Many popular Minnesota lakes turn into towns on ice over the winter.

Upper Red Lake is visited by tens of thousands of anglers and many spend a weekend or a few days on the ice. And some leave more than footprints and frozen-over ice-fishing holes when they depart.

This winter the Upper Red Lake Area Association ran a pilot project to address the issue of people dumping human waste on the ice. They installed dumpsters at lake access points and mounted a public awareness campaign to encourage anglers to properly dispose of human waste.

“They recorded well over 10 tons of human waste bags, toilet bags that people had put in those dumpsters,” said Robyn Dwight, president of the Upper Red Lake Area Association.

The campaign was so successful Dwight said the group is looking for funding to continue it next year.

Dwight is among a growing number of Minnesotans organizing to call for tougher enforcement and more resources to keep lakes clean over the winter.

Keep it Clean initiative

The Keep It Clean initiative started in 2012 around Lake of the Woods along the Canadian Border as trash proliferated on the popular winter fishing destination.

In the past couple of years, Upper Red Lake and Lake Mille Lacs joined the effort because of what they saw as a worsening problem. Dwight said they’ve heard from other lake groups in Minnesota and in surrounding states who also want to join the initiative.

Trash left on the ice has long been a issue for many Minnesota lakes, but Dwight said the evolution of wheel houses has exacerbated the pollution and the concerns. Wheel houses are essentially fully appointed recreational vehicles with holes in the floor for fishing through the ice. They allow anglers to spend days at a time on the ice.

“More and more people have an opportunity to leave trash on the ice, not only trash but human waste because these beautiful RVs are now equipped with black and gray water holding tanks,” she said.

“We don’t have the resources in the state of Minnesota to deal with these new winterized wheel houses. We don’t have winterized (sewage) dump stations and we don’t have the resources to keep up with the whole phenomenon of winter camping on the ice.”

So the groups teamed up to push for legislation that would toughen state law regarding leaving garbage on the ice.

The bill also would require a study of the costs of expanding enforcement of the law. It has garnered bi-partisan support from lawmakers since it was introduced earlier this month and will go before a Minnesota House committee later this week.

The majority of anglers manage their trash properly, and some resorts provide trash service on Mille Lacs said Ann Brucciani Lyon with the Mille Lacs Area Community Foundation.

“It’s that group that doesn’t pick up after themselves that’s creating challenges for everybody else that’s out there and it’s affecting everybody else’s enjoyment,” she said.

Brucciani Lyon said social media is rife with examples of a wide range of waste abandoned or dumped on the ice.

“You will see very heated language when people are finding a garbage bag that’s been left behind or trash that’s out there,” she said. “And it is a polarizing issue because people, the majority, would like to see the lakes clean and healthy.”

OF NOTE

The U.S. Small Business Administration has named Abdirahman Kahin, CEO and owner of Afro Deli and Grill, as Minnesota’s Small Business Person of the Year for 2023. Kahin will compete for National Small Business Person of the Year during National Small Business Week, the first week of May, in Washington, D.C. Since the first location opened in 2010, Afro Deli has expanded to four locations across the Twin Cities.

ADVERTISING/PUBLIC RELATIONS

Primacy Strategy Group, a St. Paul-based lobbying and business promotion firm announced the following staff promotions and additions: Jake Blum, promoted to political director and public relations manager; Calvin Benson, hired to the government relations and regulatory affairs team, and Heidi Esparza, hired as executive assistant to the CEO. Primacy Strategy Group is a partnership between PR firm Synergetic Endeavors and Minneapolis law firm Lockridge Grindal Nauen.

AGRICULTURE

Ceres Global Ag Corp., a Golden Valley-based commodity and energy logistics company, announced it has named Jennifer Henderson vice president, general counsel and corporate secretary, effective Feb. 13. Henderson previously held similar executive roles at Believer Meats.

ARCHITECTURE/ENGINEERING

Wold Architects & Engineers, St. Paul, announced the promotions of Rachel Bartling, Tom Clark and Teng Vang to the associates leadership team in St. Paul.

CONSTRUCTION

System Pavers, a California-based outdoor-living design and installation company, announced the hire of Brent Schaefer as chief growth officer, based in the Twin Cities. Schaefer previously served as an investment professional at Houlihan Lokey and Morgan Stanley.

LAW

Winthrop & Weinstine, Minneapolis, announced that Michael A. Gale-Butto has joined the firm as an associate in the Litigation practice. Gale-Butto is a former assistant attorney with the city of Minneapolis.

