In the fed statement, Signature Bank also failed.

The special assessment on banks was put into place in 2008 to prevent future bailouts.  

No new funding is being sent to the FDIC, given there is none to give them without a debt ceiling increase.  Money will come from the  Deposit Insurance Fund and selling assets.

Mar 12, 2023 22:40:30 GMT Gyro LC said:

Mar 12, 2023 22:16:43 GMT iNCY said:

As it turns out the SVB debacle is a canary in the coalmine for everything this thread is talking about.

Would you believe the SVB CFO used to do the same role at Lehman Brothers?
Roots of the failure are in buying fixed interest MBS at record low rates, then were unable to provide the market rate interest as treasury bonds went up, so they offered 4% while collecting 1.5%, yeah it is pretty crappy math.

Twitter is awash with people saying how the FDIC guarantee of only 250k is unfair... It's not even the point. Where does the money come from if the US Government decides to bail out the bank?? Jerome will have to make his money printer go Brrr and hyperinflation will be upon us.


On the topic of inflation, I freely admit that much of the heat in the market is corporate profits.
That's not even the point... The point is that if prices keep rising and people keep paying them with no reduction in their personal spending it is inflation... There is too much money in the market and the Fed has to raise rates until people stop spending in amounts large enough to stop price pressures.

I think the major issue at SVB was the bulk of their clientele were tech start ups that live on cheap money as you’ve said many times before. Once they couldn’t get cheap money the tech startups had to withdraw their funds to make payroll and SVB had bad bond/investment exposure. They did a bad job of communicating their sale of bonds to raise funds, and the startups panicked and pulled their cash because they are very sensitive to losing funds. Plus the few VCs that advise most of the tech start ups told their clients to pull funds which caused the run.

What is scary is there are three more banks that are pretty much in the same spot now.  First Republic a lot do not think will make it and two others I was seeing that they said are very vulnerable.  

FDIC can bail only so much out with the Deposit Insurance Fund.  Once that fund hits zero everyone else is fucked.  President and Congress not likely able to help either until the debt ceiling issue is resolved since we are in emergency measures.

Man Biden really sucks huh?

Our banks are falling, but we keep sending money to Ukraine.

16 banks failed under Trump.  1 so far under Biden.

www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/

Still find it interesting once again the people who made the decisions that led to this bank collapse gave themselves all bonuses on the way out. Now all the companies who used a risky bank get all their cash back, plus the benefits of the high interest yield they were getting. But the common consumer will be the ones punished for their actions.

Rich stay rich.

SPX futures are way up, this is another case of confused policy and messaging.
Market is seeing the bank failure as a sign rates rises are nearing the end of their raising cycle, to the market that's bullish.

Yellen and Powell have no plan, I can see no way they can get rid of inflation without some sort of capitulation in the market. Powell can't put a consistent narrative together and the markets are floundering with trying to read the tea leaves.the fact that there is so much money ready to buy back into the market is entirely the problem.

Credit Suisse looks to have sold to UBS for $2 Billion.
It was worth $7 Billion on Friday

For some context the Saudi bank stumped up some capital and 3 months ago bought 10% of the company for $1.5 Billion. At the current numbers their share is worth $200 million... Ouch.

Banks looking for the government to put a bottomless guarantee on bank deposits to stop a market wide panic.
It is one of those it might blow over or it's just economic armageddon.

I was warning for years about people borrowing cheap money to speculate on bubbles. The only reason it hasn't all gone to shit is because currently people are servicing the debt. The next question will be whether companies using income to service debt or cash at hand from equity sales. The latter is not sustainable. Again, it's not a problem unless the banks margin call the borrower's. People are going to freak if they find out that's a thing.

1 billion was all USB offered, or $.50 a share.

They know it is a take it or leave it movement.

Report I saw was about 200 banks in the US are at risk for this. They are petitioning the FDIC, and fed reserve, now to ensure all deposits, as they fear people will realize how fragile they are and move their cash to somewhere safer, which will cause them to collapse.

I suspect what will happen is nothing changes until more collapse.  Americans do not care if their banks invest their cash in high risk investments so long as they get their cut.  And when they do south, people here just demand the government pay for the losses.

Hum seeing .50 and .25 a share, weird. And a mix match with the 1 and 2 billion number with the share prices. Journalism in 2023.

Love how credit Suisse is trying to claim it is too low. Like you have no leverage here. It is take a deal or walk with nothing.

Mar 19, 2023 18:04:56 GMT c said:

Hum seeing .50 and .25 a share, weird. And a mix match with the 1 and 2 billion number with the share prices. Journalism in 2023.

Love how credit Suisse is trying to claim it is too low. Like you have no leverage here. It is take a deal or walk with nothing.

It was 1 and CS have a hard know, now it's 2... Plus a 300b line of credit from the Swiss National Bank.
It's pretty ugly.

