if something goes wrong -- like a refrigerator at a bakery -- that's an easier calculation to make than if the asset is software, like in the case of Giorgi's business. Tech founders want to form a relationship with a bank like SVB that understands the industry and provides additional support for commercial banking, like multi-currency accounts and wires, as well as broader support connecting businesses with investors.
The pool of options, then, is quite small.
Community Development Financial Institutions like Leach's -- which include credit unions, mission-driven banks or loan funds that specifically work with underserved communities -- offer one solution for new partners, albeit a limited one. They may not "have the balance sheet for larger loans, they may not have this rapid approval for a credit score model," he said, but they do have the values proposition. Angel investors that specialize in funding minority-run start-ups are another potential solution.
Moving forward, banks may also put higher standards in place for issuing credit, loans and providing funding, which will also affect businesses owned by women, people of color and LGBTQ+ people, said Lyda Bigelow, a professor of strategy and entrepreneurship at the University of Utah.
"Part of the problem is that, especially when you're talking about start-ups, perhaps your current return measure, or current increase in sales year-over-year, or current expected growth over the next 12 months -- maybe those metrics don't look as good as a comparable start-up run by a White dude," Bigelow said. "That's always difficult for the smallest and riskiest start-ups and that generally correlates with the founders' demographics."
Danny Taing, the founder of Bokksu, a Japanese snack box subscription service, said he's been in a sense mourning the loss of the community that SVB created for minority founders. Not only did the bank connect him with his lead investors, but it also helped fund Asian-American events and was planning to feature him more broadly in the community in the coming months as both an Asian-American founder and an out gay man.
"It's going to be a huge loss for our community because plenty of straight White male founders have support networks, but there's pretty much no money for us. ... Now I have to build new relationships again from the ground up with bigger banks, and honestly I don't think they are going to care about me," Taing said. "It's this loss of a really big champion."
He and other founders are working to raise awareness to the challenges for minority-owned businesses and to help each other with funding if things get difficult again.
"We have to help each other," Taing said, "because not a lot of people helped us." | Women and minority business owners relied on Silicon Valley Bank when other banks turned them away. Now what? |
Analysts say the SVB collapse will further pressure the declining VC market, but other investors say it's business as usual. (GeekWire Photo / Nate Bek)
Some venture capitalists say it's business as usual for their investment plans in the aftermath of Silicon Valley Bank's downfall.
But analysts with PitchBook wrote in a report this week that SVB's collapse "could not have come at a worse time for the VC market."
The chaos surrounding Silicon Valley Bank and larger upheaval in the banking sector coincides with an already sluggish venture capital investing landscape, following record funding levels in 2021.
Higher interest rates and the broader tech downturn were already slowing investment activity. Pacific Northwest startup deal value was down nearly 80% in the first two months of this year, according to GeekWire's recent fundings list.
Nationally, venture-backed companies raised $29.3 billion across 1,245 deals through February, according to preliminary VC data provided by Ernst & Young. That's down from 2,383 deals and nearly $56 billion during the same two-month period last year.
"There would never have been a good time for the bank to fall, but this is another major pressure on the market that will accelerate the pricing correction in VC," PitchBook senior analyst Kyle Stanford wrote in an email newsletter Saturday.
Andy Liu, partner at Unlock Venture Partners, predicts that new deals will slow in the near and mid-term, while the bar for entrepreneurs will be raised.
"The impact psychologically for investors will be to invest in startups likely to have the least amount of future financing risk, which includes more syndicated deals resulting in deals that take much longer to put together," he said.
Unprofitable startups will have a harder time raising venture debt from banks, Liu said. SVB was a top provider of venture debt, a specialized loan typically repaid using future venture capital, helping startups fund their growth and bridge the gap between investment rounds.
Other investors say it's business as usual.
"This was a moment in time that froze funds," said Hope Cochran, managing director at Madrona Venture Group. "It certainly doesn't change our strategic direction for what we're here to do. There is no reason why we would slow down investing now."
Tola Capital Managing Director Sheila Gulati said there will be long-term impacts on startups, such as increased attention on cash management, and changes to venture debt and revenue-based financing.
But she does not expect a "funding freeze," particularly with the continued rush of new innovation around artificial intelligence technology such as the launch of GPT-4 this week.
"This AI tailwind will far outweigh the banking crisis headwind from a venture funding perspective, and we couldn't be more excited to back great companies at this time," she said.
Speaking on the GeekWire Podcast this week, Kirby Winfield, founding general partner of Seattle VC firm Ascend, agreed there is not "some sort of deep freeze."
Winfield said venture capitalists have a fiduciary duty to their limited partners to discover and invest in the "best founders in the market." He committed to a deal last week, in the middle of the SVB fiasco.
"There's no stopping deployment," Winfield said.
Legendary venture capitalist Bill Gurley, who backed Seattle tech giants Zillow and Rover, told Bloomberg he expects prolonged pain in the tech sector.
But the turmoil may actually create opportunities for investment.
"A lot of people aren't investing," said Jason Stoffer, partner at Maveron, "which always makes it a good time to invest." | Analysts caution that Silicon Valley Bank collapse could further cool declining VC market |
Welcome to The Interchange! If you received this in your inbox, thank you for signing up and your vote of confidence. If you're reading this as a post on our site, sign up here so you can receive it directly in the future. Mary Ann is on a much deserved break this week, so I am filling in for her, bringing you the hottest fintech news of the previous week. Now let's dive into the fintech news because you are probably wondering what's up with your favorite bank, and I promise to get to that first. Let's go! -- Christine
We've learned a lot more about the Silicon Valley Bank collapse since the last time you read this newsletter (lots and lots).
The latest being that SVB Financial filed for Chapter 11. And First Republic Bank, which was ensnared in all this mess earlier this week, found some saviors in the way of some of the nation's largest banks that reportedly came together to bolster the bank with around $30 billion in rescue deposits.
This week, some of my colleagues took a deep dive into the effects on consumers, businesses, banks, investors, and so on -- all over the world -- who had made deposits with SVB. If anything, it shows just how connected the startup ecosystem really is.
Annie Njanja and Tage Kene-Okafor got the scoop on African companies affected by the SVB collapse. For example, they spoke to Nala, a mobile money transfer startup, which was able to pull its funds out of SVB before it collapsed. In contrast, Chipper Cash was among several startups that could not access a portion of their funds at the time.
They noted how prolific SVB was in the startup ecosystem when it came to companies opening SVB bank accounts, especially those who were part of a U.S. accelerator program, even explaining how difficult that process was when potential account holders didn't have a Social Security number or established U.S. address. They also wrote that this type of incident, along with existing high-risk banking options, "have reinforced the need to build homegrown solutions" in Africa.
"If you want U.S.-based banking, which does instill credibility (still) with investors, those are your options," said Stephen Deng, co-founder and general partner at Africa-focused early-stage VC firm DFS Lab. "I think what changes is that founders must know how they manage counterparty risk. Sweep networks, and treasury management, are all top of mind."
Meanwhile, Brian Heater reached out to founders and investors in the robotics sector, typically a capital-intensive industry, about what the fallout could mean for them in terms of access to future capital and continuing to diversify sources of funding.
An interesting comment came from Peter Barrett at Playground Global, who said, "If SVB rises from the ashes -- and we act to mitigate the weaponization of concentrated digital media -- money may not become impossibly expensive for capital intensive technologies like robotics. On the other hand, now that we have motor memory for bank runs, things could get messy. How best would an adversary attack innovation in robotics? We saw how destructive a handful of influential tweets and emails could be in unwinding a valued and respected 40-year-old institution. Why bother with a cyberattack when a few well-placed uppercased words from apparently reputable sources can wound thousands of our most innovative companies?"