MANUFACTURING

The Toro Co., a Bloomington-based maker of lawn mowers and snow removal machines for consumers and businesses, announced that Renee J. Peterson, vice president and chief financial officer, plans to retire in July 2023. Angela C. Drake, currently vice president, finance will succeed Peterson as vice president and chief financial officer, effective March 10. Peterson will continue to serve the organization as vice president, finance, to assist with the transition.

MEDICAL TECHNOLOGY

Electromed, a New Prague-based make of airway clearance technologies, announced that Kathleen Skarvan will retire as president and chief executive officer in 2023, after which Skarvan will serve as a non-employee member and chair of the company’s board of directors.

NONPROFITS

Angel Foundation, a Mendota Heights-based organization that helps meet the financial needs of cancer patients, announced that Kirstie Foster has been named as chair of the board of directors. Foster is the president and founder of Foster Modern PR. She previously held positions at CHS, Blue Cross and Blue Shield of Minnesota, and General Mills. … Lutheran Social Service of Minnesota announced the following employee recipients of its 2022 President’s Award of Excellence: Janelle Milling, Kelli Whisnant, Jody Shaskey-Setright, Jenni Carrier, Sheri Swopes, Stacy Abdouch, Taymara Montague, Alissa Dott, and Jennifer Kreps.

OPENINGS

IWG, a global provider of hybrid working locations with brands Spaces and Regus, announced the opening two flexible workspaces in Lakeville and Rochester, in partnership with Ryan Semler and Reed Lifka, under the Regus brand.

ORGANIZATIONS

Minnesota Builders Exchange, a trade group representing the commercial construction industry, announced its 2023 board members and leadership: Board Chair Greg Grazzini, Grazzini Brothers, Eagan; Vice President Michael Carlson, Max Gray Construction, Hibbing; Treasurer Heidi Sedlacek, Bituminous Roadways, Mendota Heights; Secretary David Siegel, MBEX executive director, and Immediate Past President Randy LaFaive, Market & Johnson, Stillwater. Board members: David Brandt, Jason DuVal, Chuck Geisler, Brian Kalla, Sean Ochis, Jason Rentmeester, Andrew Ristrom, Nate Sapik.

RETAIL

Twin Cities Premium Outlets, Eagan, announced the following upcoming openings: jewelry retailer Lovisa; Kids Palace, an indoor park and fun center, and Luxhury, a health-focused personal care brand, relocating from a previous location at the center.

All of a sudden, shaky banks are back in the news.

For codgers like me, 2008 isn’t all that long ago, but for a significant proportion of the economically active U.S. population, this may all be new and strange.

And even many economists may wonder, is this the biblical “cloud no bigger than a man’s hand” suddenly rising out of the sea that turns into a torrent of financial failures? Or are Silicon Valley Bank, Signature Bank, First Republic and Credit Suisse just anomalous blips that will be forgotten by Memorial Day?

Who knows? As pundits by the score debate whether this is a “bailout” that incentivizes “moral hazard,” or a failure or regulation, it is clear that many intelligent laypersons don’t really understand banking. So let’s step back and review relevant basics.

Banks are financial intermediaries. They link people who have money now but want to spend it later with others who want to spend now and are willing and able to pay it back later. The latter group, borrowers, pay interest. Savers may receive interest or may simply benefit from payment services such as checking accounts.

As intermediaries, banks also perform transformations. These may be in size or denomination — on one hand, thousands of household accounts, each with a few hundred to a few thousand dollars saved, get turned into loans to buy $10 million locomotives. On the other, $20 million from a single pension fund may be transformed into thousands of credit card accounts with balances of a few hundred to a few thousand bucks.

Transformations may be in time. In old-time savings-and-loan banks, most accounts could be emptied whenever the owner wanted, but the idea was that most would keep their money in long enough to make 30-year mortgage loans that went into those account holders’ neighbors’ homes. This was not a problem as long as the overall deposit base remained stable, just as it is for checking accounts used as a source of funds for longer-term business loans.

Finally, intermediation and transformation may be in risk. A tangible fraction of mortgages, auto loans and credit card accounts don’t get paid — but a bank with thousands of such accounts, and collateral, can manage its pricing to cover losses. Depositors run no risk, if their savings are under the amount covered by the Federal Deposit Insurance Corp. and little above that. Banks themselves pay the premium for this insurance, not taxpayers, yet banks also charge customer fees to protect their bottom lines.