Indeed. As you can imagine, all of this is continuing to develop, so stay tuned for more.
Moving on, we are constantly told to diversify our holdings in the financial world -- have money in a number of different mutual funds or have some money in checking and other money in savings. Over in TechCrunch+, all of this SVB business got Natasha Mascarenhas thinking about how to do this.
She spoke with some founders and investors about the concept of "single points of failure." Specifically, where else a business can diversify -- for example, founding team and succession plans -- to make sure it doesn't have its eggs all in one basket.
Before I get into more news, I wanted to mention that while people have been pulling money out of SVB, there are some still supporting the bank. For example, Brex announced that it was depositing $200 million of its money into SVB -- pulling it from other big banks to do so. CNN also reported on others.
Weekly News
Some companies that provide banking services to startups stepped up following the Silicon Valley Bank collapse to offer their services and help companies maintain cash flow. Mary Ann reported on a few companies, like Rho, that saw a surge in new customers, including Mercury, which moved quickly over the weekend to launch a new product called Mercury Vault. This product "offers customers expanded FDIC insurance of up to $3 million via a new product in the wake of Silicon Valley Bank's collapse. That's 12x the industry standard for institutions of $250,000 in FDIC insurance that other institutions offer." Then Friday, the company upped that, announcing on Twitter that "by Monday, Mercury customers will have access to up to $5M in FDIC Insurance -- 20x the per bank limit."
It's official: by Monday, Mercury customers will have access to up to $5M in FDIC Insurance - 20x the per bank limit. Learn more: https://t.co/0YSRB0AOX6 -- Mercury (@mercury) March 17, 2023
Stripe was quite active this week. I updated an earlier story Mary Ann worked on about Stripe going after additional funding. At the time, it was expected it would bring in about $2 billion, but instead, Stripe ended up with $6.5 billion but at a reduced valuation of $50 billion. The Series I proceeds will go to "provide liquidity to current and former employees and address employee withholding tax obligations related to equity awards, resulting in the retirement of Stripe shares that will offset the issuance of new shares to Series I investors." Also, Stripe was chosen to work with OpenAI to monetize ChatGPT and DALL-E.
Reports Manish Singh: "PhonePe has raised another $200 million as part of an ongoing round, a move that has now helped it pull $650 million in recent weeks despite the market slump as the Indian fintech giant bulks up its war chest following its recent separation from parent firm Flipkart. Walmart, which owns the majority of PhonePe, has invested $200 million into the startup. The ongoing round values the Bengaluru-headquartered company at $12 billion pre-money. The startup has said that it plans to raise up to $1 billion as part of the ongoing round."
Reports Natasha Mascarenhas: "Founders are still shaking off the dust a week after Silicon Valley Bank's collapse. Rumors are swirling about who might be looking to buy the beleaguered bank's assets. Some of the top firms urged their portfolio managers to diversify their assets as the bank was collapsing, and are continuing to do so, even though regulators have stepped in to guarantee that all depositors would get access to their stored cash. While diversifying assets feels obvious in retrospect, actually following that bit of advice is harder than it seems."
According to Sift's Q1 2023 Digital Trust & Safety Index, buy now, pay later (BNPL) companies saw payment fraud increase by a whopping 211% in 2022 over 2021. The report looked at over 34,000 sites and apps and highlighted some specific scams that fraudsters are using to steal from BPNL companies and merchants. For example, Telegram is one platform where Sift said "rapid proliferation of scammers advertise the services they could provide with stolen information," including fake credit cards and sale of compromised email credentials. In one scheme, Sift observed a fraudster posting "unlimited access" to an account on three of the top BNPL providers for just $35.
Adyen, providing end-to-end payment capabilities, said it further advanced its digital authentication solution, combining security and seamless checkout experiences for it customers. In testing, Adyen was able to authenticate the consumer on behalf of the issuer, while they remained on the merchant checkout page, helping merchants get a conversion uplift of up to 7%.
Funding and M&A
Seen on TechCrunch
Wingspan raises $14M for its all-in-one payroll platform for contractors
Here's a new corporate card startup, backed by $157M in equity, debt, going after Brex, Ramp
Metaverse payment platform Tilia gets strategic investment from J.P. Morgan
Indonesia's Broom builds out automated asset-backed lending for used car dealers
Nigerian credit-led fintech FairMoney acquires PayForce in retail-merchant banking play
And elsewhere
Masttro secures $43 million growth equity investment led by FTV Capital
Cover Genius, an insurtech for embedded protection, acquires Clyde
Greek fintech Natech grabs EUR10M in convertible bond to expand
Payments infrastructure startup Payabli closes $12M
Apexx Global, a payments orchestration startup, raised $25M
Chile-based recurring payments company Toku raises $7.15M
That's it for now. I hope you enjoyed my takeover of Mary Ann's column. Don't worry, she will be back for the March 26 edition! Have a great week, Christine | Silicon Valley Bank's crash is providing valuable lessons all over the world |
A version of this story first appeared in CNN Business' Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.
New York CNN --
It's difficult to overstate the influence that Silicon Valley Bank had over the startup world and the ripple effect its collapse this month had on the global tech sector and banking system.
While SVB was largely known as a regional bank to those outside of the tight-knit venture capital sphere, within certain circles it had become an integral part of the community - a bank that managed the idiosyncrasies of the tech world and helped pave the way for the Silicon Valley-based boom that has consumed much of the economy over the past three decades.
SVB's collapse was the largest bank failure since the 2008 financial crisis: It was the 16th largest bank in the country, holding about $342 billion in client funds and $74 billion in loans.
At the time of its collapse, about half of all US venture-backed technology and life science firms were banking with SVB. In total, it was the bank for about 2,500 venture firms including Andreessen Horowitz, Sequoia Capital, Bain Capital and Insight Partners.
But the influence of SVB went beyond lending and banking - former CEO Gregory Becker sat on the boards of numerous tech advocacy groups in the Bay Area. He chaired the TechNet trade association and the Silicon Valley Leadership Group, was a director of the Federal Reserve Bank of San Francisco and served on the United States Department of Commerce's Digital Economy Board of Advisors.
There's no doubt that the failure of Silicon Valley Bank left a large void in tech. The question is how that gap will be filled.
To find out, Before the Bell spoke with Ahmad Thomas, president and CEO of the Silicon Valley Leadership Group. The influential advocacy group is working to convene its hundreds of member companies - including Amazon, Bank of America, BlackRock, Google, Microsoft and Meta - to discuss what happens next.
This interview has been edited for length and clarity.
Before the Bell: What's the feeling on the ground with tech and VC leadership in Silicon Valley?
Ahmad Thomas: Silicon Valley Bank has been a key part of our fabric here for four decades. SVB was truly a pillar of the community and the innovation economy. The absence of SVB - that void - and coalescing leaders to fill that void is where my energy is focused and that is not a small task.
I would say there was a fairly high level of unease a few days ago, and I believe the swift steps taken by leaders in Washington have helped quell a fair amount of that unease, but looking at Credit Suisse and First Republic just over the last couple of days, clearly we are in a situation that is going to continue to develop in the weeks and months ahead.
So how do you fill it?
We're working to be a voice around stability, particularly about the fundamentals of the innovation economy. We can acknowledge the void given the absence of Silicon Valley Bank, but I do think we need voices out there to be very clear in highlighting that the fundamentals and the innovation infrastructure remains robust here in Silicon Valley.
This is a moment where I think people need to take a step back, let cooler heads prevail, and understand that there are opportunities both from an investment standpoint, a community engagement standpoint and corporate citizenship standpoint for new leaders in Silicon Valley to step up.
Are you working to advocate for more permanent regulation in DC?
It's far too early for that. But if there are opportunities to enhance access to capital to entrepreneurs to founders of color or in marginalized communities and if there are opportunities to try and drive innovation and economic growth, we will always be at the table for those conversations.
Do you have any ideas about how long this crisis will continue for? What's your outlook?
The problem is twofold: A crisis of confidence and the set of economic conditions on the ground. The economic conditions remain volatile for a variety of reasons: The softening economy, inflationary pressures and the interest rate environment. But I think right now we need to focus on stabilizing confidence in the investor community, in our business executive community and in the broader set of stakeholders around the strength of the innovation economy. That is something we need to shore up near term.
UBS is buying Credit Suisse in bid to halt banking crisis
From CNN's Mark Thompson
Switzerland's biggest bank, UBS, has agreed to buy its ailing rival Credit Suisse (CS) in an emergency rescue deal aimed at stemming financial market panic unleashed by the failure of two American banks earlier this month.
"UBS today announced the takeover of Credit Suisse," the Swiss National Bank said in a statement. It said the rescue would "secure financial stability and protect the Swiss economy."
UBS is paying 3 billion Swiss francs ($3.25 billion) for Credit Suisse, about 60% less than the bank was worth when markets closed on Friday. Credit Suisse shareholders will be largely wiped out, receiving the equivalent of just 0.76 Swiss francs in UBS shares for stock that was worth 1.86 Swiss francs on Friday.
Extraordinarily, the deal will not need the approval of shareholders after the Swiss government agreed to change the law to remove any uncertainty about the deal.
Credit Suisse had been losing the trust of investors and customers for years. In 2022, it recorded its worst loss since the global financial crisis. But confidence collapsed last week after it acknowledged "material weakness" in its bookkeeping and as the demise of Silicon Valley Bank and Signature Bank spread fear about weaker institutions at a time when soaring interest rates have undermined the value of some financial assets.
Read more here.
FDIC sells most of failed Signature Bank to Flagstar
From CNN's David Goldman
A week after Signature Bank failed, the Federal Deposit Insurance Corporation said it has sold most of its deposits to Flagstar Bank, a subsidiary of New York Community Bank.
On Monday, Signature Bank's 40 branches will begin operating as Flagstar Bank. Signature customers won't need to make any changes to do their banking Monday.
New York Community Bank bought substantially all of Signature's deposits and a total of $38.4 billion worth of the company's assets. That includes $12.9 billion of Signature's loans, which New York Community Bank purchased at a steep discount --- it paid just $2.7 billion for them. New York Community Bank also paid the FDIC stock that could be worth up to $300 million.
At the end of last year, Signature had more than $110 billion worth of assets, including $88.6 billion of deposits, showing how the run against the bank two weeks ago led to a massive decline in deposits.
Not included in the transaction is about $60 billion in other assets, which will remain in the FDIC's receivership. It also doesn't include $4 billion in deposits from Signature's digital bank business.
Read more here. | Silicon Valley Bank left a void that won't easily be filled |
A firestorm among the banking sector, including the failures of Silicon Valley Bank and New York's Signature and infusions of capital into First Republic Bank and Credit Suisse, has real estate investors scrambling to figure out what this all means for accessing debt.
"Our house view is that there is certainly a more constrained credit market, at least temporarily," says Michael Riccio, senior managing director and co-head of national production at CBRE Capital Markets. "However, it is still fairly early, and every lender is trying to determine how they are going to react to this change in the market," he says.
Related: Tax Considerations Relating to Debt for Distressed CRE Owners
Some real estate pros credit the federal government for moving quickly to prevent a bigger systemic crisis and returning some sense of stability, albeit it precariously. A joint statement issued by the Treasury Department, Federal Reserve and FDIC said that it would fully protect depositors of both Silicon Valley Bank and Signature Bank. "Our view is that it may be contained because of what the Federal government has done. So, we're thinking that there might not be widespread collateral damage," adds Riccio.
Yet the turmoil is already reducing liquidity in the commercial real estate capital markets. Lenders are expected to err on the side of caution with more conservative underwriting. That pullback is already evident in the past week with spreads that have widened across most lender groups--CMBS, debt funds and banks. And CMBS issuance has ground to a halt due to the volatility in the market.
Related: How C-PACE Financing Can Substitute for a High-Cost Mezzanine Loan
"After the closures of SVB and Signature Bank, it seems almost inevitable that CRE credit spreads will increase and lending liquidity will decrease over the short run," says JP Verma, senior product director, banking solutions at Trepp. "However, there are still several questions that don't have an easy or immediate answer, such as whether lending liquidity is drying up, how lending spreads are reacting, and how long this fallout will last."
The sector may not have helped its own cause with reports that a run of New York City real estate investors pulling money out of Signature Bank contributed to its failure. The bank also had been one of the largest players in New York City lending with $35 billion in loans to the sector on its balance sheet. Meanwhile, according to CoStar, at least four REITs--Cousins Properties, Alexandria Real Estate Equities, Paramount Group and Hudson Pacific Properties--reported that they face risk because of dealings with Silicon Valley Bank or its parent, SVB Financial Group.
A silver lining to all the doom and gloom is that when risk increases, as it has in recent days, investors often flock to safe investments like Treasury bonds, which pushes down yields and increases their price, notes Verma. This in turn should result in lower losses on bond sales, which is a positive for commercial real estate borrowers, as this means that mortgage rates that had spiked in recent months could now decrease. The industry also is waiting to see how turmoil in the banking sector may influence Fed interest rate policy. The Fed is set to address another possible rate increase at its March 22 FOMC meeting. According to the CME FedWatch Tool, the current probability forecast puts a 25-basis-point increase at 64 percent odds.
Banks conserve capital
Banks are coming off a record year of commercial real estate loan originations in 2022. According to Trepp, banks originated $479.1 billion in loans--nearly 60 percent of the total origination volume among all sources. With the current issues on top of a high interest rate environment, banks are likely to pull back, assess portfolio risk and focus on protecting deposits.
"I think 2023 definitely will be a slower year for banks. Banks are very focused on funding at the moment. Deposit growth is not nearly as strong as it was in 2022. So, that in and of itself will cause banks to be a bit more cautious from a lending perspective," says Johannes Moller, CFA, FRM, a director and ratings analyst in the financial institutions group at Fitch Ratings.
The capitol spigot is not turned off completely. Banks likely will reserve capital for customers that have existing relationships, especially their depositors, Moller adds. In addition, banks are apt to have different appetites for property types based on current portfolio concentrations, as well as supply and demand dynamics in the markets where they active.
Taking some of the recent bank turmoil out of the equation, the larger money center banks were already more constrained in real estate lending both late last year and the beginning of 2023. In comparison, regional and community banks remained very active. "We did an awful lot of our business with that group of banks last year," notes Riccio. Anecdotally, Riccio is still hearing that some banks have strong balance sheets and good liquidity. While they may underwrite a little more conservatively because there may be more concern about a possible recession ahead, they are still in the market and have plenty of money to lend, he says.