Moreover, many thousands of households may have a money market fund in their retirement accounts. Those funds may buy financial commercial paper banks sell to get money wholesale to make consumer credit loans. The people with the retirement account run no risk because of the two-stage intermediation, retirement saver to mutual fund to bank to borrower.

Understand also, that there are two ways a bank can “go bust.” One is illiquidity, the inability to turn assets like collateral, loans and investments into cash rapidly enough to meet demands for cash, even if the value of assets the bank has exceeds the liabilities it owes. The other is insolvency, when the amount a bank owes is greater than what it owns.

Many bank failures of the “run-on the bank” type shown in the movie “It’s a Wonderful Life,” are caused by illiquidity. The film’s fictional small-town “Bailey Building & Loan” made mortgage loans that were being repaid, but when all the depositors wanted to withdraw passbook savings at the same time, banker George Bailey could not demand that mortgages be paid early. His family’s savings and loan would “go bust.”

Then there are bank failures due to insolvency. In the 1980s, thousands of rural agricultural banks were closed by an FDIC team that showed up on a Friday afternoon with a locksmith and 20 pre-ordered pizzas. No depositors crowded outside demanding their funds. But these banks had made land mortgages and operating loans to farmers who were going bankrupt. Many of the loans were near worthless. The banks were busted even if they had cash in the tills to give to depositors.

Most of the bank failures in the 2007-08 era were caused by insolvency from mortgage loans going bad, and the moral hazard of bundling those loans into securities that were traded ever higher up the financial food chain. So instead of Bailey Building & Loan, we had the failures of Wall Street stalwarts Bear Stearns and Lehman Brothers.

In the news this past week, Silicon Valley Bank, Signature Bank and First Republic all seem to suffer from illiquidity. Switzerland’s Credit Suisse is a case by itself involving both illiquidity and insolvency.

In econ textbooks and past history, illiquidity was prevented by a “reserve requirement.” Banks could not loan out 100% of their deposits. Some had to be held in reserve as ready cash to satisfy withdrawals. That is why our central bank is called the Federal “Reserve.” With adequate reserves, a bank could cover withdrawals under normal circumstances and, after 1913, could borrow from the Fed if needed.

In intro econ courses, this “required reserve ratio” usually is 10% to ease calculations for the prof’s blackboard examples. However, in practice in our nation, it is effectively zero.

Federal Deposit Insurance also was instituted to reduce failures due to illiquidity. If the public is confident they will always get their $10,000 or $100,000 or, nowadays, $250,000 out, they don’t worry. There are no angry crowds outside banks.

However, as Silicon Valley Bank found out, business depositors with accounts in the tens of millions can and do rush to withdraw. Even a large bank can be illiquidity-busted in a couple of days.

The vaccine against insolvency is the capital of the owners, the fraction of assets that is not owed to anyone. Bank regulators monitor capital adequacy relative to state and federal banking law. Capital won’t always protect a bank from failure, but it can give regulators time to close the bank down while all depositors can get paid.

The final econ lesson is that the “par” or “face” value of a bond or promissory note and its market value on any particular day can vary widely. The SVB failure puzzles many, and is unique, in that most of its assets were not risky loans to businesses or persons, as in 2007-08. They were in long-term Treasury bonds. There never has been a case in which such a bond did not pay both interest and principal when due. U.S. Treasury bonds are the zero-risk investment par excellence. And no one is questioning that in this case.

So what happened?

Well, if you have a piece of paper saying U.S. Treasury, 30 years, $10,000 and 2.98%, you will get $298 interest every year and $10,000 at the end of 30 years. No risk at all.

However, if interest rates rise, as they have been over the past year, and investors can get other pieces of paper offering $420 a year and $10,000 back at the end, and you suddenly need cash, and must sell your piece of paper to any willing buyer, no one will give you that $10,000 face value. Why should they take $298 a year rather than $420? So you would have to sell it for a lot less than what you would get if you held it for another 29 years. That 2.98% versus 4.2% is the difference on 30-year Treasurys between August and December 2022.

So SVB had assets that were perfectly “safe” to cover deposit liabilities in the long run, but could not sell its bonds to come up with cash in the short run. And its Big Tech depositors — more than 90% far exceeding the FDIC’s insured account limit — wanted their cash.

So all this is background to the key policy question: When — and why — should government, through its bank regulating and insuring agencies, intervene to keep banks from failing? That is a complicated question meriting a column of its own.