Strong commercial real estate fundamentals may help counter some of the current turmoil. From a high level, asset and credit quality metrics for commercial real estate are strong for banks, notes Moller. According to the Mortgage Bankers Association, delinquencies on commercial and multifamily mortgages held by banks and thrifts was below 0.5 percent as of the fourth quarter of 2022. When taking a closer look at some of the leading indicators--such as criticized or classified loans--there has been a modest uptick in areas such as office, but levels even overall are still well below long-term averages. "Banks are not starting to wave red flags, but they are mentioning that there is some degree of concern around the ability of their borrowers, specifically these office properties, to be able to perform long term given the dynamic we're seeing from work from home," says Moller.
More conservative lending is not good news for borrowers with looming loan maturities. According to Trepp, there are more than $60 billion in fixed-rate loans that will soon require refinancing at higher interest rates. Additionally, there are more than $140 billion in floating-rate CMBS loans that will mature in the next two years, according to Goldman Sachs. "Floating-rate borrowers will have to reset interest rate hedges to extend their mortgage at a higher cost and these hedges have become very expensive," says Verma. Delinquencies also are expected to rise, especially for the floating-rate loan borrowers. Office properties in particular is expected to be hard hit due to falling values and softening demand related to hybrid and remote work.
Monitoring CRE lending risk
Banks are the largest holders of commercial real estate mortgages in the U.S., holding roughly 40 percent of total commercial and multifamily outstanding debt. Banks also have indirect real estate exposure through their lending to non-bank financial institutions. However, much of that risk is concentrated in smaller banks. The largest banks in the U.S. have very modest exposures to this asset class, at an average of about 5 percent of assets, according to Fitch. "Commercial real estate has always been more the domain of small banks, and it's why small banks fail," says Julie Solar, a group credit officer Fitch Ratings' Credit Policy Group.
Within the Fitch-rated U.S. bank universe, the agency has four banks on Rating Outlook Negative (RON). In addition to Signature Bank, the other three banks are Dime Bank, New York Community Bank and M&T Bank Corp. M&T Bank is the only one with a RON due to real estate exposure. Relative to peers, M&T has high exposure to hospitality loans, which warrants keeping an eye on even though the hotel sector has been recovering since the pandemic, notes Moller.
Another factor that could weigh on bank liquidity is stress testing. Comprehensive Capital Analysis and Review stress testing is a set of forward-looking requirements used by the regulators to oversee banks' capital adequacy, capital distribution and capital planning processes under various economic scenarios, including a severely adverse macroeconomic stress scenario provided by the regulators themselves. These tests tend to focus on capital adequacy rather than on liquidity and over the last several cycles, all the participants (mostly large banks) have been passing the stress tests, notes Verma. Results from the annual stress tests are typically released in June.
Banks will be applying fairly adverse hypothetical scenarios for their stress testing models, which include a 40 percent reduction in commercial real estate values and a projected loss rate of 9.8 percent. Even under these stress test scenarios, banks are still well capitalized, notes Solar. "Over the last handful of years, the stress tests continue to demonstrate the resiliency of the large U.S. banks that participate," she says. Banks also have much greater liquidity as compared to levels heading into the Great Financial Crisis.
That said, asset quality is probably unsustainably low, adds Solar. Over the last three years, there have only been 85 basis points in cumulative losses related to commercial real estate loans. Those losses will inevitably increase given the higher interest rates, expectations for lower property values and slowing economy that will make it more difficult for borrowers. "Where you will see the most pain will be smaller banks that are going to be more concentrated," she says. | Real Estate Investors Brace for a Liquidity Squeeze Amid Bank Sector Turmoil |
Series: A Closer Look Examining the News
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The collapses of Silicon Valley Bank and Signature Bank this past weekend were the end point in an all-too-familiar cycle: first the boom, then the breathtakingly speedy bust and then the bailout. We are now at the postmortem moment -- when everyone wonders where the regulators were.
Silicon Valley Bank has already become notorious for how obvious its red flags were. Perhaps the most telling was the rapid growth of its borrowing from the Federal Home Loan Banks system. Banking experts know this Depression-era group of government-sponsored lenders as the second-to-last resort for banks. (The Fed is, as always, the lender of last resort.) At the end of last year, Silicon Valley Bank had $15 billion of FHLB loans, up from zero a year earlier.
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"That's the type of flag that says you need to look closely," Kathryn Judge, a Columbia law professor who specializes in financial regulation, told me. But there's no sign the loans triggered any regulatory attention.
Primary responsibility for the debacle lies, of course, with SVB's management. But regulators are supposed to grasp that they exist because bankers are always tempted to take risks. Bankers want to grow too fast, borrow cheaply, lend freely and lock their investments up unwisely for long periods in hope of gaining higher returns.
Some commentators are now reiterating calls for banking rules to be tightened, which is probably a wise move. But the collapse of the two banks proves once more that the culture of the regulators is as important as any rules, laws or tools at their disposal.
At least one journalist detected banks' rising vulnerabilities, including those of Silicon Valley Bank, as early as last November; the Federal Deposit Insurance Corp.'s own chair had also warned about the problem. A few short sellers even started betting against the bank's stock. Now, however, the combination of reckless bankers and lax regulators has left us with a financial crisis and a federal-government bailout -- and the well-rehearsed spectacle of regulators promising to do better next time. (And yes, this was a bailout. Some depositors were facing losses and the federal government, backed by the public, prevented that -- at as-yet-unknown scale and cost.)
One troubling aspect of this particular collapse is just how unremarkable a bank run it was, how basic its causes were. Regulators didn't need any fancy analysis to detect the danger at Silicon Valley Bank. They just needed to notice its financial results. Granted, in 2018 Congress had loosened the post-global-financial-crisis Dodd-Frank regulations that would have required a bank like SVB to undergo more frequent stress tests, but those tests measure exotic or extreme risks. All that was required in this case was regular supervision. The bank had clear risk-control flaws and disclosed losses on its books, right there in its Securities and Exchange Commission filings.
Silicon Valley Bank's assets had grown dramatically, quadrupling in five years, as had its deposits. Both phenomena are almost always worrying signs. The bank was also overly concentrated in one sector of the economy, and an unusually large proportion of its deposits -- about 94% -- was uninsured, above the $250,000 limit that the FDIC will guarantee per deposit.
No bank can survive if every creditor asks for their money back at once. The larger the portion of a bank's clients that could wake up one day to realize that their deposits are not protected, the greater the risk of a run.
What Silicon Valley Bank did with those deposits should have been another warning signal. It used them to buy too many long-term bonds. As interest rates go up, bonds lose value. Nobody should have needed the warning, but the bank itself said that interest-rate risk was the biggest hazard it faced. And regulators should have noticed before the bank began borrowing heavily from the FHLB system.
In its SEC filings in the third quarter of last year, the bank's parent company disclosed that it was sitting on losses from its bond purchases big enough to swamp its total equity. That would have been a good time for supervisors to tell the bank to get its act together.
Silicon Valley Bank was far from doing so: It hadn't had a chief risk officer for most of that year. "Regulators had to know that, and it has to matter," Jeff Hauser, the founder and director of the Revolving Door Project, a Washington nonprofit that tracks the regulatory state, told me. "Once we valorize success as proof of wisdom, it's hard for a lowly bank examiner to say, 'This place doesn't have a risk officer and doesn't have a plan to address the risk on its books.'"
Bank regulators have awesome powers. They can go into a bank, examine its operations and demand changes. The problem is that they rarely do. "The regulators are like all the conflicted agents in ratings [agencies] and other areas," Chris Whalen, a longtime financial analyst, told me. "They go with the flow in good times and drop the ball in bad times."
The San Francisco Fed, which regulated the parent company, and the California regulators, which oversaw the bank itself, could have required SVB to raise capital last year, when it was less vulnerable. They could also have required the bank to increase rates on its savings accounts -- in other words, to pay people more to lend it money. That would have eroded earnings but it would've kept customers from fleeing. Ask Greg Becker, the bank's chief executive, today if he would rather have reduced per-share earnings or avoided having superintended the second-largest banking collapse in U.S. history.
So why don't we have regulators who can be relied on to do their jobs?
Part of the answer is a legacy of the Trump administration's penchant for installing regulators who are opposed to regulation. Donald Trump appointed Randal Quarles as the first-ever vice chair of banking supervision at the Federal Reserve. (The Fed did not respond to questions for this story.) Quarles saw it as his mission to relax the post-financial-crisis regime. He sent unambiguous signals about how he felt about aggressive regulators -- "Changing the tenor of supervision will probably actually be the biggest part of what it is that I do," he declared in 2017. Translation: Any sign of showing teeth and he'll get out the pliers. And when Jerome Powell was nominated to be the chair of the Fed, in 2017, he told Congress that Quarles was a "close friend," adding, "I think we are very well aligned on our approach to the issues that he will face as vice chair for supervision." Naturally, Quarles supported the 2018 law to roll back stress tests -- something that Becker himself had called for. Quarles also did not respond to my request for comment.
This crisis raises the old issue of how strange it is that the Federal Reserve regulates banks at all. In the years leading up to the 2008-09 financial crisis, an alphabet soup of regulators ostensibly shared responsibility for banking oversight along with the Fed: The OTS (Office of Thrift Supervision), the OCC (Office of the Comptroller of the Currency), the SEC (Securities and Exchange Commission), and the CFTC (Commodity Futures Trading Commission). Banks and financial entities played these agencies off against one another to shop for the least restrictive. Policy makers and legislators knew this and toyed with changing the architecture of banking-and-securities regulation. Ultimately, their only action was to close down the least of them, the OTS, and keep the rest, each of which had its own constituency of supporters.
So the Federal Reserve kept its responsibilities. But critics argue that the Fed can never become an effective bank regulator because its chief concern is with the more glamorous business of managing the economy.
The roots of regulatory failure run deeper, however, than the Trump administration's actions. President Joe Biden's appointees at the Federal Trade Commission, the Department of Justice, and the Consumer Financial Protection Bureau appear to be trying to wield their powers to make the economy more efficient, safer and more equitable. But pockets of learned governmental helplessness remain. Regulators have an ingrained fear of stepping in, making people uncomfortable, making demands and using their clout.
The Fed's banking supervisors should have been on heightened alert as its governors started boosting interest rates. Silicon Valley Bank faced not only the interest-rate risk to its treasury-bond holdings but also the likelihood of credit losses accumulating on its books from distressed venture-capital firms and declines in commercial real-estate values last year.
The fact that the Fed supervisors weren't agile with Silicon Valley Bank indicates that they have failed to internalize how woefully fragile our financial system is. The U.S. has suffered repeated bubbles, manias and crashes since the deregulatory era began under Ronald Reagan: the savings-and-loan crisis, Long-Term Capital Management, the Nasdaq crash, the global financial crisis, the financial convulsions of the early pandemic. Congress and regulators sometimes shore up aspects of the system after the event, but they have failed to foster a resilient financial system that doesn't inflate serial bubbles. Each time, instead, the regulators reinforce a lesson that if bubble participants huddle as closely together as possible, and fail conventionally, the government will be there to save them.
"One of the most disturbing dynamics here," Judge, the Columbia Law professor, told me, "is a loss of respect for the Fed as a supervisor, as a regulator." That is not a good place for the industry's chief overseer to start rebuilding confidence in the integrity of the American banking system. | What the Collapse of Silicon Valley Bank Reveals About Regulation |
Is this a banking crisis - how worried should I be? Published 19 hours ago
This video can not be played To play this video you need to enable JavaScript in your browser. Media caption, Is this the start of a financial crisis?
The news is full of emergency meetings, central banks offering credit lifelines and tumbling bank shares.
No wonder people are asking: is this the start of another financial crisis?
Politicians, including the UK prime minister, and central banks, say the situation is now stable. But banking shares have continued to fluctuate.
So how bad is this and what does it mean for you?
What is happening with banks and are they collapsing?
Credit Suisse is being taken over by UBS. Both are giant Swiss banks, but their investment banking arms operate all over the world.
Swiss banking has the ultimate reputation for financial stability, so the slide into uncertainty for Credit Suisse, and the shotgun marriage to UBS, have left the Swiss rather dazed.
Two US banks had already gone under this month - Silicon Valley Bank and Signature Bank - both catering largely to the tech sector. While those are the biggest bank failures in the US since 2008, neither was anywhere near the size of Credit Suisse.
Image source, Getty Images
No other banks have collapsed, but central banks were worried enough to announce new measures to make extra cash available to make sure financial transactions continue as normal.
That is the kind of action that was taken during the financial crisis in 2008 and at the start of the pandemic, designed to shore up confidence and make sure banks can still make loans and pay out to customers who want to take their money out.
Are UK banks at risk?
The Bank of England admitted it had been watching closely as Credit Suisse's fate was determined in a marathon meeting over the weekend, but said there was no reason to worry about a knock-on effect on UK banks.
The UK banking system was "well capitalised and funded, and remains safe and sound" it said.
Both UBS and Credit Suisse have London operations, managing money for wealthy clients and advising on mergers and investments and there may be some job losses where the two banks' businesses overlap.
Bank shares have certainly had a wobble over the past week, as confidence was shaken.
But there is no reason to expect any further direct impact on UK banks, from either Credit Suisse's demise, or the collapse of the smaller US lenders.
Why is this happening now?
Credit Suisse had problems all of its own - missteps over risk management going back years, scandals it was caught up in, including money laundering, and last year it reported a heavy loss.
But it found itself in a sudden downward spiral last week, despite a $50bn (PS41bn) emergency lifeline from the Swiss National Bank, and its customers began shifting their funds to other banks.
The US bank casualties faced different challenges. Signature took a hit from recent big falls in the value of cryptocurrencies, and both found their balance sheets weren't robust enough to cope, when depositors rushed to take their money out.
But there is a common factor affecting all three and the banking sector more broadly: sharply rising interest rates.
Central banks around the world have been raising the cost of borrowing to try to dampen down rising prices. After years of very low interest rates, that has come as a shock.
Image source, Reuters Image caption, The US central bank has been raising interest rates under chairman Jerome Powell
Banks holding government bonds, that go down in value when interest rates rise, have suddenly found their assets are worth less.
That has affected the whole banking sector, but smaller banks are more vulnerable.
Wall Street's biggest banks organised a whip-round to bail out another tech-focused bank, San Francisco-based First Republic. And the Federal Reserve, the US central bank, said there had been a surge in emergency lending to US banks generally.
Is my money safe?
Ordinary people have little reason to fear for their funds.
In the highly unlikely scenario that a bank or building society actually collapses, then deposit protection is in place.
In the UK, that means PS85,000 per person, per institution is protected (or PS170,000 in a joint account). So, if you have PS85,000 in one bank, and another PS85,000 in a separately licensed bank, then it is all safe if both went bust, under the Financial Services Compensation Scheme. There is also a higher temporary limit of PS1m for six months, if you get a sudden influx of funds, such as an inheritance.
Protection is similar in the EU, and the US government has safeguarded deposits of up to $250,000 for a long time.
Is this a banking crisis?
There isn't the same system-wide problem that there was in 2008, when banks around the world suddenly found they were exposed to rotten investments in the US housing market.
That led to enormous government bailouts and a global economic recession.