Bob Haddow, also known as Barber Bob, gets all sorts of clients at his Grain Exchange Barbershop — baseball players, judges, police officers, strippers, city workers — anyone who happens to be looking for a haircut in downtown Minneapolis. 

But his clients will soon have to find a new barber: the shop is closing its doors at the end of the month, after more than 120 years in business. The building was recently sold and will be getting a remodel, so Haddow is shutting down the business.  

Haddow opened up the shop on Saturday and Sunday for a sale. He’s collected a lot of memorabilia in his ten years as the shop’s owner: photography, art, knickknacks filling the shelves, calendars, an old typewriter. Even the two barber chairs were for sale.  

A lot of the art is his own. Haddow has a doctorate in art history, and he spends his off days at Minneapolis’s art museums.  

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Several of the paintings on the walls of his shop are from a series he did of the St. Paul Saints baseball games in the 1990s. One depicts Ila Borders, the first woman to pitch in a professional men’s baseball game. Many show larger-than-life figures gazing down over the stadium from the skyline — one shows Jesus, another Abraham Lincoln. 

“These are crazy folk art style paintings,” Haddow said. “Nobody really understood them, and I never really found a market for them. But in the barbershop, they’ve been perfect. They’re great decorations, and they’re talking points.”  

And talking to people is Haddow’s favorite part of the job. He’s built a lot of relationships with his clients over the years. 

“When I’m in the barbershop talking to people, I’m happy, because I’ll be talking just like I’m teaching in school or something, except I don’t have students with me, I have just other people who we can have these conversations with,” Haddow said. “I can have fun with it all.” 

Haddow has run the barbershop for about ten years now. He took it over just after the exchange closed its trading floor and moved to an electronic platform. Since then, he’s seen downtown change and develop — and, in the last few years, get quieter.  

In 2020, Miami International Holdings bought the Grain Exchange. All of the other businesses in the downtown building lobby have closed. 

But the barbershop has stayed mostly the same. He still charges $25 for every haircut — except for one buddy who usually pays him with a bottle of wine.  

Haddow is sad to see it go. He said he doesn’t come across many little shops like this anymore, and his hopes for what will happen to the space aren’t very high.  

“It’s eventually gonna be renovated, and they’re gonna need another salon or something in here, and it’ll be a Great Clips,” he speculated. “$50 haircut and $100 worth of shampoo.”  

But Haddow isn’t going far. Since he announced that the shop is closing, he’s had a lot of offers of new spaces he could move to. He’s still weighing his options, but he says he’ll be staying in Minneapolis.  

Wherever he ends up next, he’s hoping he’ll still be able to meet people from all corners of the city.   

“That’s what you are as a barber, you’re in the middle,” Haddow said. “And, of course, my training as an historian and all the things that I’ve written and painted — it all comes from other people’s stories and trying to stay in the rhythm of the city.” 

With the impeccable timing of one of the country’s famed watches, Swiss officials brokered a last-minute emergency takeover of the troubled bank Credit Suisse by fellow banking giant UBS.

In a press conference on Sunday, Swiss president Alain Berset said the recent banking industry turmoil had destabilized Credit Suisse and that this deal was vital to stabilizing the bank and the global banking sector.

Under the deal, UBS Group AG will buy Credit Suisse for more than $2 billion in an all stock deal. UBS will also get an extra $100 billion from the Swiss central bank as part of the deal.

Swiss Assist

The marriage between UBS and struggling rival Credit Suisse marks the latest eruption in the ongoing banking troubles sparked by the collapse of Silicon Valley Bank.

Panicked investors and jittery depositors pulled billions out of the long-troubled Credit Suisse in recent days, leading to worries the bank could become insolvent if emergency measures were not taken. The Swiss central bank threw a $54 billion life to Credit Suisse, but it wasn’t enough to stabilize the institution.

It’s yet another stunning event in more than a week of turmoil and alarm in the banking sector, especially worrisome because Credit Suisse is what’s known as a “global systemically important bank.” That essentially means if Credit Suisse fails, it could have ripple effects throughout the global economy.

A History of Trouble

The Credit Suisse crisis boiled over last week, when the bank announced “material weaknesses” in its financial reporting.

But the bank’s troubles started long before that, with a series of financial and political scandals that hit the bank’s reputation and bottom line. In the last two years alone, the bank’s stock has fallen by more than 80 percent.