Image source, Pool/EPA Image caption, US President Joe Biden pledged to do "whatever it takes" to ensure the safety of the banking system
Since then, banks have been ordered to hold more capital and regulations around risk have been tightened. So most experts believe the impact of these current troubles will be contained.
Still, the world of banking is extremely complicated. It can be hard to identify where new fragilities might lie, until the system comes under pressure, as it did when Liz Truss's government surprised the markets with its new economic strategy in September, and as it is now with higher interest rates, and wavering confidence.
Moreover, nervousness around the health of banks is often contagious. And if people start to worry about their deposits they can move them at the click of a mouse.
Even if we don't see the total breakdown in trust that characterised the financial crisis, we could still see regulators toughening up the rules further and banks pulling back on their willingness to lend. | Is this a banking crisis - how worried should I be? |
We know that Silicon Valley Bank collapsed, for the most part, because it failed to manage its interest-rate risk. The bank's subsequent selloff of assets and resulting bank run that caused put in motion the second-largest bank failure in U.S. history.
Knowing this, though, it might also be the right time to look at some of SVB's biggest clients: the venture capital firms whose investments fund Silicon Valley's most innovative startups.
Upon the first signs of trouble at SVB, VC firms were some of the first to advise their clients to get their money out of the bank, which some investors blame for feeding the fire.
Over the weekend, prominent VCs were also vocal in pressing the government transfer SVB to a larger bank and secure all of its deposits -- or face contagion and further crisis.
To make sense of where VCs stand in this mess, Marketplace's Kai Ryssdal talked to Peter Lee, Martin Luther King Professor of Law at UC Davis School of Law, who published a study last year on the VC ecosystem.
"They enjoy this almost mythic reputation for innovation, for individuality, for creating long term value, but I think that the collapse of SVB and other incidents really poke some holes in that image," Lee said. "And I think that we might think more carefully about how we might want to regulate VCs in the future."
The following is an edited transcript of their conversation about what the fallout of SVB's collapse can teach us about the VC industry.
Kai Ryssdal: Could you, as briefly as is reasonable, describe the venture capitalist ecosystem for me?
Peter Lee: Sure. So first, social ties are really critical to Silicon Valley. And social ties are particularly important to connecting entrepreneurs and VCs. Basically, who you know matters more than what you know. Secondly, VCs exhibit a significant degree of herd mentality. They tend to cluster investments in the same trendy technologies, and there's a lot of groupthink in their investments. And then finally, the VC business model really favors -- and this is not entirely surprising -- big upsides in a medium-term timeframe. One of the upshots of this is that this effectively excludes large swaths of potentially socially-valuable innovations from really being attractive from the perspective of VC investors.
Ryssdal: Okay, so with that as academic backdrop, were you at all surprised when on Friday morning, you heard SVB had been seized by regulators?
Lee: I was not actually that surprised. I think this actually reflects one phenomenon I just described, which is this herd mentality. Just as VCs tend to cluster their investments in particular areas of technology, it did not surprise me that you had a significant movement on the part of VCs to advise their portfolio companies to get out of SVB.
Ryssdal: Right. Okay, here's the thing that amazes me about this. And this isn't my original thought, I have a very good friend who's in venture capital, who repeated this to me on Friday afternoon: these guys basically cannibalized their own bank by urging their portfolio companies to get out of SVB. They made the bank that they were instrumental in helping create and live on crash.
Lee: That's true. That's true. You know, I think that in a macroscopic sense, it's obviously had very negative impacts. But in terms of what you're doing in the moment, as a quote, unquote, "rational actor," it actually makes sense to withdraw your money as quickly and as soon as possible, before the bank fails and taking out your money no longer becomes viable.
Ryssdal: What do you make, then, of a very large handful of very high profile venture capitalists saying on Twitter and publicly elsewhere: "You must save us or Armageddon will be nigh."
Lee: Right. So this is somewhat ironic, given that there is this ethos of individualism and libertarianism within Silicon Valley. They're kind of supposed to represent the freewheeling market economy. But in fact, they're basically saying we need to have government intervention to step in and forestall a major crisis.
Ryssdal: We should say here, the government smiles on the venture capital community.
Lee: Yes. In many ways, the venture capital community has benefited substantially from government intervention. And I would say that the government has actually looked to the VC markets as an important tool in industrial policy.
Ryssdal: With the understanding that you devoted some portion of your professional life to studying this group of people, this whole episode doesn't really reflect well on them, does it?
Lee: It doesn't actually. And I think we need to think a bit more carefully about the role of VCs in society, the role of VCs in the economy. One of the reasons I was actually interested in studying the VC community is that they enjoy this almost mythic reputation for innovation, for individuality, for creating long term value. But I think that the collapse of SVB and other incidents really poke some holes in that image. And I think that we might think more carefully about how we might want to regulate VCs in the future. | Silicon Valley Bank's collapse reveals deeper flaws in the venture capital industry |
It doesn't seem fair, does it? Just 15 years after our financial overlords went on a bailout binge, showering bankers with trillions of taxpayer dollars, they're once again riding to the rescue of the rich while the public watches in horror. Did they learn none of the lessons from the 2008 meltdown?
Actually, yes, they did. The government's financial-crisis managers clearly studied the lessons of 2008, which is one reason the collapse of Silicon Valley Bank a week ago doesn't seem to have created another cataclysm, at least so far. It's the public that's never understood those lessons, which is one reason the public is likely to draw the wrong conclusions about the SVB mess too. And the most important lesson is the hardest to understand: Good financial-crisis management isn't supposed to seem fair.
That's because managing a financial crisis, as the overlords of 2008 explained in a short book I helped them write, is like fighting a dangerous fire. Good firefighters don't worry whether the burning building was up to code, or whether someone smoked in bed, or whether some friends of the tenants are trashing them on Twitter. They don't ask themselves if maybe some of the bozos inside deserve to burn. They focus on putting out the flames, because fires can spread, and out-of-control infernos can be disasters for everyone.
Annie Lowrey: You should be outraged about Silicon Valley Bank
During the 2008 financial crisis, there was no way to extinguish the flames without bailing out some of the financial arsonists, although it's a myth that none of them paid any price, and the bailouts ended up turning a profit for taxpayers. The Biden administration's more modest SVB bailout shouldn't cost taxpayers a dime either, and so far there's been no need to bail out any arsonists, although some depositors (including solar developers as well as wealthy tech bros) who wrongly assumed their building was safe were protected from losses. They weren't protected because they were innocent or worthy or entitled to protection. They were protected to quell a panic, because panic is what turns local financial fires into systemic conflagrations.
Still, even a mini-bailout that doesn't rescue villains or soak taxpayers is a bailout, and bailouts make people mad. Where's our bailout? Why do the government suits always do favors for millionaires with connections? What kind of message does this send?
It sends the calming message that everyone should feel safe stashing cash in banks. But it definitely looks bad; bailouts always do.
The general weakness of the financial system is that it rests on a foundation of confidence. That's why banks are called "trusts," and why many of their buildings have giant pillars out front to convey stability. It's why the word credit comes from the Latin for "believe."
There's also a specific weakness illustrated by the bank run in It's a Wonderful Life: Banks don't keep most of their deposits in the bank. They use deposits to make long-term loans, a great way to help individuals and businesses invest in the future that can become extremely not-great if a lot of depositors suddenly lose confidence and decide they want their money back. After bank runs helped start the Great Depression, the newly created Federal Deposit Insurance Corporation began insuring deposits--originally up to $2,500, now up to $250,000--to eliminate the incentive for freaked-out depositors to run. It's an excellent confidence booster, especially now that a bank run no longer requires an actual run to the bank, just a click of a button.
But deposit insurance didn't eliminate fear. In 2008, panic about sketchy mortgages and complex financial instruments backed by sketchy mortgages sparked a new round of bank runs--except this time, most of the runs were on firms that weren't official FDIC-insured deposit-taking "banks," so they had avoided strict oversight from banking regulators even though they borrowed short and lent long like banks. Countrywide Financial, IndyMac, Bear Stearns, Washington Mutual, Fannie Mae, Freddie Mac, Lehman Brothers, and AIG all collapsed when their short-term creditors lost confidence and demanded their money back.
The government's crisis managers tried desperately to eliminate incentives to run, first by making cheap liquidity widely available, then by guaranteeing trillions of dollars worth of liabilities, and eventually by persuading Congress to inject $700 billion worth of direct capital into the system through the Troubled Asset Relief Program to assure creditors that their money was safe. When ordinary Americans started to flee from money market funds, the government backstopped those too.
Derek Thompson: The end of Silicon Valley Bank--and a Silicon Valley myth
It took more than a year, but it worked. The panic subsided. The system recovered.
The conventional wisdom at the time, and still today, was that the government bailed out Wall Street while screwing Main Street. But the reason the government bailed out Wall Street was to prevent the banking crisis from turning into a second Great Depression that really would have screwed Main Street. The financial rescues of 2008 all helped stabilize the system; the fall of Lehman, which the government failed to rescue, is what nearly dragged the system into the abyss.
And remember, the shareholders of all those failed firms were totally or virtually wiped out. The CEOs lost their jobs. The government put a lot of tax money at risk, but it all got paid back with interest. And under President Barack Obama, Washington passed a separate $800 billion economic stimulus bill for Main Street, another subject I've spent too much time thinking about, that helped end the recession in a hurry.
The mega-bailouts of 2008 did, in fact, protect some irresponsible financial gamblers from the consequences of their bad bets, which did, unavoidably, send a bad message about irresponsible gambling. That's why Obama signed the Dodd-Frank financial-reform law in 2010, which essentially made the fire code much tougher and required more banklike firms to obey it. Dodd-Frank actually weakened some of the government's firefighting tools, an understandable but dangerous response to the anti-bailout backlash. In general, though, it made the financial system much safer and ushered in 15 years of financial stability.
Financial stability, unfortunately, tends to breed overconfidence. I must confess that in 2018 when President Donald Trump signed a bill relaxing Dodd-Frank's oversight rules for SVB-size banks, I didn't think it was a good idea, but I didn't think it was a big deal, either. (Whoops.)
More oversight would have been better because SVB was a disaster waiting to happen--a bank with 94 percent of its deposits uninsured, uniquely vulnerable to a run. It didn't help that most of the deposits came from one gossipy industry, or that its executives were using them to place long-term bets on low interest rates. The whole debacle was reminiscent of the old Saturday Night Live ad for Bad Idea Jeans.
The early stages of a financial crisis can be tricky for the firefighters because it's hard to know whether there's a genuine systemic risk of the fire spreading. They don't want to overreact to every sign of turbulence, because bailing out reckless risk takers can create "moral hazard," which encourages more reckless risk taking in the future. At the same time, the natural instinct to punish irresponsibility can fan the flames of panic in real time.
But SVB was a classic bank run, and a pretty obvious contagion risk for similarly sized banks, so the crisis managers basically followed the playbook from 2008.
I'm embarrassed to say I had never heard of SVB until Friday morning, when a group chat I'm in with some Miami tech entrepreneurs and venture capitalists blew up. I guess I contributed to the panic when one of the VCs said she was torn about pulling out her money because SVB's managers had been such good partners, and I said it didn't matter because none of them would have jobs on Monday. (I'm also embarrassed to say I shared the not-very-reassuring "EVERYBODY STAY CALM" gif from The Office.) When confidence goes, it goes fast.
But this was an unusual situation where the Federal Reserve, the FDIC, and the Treasury Department could act quickly and decisively without creating serious moral hazard. They ousted the SVB managers who got the world into this mess. They let SVB's shareholders lose all their equity. They didn't even backstop all of SVB's bondholders, even though the 2008 rescues protected just about all creditors to prevent others from running. But the government immediately made cheap liquidity widely available and guaranteed all of the uninsured deposits. The thing is, bailing out depositors who happen to park their cash in the wrong bank doesn't encourage risk taking. Parking cash in a bank is supposed to be the opposite of risk taking!
Bailouts are inevitably suboptimal, and they inevitably make people mad. Critics of the Biden administration's handling of SVB say the firefighters have done too much. But continuing problems at First Republic Bank and a few other regional banks caught up in the frenzy suggest otherwise--and some of the anti-bailout and anti-guarantee provisions in Dodd-Frank might have constrained the government's ability to respond even more forcefully. The where's-my-student-loan-bailout analogies whipping around the internet are beside the point; student loans, as burdensome as they might be, don't have the potential to create global calamities when they don't get paid back in full. As for the preposterous Republican complaints that SVB illustrates the dangers of "woke" banking, let's just say it's equally plausible that the countless institutions with similar rhetorical commitments to diversity that didn't fail illustrate the benefits of "woke" banking.
David A. Graham: Why Republicans are blaming the bank collapse on wokeness
Once this fire is fully extinguished, God and Fed willing, we should figure out why SVB's supervisors let it play with matches, update our fire code (including the dollar limits on deposit insurance), and make sure our firehouses are properly equipped. But we shouldn't delude ourselves that we can fully fireproof the system or ensure that it never requires another bailout. As long as financial institutions borrow short and lend long, they will always be vulnerable to runs. And risk will always migrate to the path of least resistance, especially in times of stability, when the risk doesn't seem that risky.
Before last week, there weren't many voices warning that SVB was about to erupt in flames. We should have the humility to recognize we probably won't anticipate where the next fire will start either. Hopefully, it won't happen for a while. And hopefully, the men and women with the hoses will have the guts to do the right thing again, because that isn't inevitable at all. | Yes, Silicon Valley Bank was bailed out. So what? |
It has been a year since the Federal Reserve started to raise interest rates and banks are starting to fall over in the US. Anybody who thinks Silicon Valley Bank was a one-off is deluding themselves. Financial crises have occurred on average once a decade over the past half century so the one unfolding now is if anything overdue.
The reckoning has been delayed because since 2008 banks have been operating in a world of ultra-low interest rates and periodic injections of electronic cash from central banks. Originally seen as a temporary expedient in the highly stressed conditions after the collapse of Lehman Brothers, cheap and plentiful money became a constant prop for the markets.
Over the years, there was debate about what would happen were central banks to raise interest rates and to suck the money they had created out of the financial system. Now we know.
The action deemed necessary to rein in inflation has deflated housing bubbles, sent share prices plunging and left banks nursing big losses on their holdings of government bonds.
The Bank of England was quicker out of the blocks than the Fed. Threadneedle Street began raising rates in December 2021 and has now raised them 10 times in a row. The European Central Bank waited until July last year before making the decision to increase borrowing costs for the first time in a decade, and went ahead with an increase last week despite news that the banking malaise had spread across the Atlantic to Credit Suisse.
Ignore the fact that the US, UK and eurozone economies have all held up better than was expected in the immediate aftermath of the energy price shock caused by Russia's invasion of Ukraine. It takes time for changes in monetary policy - the decisions central banks make on interest rates and bond-buying or selling - to have an impact.