Credit Suisse was created 166 years ago to help finance Switzerland’s rail network. It became an international name in the banking sector and one of the most significant banks in the world

But the bank’s reputation has taken several huge hits in recent years, including being linked to a money laundering operation involving a cocaine trafficking ring in Bulgaria, and hiring detectives to spy on an executive who left to work at a rival bank.

Copyright 2023 NPR. To see more, visit https://www.npr.org.

Risk. It’s tricky. Try to avoid one set of risks, you can just end up exposing yourself to another. That’s what happened to Silicon Valley Bank.

“Silicon Valley Bank was a very good bank… until it wasn’t,” says Mark Williams, professor of finance at Boston University and a former bank examiner for the Federal Reserve.

A victim of its own success

Williams says the problem at Silicon Valley Bank really started with its wild success. Many of its tech company customers were raking in money during the early pandemic.

“Silicon Valley Bank was just flush,” he says. “Its deposit base tripled between 2020 and 2022, with billions and billions of dollars flowing in.”

A lot of those billions had come from all of the risks the bank took, lending money to start-ups and companies that couldn’t get loans at other banks. Those risks paid off.

And Silicon Valley Bank took all of those billions it earned from taking those risks and stowed them into what is supposed to be the least risky investment around: US government bonds.

Bonds: The Riskless Asset

Bonds are like a little loan you give the government for 3 months, 1 year, 10 years etc., depending on which bond you buy.

At the end of that time, the government will pay you back for that loan, plus a little interest. US bonds are considered to be the safest investment on the planet. The U.S. always pays back its debts. They are often called a riskless asset.

The downside? Government bonds don’t pay out a lot. Super safe, not super profitable. But some of these bonds are slightly more profitable than others.

Longer term bonds (like 10 year bonds) typically pay out more at the end than the 3 month or 1 year bonds, which makes sense: Long term bonds mean you agree to lend the government your money for years. You get more yield – a bigger payoff – for that wait.

“Basically what happened was Silicon Valley Bank wanted a bigger payout,” says Alexis Leondis, who writes about bonds for Bloomberg. “So they basically wanted to reach for longer term bonds, because, I think, they felt like what they would get from shorter term bonds was kind of a joke.”

Risky business

Silicon Valley Bank locked billions of dollars away into 10 year bonds. But there were risks it wasn’t seeing.

Risk #1: Access. Those billions were now locked up for years. It wouldn’t be easy to get that money in an emergency.

Risk #2: Interest rates. When interest rates started going up, the market value of Silicon Valley Bank’s bonds went down.

That’s because the bank bought its government bonds before interest rates started going up. The price you get from bonds is directly tied to interest rates. When interest rates go up, the market price of older bonds goes down because new bonds pay out higher interest rates.

When rates started climbing quickly, the price of Silicon Valley Bank’s bonds tumbled.

Risk #3: Really, really rich customers. When rumors started up about the bank, customers panicked and and started pulling their money out. Because they were rich individuals and companies, that meant multi-million, even multi-billion dollar accounts cashing out all at once.

Silicon Valley Bank needed a lot of cash fast. But, of course, a lot of its cash was locked up in 10 year bonds. Now it had to try and sell those now to get cash.

Government Bond Fire Sale

That’s where the interest rate risk bit Silicon Valley Bank: Trying sell those second hand, low interest rate bonds at a moment when all the new bonds being issued paid out far more was not easy.

“Now, that same bond and the yield would be about 20 times higher,” says Mark Williams. “So, to encourage investors to even think about your old bond, you would have to discount it.”

Discount as in, a fire sale.

Silicon Valley Bank took huge losses selling off its bonds, and more investors panicked and pulled out their money. Williams says it was a bank run on a scale the U.S. hadn’t seen since the Great Depression.

“In a single day last week, depositors knocked on the door and pulled 41 billion depositor dollars out,” says Williams. “That’s about a quarter of their total deposits. No bank, no matter how strong, could ever survive that sort of withdrawal… that sort of run on the bank.”

The rest of Silicon Valley Bank depositors were bailed out.

Guilt by association

Mark Williams says even though Silicon Valley Bank made a bunch of very specific mistakes, people all over the country got scared and started yanking money out of smaller banks.

“That means these smaller, regional banks are getting potentially destabilized,” says Williams.

Where are these nervous investors putting their money? Williams says a lot of it is getting deposited into big banks that customers see as safer. Also, a lot of people are putting their money into U.S. government bonds.

Demand has spiked all week for the riskless asset.

Copyright 2023 NPR. To see more, visit https://www.npr.org.