As Dhaval Joshi of BCA Research pointed out last week there are three classic signs that a recession is coming in the US: a downturn in the housing market, bank failures, and rising unemployment. Housebuilding is down by 20% in the past year, which means the first has already happened. The problems at SVB and other US regional banks suggest the second condition is now being met. The third harbinger of a US recession is a rise in the US unemployment rate of 0.5 percentage points. So far it is up by 0.2 points.
"Banks tend to fail just before recessions begin," Joshi says. "Ahead of the recession that began in December 2007, no US bank failed in 2005 or 2006. The first three bank failures happened in February, September, and October of 2007, just before the recession onset.
"Fast forward, and no US bank failed in 2021 or 2022. The first bank failures of this cycle - Silicon Valley Bank and Signature Bank - have just happened. If history is any guide, the start of bank failures presages an economic recession that is more imminent than many people anticipate."
The Fed and the Bank of England meet to make interest-rate decisions this week and the financial markets think that in both cases the choice is between no change and a 0.25 point increase. Frankly, it should be a no-brainer. Given the lags involved, even a cut in interest rates would be too late to prevent output from falling in the coming months, but against a backdrop of falling inflation, plunging global commodity prices and evidence of mounting financial distress any further tightening of policy would be foolish.
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Central banks seem to think there is no problem in achieving price stability while maintaining financial stability. Good luck with that. The Fed, the ECB and the Bank of England have tightened policy aggressively and things are starting to break.
It wasn't always thus. There was a marked absence of banking crises in the 25 years after the second world war, a period when banks were much more tightly regulated than they are today, and played a more peripheral economic role. Reforms put in place after the Great Depression, including capital controls and the US separation of retail and investment banking were designed to ensure governments could pursue their economic objectives without fear that they would be blown off course by runs on their currencies or turmoil in the markets.
Over the past 50 years, the financial sector has been liberalised and grown much bigger. Regulation and supervision has been tightened since the global financial crisis but with only limited effect. SVB was supposed to be a small bank that could operate with less stringent regulation than a bank deemed to be "systemically important". Yet when it came to the crunch, all the depositors of SVB were protected, making the distinction between a systemic and non-systemic bank somewhat academic. The financial system as a whole is both inherently fragile and too big to fail.
There is not the remotest possibility of a return to the curbs on banks that were in place during the 1950s and 1960s. Desirable though that would be, there is no political appetite for taking on an immensely powerful financial sector. But that, as has become evident in the past 15 years, has its costs.
One is that economies dominated by the financial sector only really deliver for the better off: the owners of property and shares. A second is that the financial markets have become hooked on the stimulus that has been provided by central banks. A third is that the crises endemic to the system become much more likely when - as now - that stimulus is removed. Which means that eventually more stimulus will be provided, the markets will boom, and the seeds of the next crash will be sown. | Silicon Valley Bank's collapse will not be a one-off - a banking crisis was long overdue |
In the wake of the Silicon Valley Bank collapse, some lawmakers have floated raising the Federal Deposit Insurance Corporation's deposit insurance cap of $250,000 if another catastrophic bank failure occurs.
"I think that lifting the FDIC insurance cap is a good move," Democratic Massachusetts Sen. Elizabeth Warren said Sunday on CBS's "Face the Nation," noting that the real question for her is: "Where's the right number on lifting it?"
The possibility of raising the insurance cap could become a bipartisan endeavor. Republican South Dakota Sen. Mike Rounds said on NBC's "Meet the Press" that the $250,000 cap might "not be enough."
SVB fallout:Yellen tells Congress that banking system 'remains sound,' savings 'remain safe'
White House defends rescue of SVB depositors
After SVB failed last Friday, the FDIC took over the bank to protect its depositors. Worries among depositors grew because the vast majority of FDIC's deposits were above $250,000 and uninsured, the result of SVB's close connections with wealthy tech startups and venture capital.
That is until the FDIC, the Federal Reserve and the Treasury Department announced that in the case of SVB, all depositors would have access to their money no matter if the deposits were above the $250,000 cap.
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Some GOP critics, such as Republican Missouri Sen. Josh Hawley, attacked the White House for the move, calling it "a bailout."
But the White House argued that the government's actions are helping only depositors and not the bank's investors or management. White House press secretary Karine Jean-Pierre said the rescue plan "is not a bailout."
Lawmakers say focus is helping depositors, not bank owners
Asked by NBC's Chuck Todd whether it was OK to let a bank fail, Rounds noted that protecting depositors should be a priority over a bank's management and investors.
"When we talk about allowing a bank to fail, it's one thing to say it's OK to allow the owners of a bank to lose their resources." Rounds said. "It's another thing to say that the depositors should necessarily be allowed to lose their deposits."
As for the $250,000 insurance cap, "perhaps that's not enough," Rounds said, adding that any discussion of raising the limit should take into account whether it is appropriate because of "inflation and so forth."
Related:Silicon Valley Bank collapse explained in graphics
In the House, North Carolina Republican Rep. Patrick McHenry, chair of the House Financial Services committee, did not dismiss the proposition, telling CBS's "Face the Nation" that he will later "determine whether or not we need to address the FDIC deposit level."
Raising the insurance cap, Warren said, would focus on protecting small businesses from massive bank failures such as what happened with SVB.
"Small businesses need to be able to count on getting their money to make payroll, to pay the utility bills. Nonprofits need to be able to do that," Warren said. | In wake of SVB collapse, lawmakers float raising FDIC insurance cap |
The House Freedom Caucus voiced their disapproval on Monday to any increased guarantees on bank deposits, a proposal that has gained traction in recent weeks since the collapse of two major U.S. banks.
Members of the House Freedom Caucus released a statement Monday stating their concerns of "big government bailouts" regarding banks. The caucus, which includes conservative GOP members such as Reps. Lauren Boebert (Colo.) and Scott Perry (Pa.), said in their statement that the banking failure was caused by regulators, not regulations, and that they will oppose increasing Federal Deposit Insurance Corporation's (FDIC) guarantee of bank deposits, which is currently capped at $250,000.
"The House Freedom Caucus remains firmly committed to ending out-of-control spending in Washington, and the resulting inflation, that lies at the heart of the current turmoil in the banking system," the released statement read.
"Furthermore, Members of the House Freedom Caucus oppose any universal guarantee on bank deposits over the current limit, as well as any attempt to force unnecessary, burdensome regulations or costs onto small and mid-sized banks (and their customers) who are at no fault in this crisis," the statement continued.
Sen. Elizabeth Warren (D-Mass.) said on Sunday that Congress should lift the cap on federal insurance on bank deposits from $250,000.
"We have to do this because these banks are under-regulated," Warren said on CBS's "Face the Nation." "And if we lift the cap, we are relying even more heavily on the regulators to do their jobs."
The FDIC currently insures deposits of up to $250,000 for each customer, but Warren said last week that this cap was meant for individuals, not for small businesses or nonprofit organizations. The Massachusetts senator also had blamed weakening regulations on banks for the Silicon Valley Bank and Signature Bank collapses that occurred earlier this month, sending the bank and tech industries into a spiral.
The House Freedom Caucus also shifted blame to the Federal Reserve's decision to raise interest rates as contributing to "skyrocketing" inflation. The members called on the Federal Reserve to "unwind" its Bank Term Funding Program, which was created in the wake of the Silicon Valley Collapse to "help assure banks have the ability to meet the needs of all their depositors."
"Any universal guarantee on all bank deposits, whether implicit or explicit, enshrines a dangerous precedent that simply encourages future irresponsible behavior to be paid for by those not involved who followed the rules," the members wrote. | House conservatives voice opposition to any increased guarantees on bank deposits |
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