Also over the weekend it looks like small to mid bank owners are trying to find buyers.
Why is this? Is it that they are cash strapped and can't find a bank run... Or, are there massive unrealised losses on their books?

Weird how none of this is mainstreet news.

In the US because they have unrealised losses and tend to operate at high risk margins since Trump killed bank reviews. They realize all it will take is one viral news story about their bank to start a run they cannot survive.

The news is mainstream, but you have to look for it in the business pages because most do not care. Americans have shown time and time they do not give a shit about investment banking and all of this will presented as mergers, which no one cares about here.

Mar 19, 2023 18:30:52 GMT c said:

In the US because they have unrealised losses and tend to operate at high risk margins since Trump killed bank reviews. They realize all it will take is one viral news story about their bank to start a run they cannot survive.

The news is mainstream, but you have to look for it in the business pages because most do not care. Americans have shown time and time they do not give a shit about investment banking and all of this will presented as mergers, which no one cares about here.

I don't call the business pages mainstream.
It's sad how there's no alarms for every day people until their life has irreversibly changed. Meanwhile people are out their financing new cars and paying for holidays on their credit cards.

Not many taking holidays in the states anymore. Upper class gets them, middle class not so much anymore. Getting a week off of work no longer something most can get.

Cars, houses, and medical debt is where the US debt is. Broke $200 billion in medical debt recently with no end in sight.

I don't know if anybody cares about this, but things are getting ugly pretty quick.

When companies need money to finance their business, they sell bonds. As in you buy an amount of bonds and they pay you back at a fixed interest rate. The riskier the debt, the higher the return.

Here's the thing though, in the UBS purchase of CS all outstanding bonds were written down to zero meaning the investor who bought the bonds loses everything...

So now, who in their right mind would hold onto their bank bonds? But without them, there is no credit.... So the FED has stepped in and switched the money printer on with inflation already at historic high levels. It will be a miracle if we get out of here without breaking something permanently.

Sounds only like the risky AT1 bonds are getting wiped out. And no one is bailing them out it appears.

But the nature of this banking crisis is coming into focus. Banks held too much risk expecting to get bailed out if they went south and not the bailouts are not coming.

So far no printing money to bail them out. And traditional bonds were not the focus here, only a tier of higher risk ones.

I do find it funny that one of the features of an AT1 bond is it can be brought to 0 fast in a situation like is happening now, but investors are absolutely shocked that it happened as they believed it would never happen and these bonds were high reward with no risk.

Wow, Fed reserve warned of problems at SVB for four years, but lacked the power to do anything about it outside stop it from making acquisitions. They sent letters warning they did not have the cash on hand needed in the event that an adverse event occured that could start a bank run. Which is exactly what wiped them out.

Will leave this for iNCY, more details of past shit without partisanship.

May want to watch those bank hearings coming. Will be a lot of theater, but also likely the best indication of where this all is going in how certain people respond.

www.sanjoseinside.com/business/federal-reserves-repeated-warnings-were-not-enough-to-save-silicon-valley-bank/

US Freedom Caucus says they will block any attempt to guarantee more than 250k by banks claiming doing so is a bailout.

This gets interesting with big banks now absorbing smalling ones. Soon there will be a theoretical cap on what can be guaranteed.

///

Also markets going up on the idea that major banks buying the smaller ones means the crisis is over.  Yeah this is all gonna end well I am sure.

So are we heading towards a GFC or what?

I wanted to get a new car

Mar 20, 2023 22:15:32 GMT Gyro LC said:

I wanted to get a new car

They stopped selling cars?!?

Fuck, I gotta stay outta these threads... it's too doomer even for me.

Mar 20, 2023 21:53:35 GMT NATH45 said:

So are we heading towards a GFC or what?

Incy will say yes, and perhaps worse.  I honestly do not know. 

But I agree with him that there is a lot of risk right now in many areas of investing and credit that can all come crashing down extremely fast.  If it does it will likely be less 2008 and more 1929.

Mar 20, 2023 22:17:24 GMT @ness said:

Mar 20, 2023 22:15:32 GMT Gyro LC said:

I wanted to get a new car

They stopped selling cars?!?

Fuck, I gotta stay outta these threads... it's too doomer even for me.

It just might not be wise to make a big purchase right now. Especially since they're only making the expensive models with high margins.

Mar 20, 2023 22:28:13 GMT Gyro LC said:

Mar 20, 2023 22:17:24 GMT @ness said:

They stopped selling cars?!?

Fuck, I gotta stay outta these threads... it's too doomer even for me.

It just might not be wise to make a big purchase right now. Especially since they're only making the expensive models with high margins.

Maybe buy a low mile second hand model. Some euro luxury cars lose a quarter or more of their value in just a few years due to the never-ending need to produce new models.

Is it too much to admit we are replicating the 20th century? We've had the pandemic, we've got tension in Europe and tension in Asia. There's talk of another financial crash.

We've maybe successfully dodged a world war, but you could suggest the war on terror was our 'great war' and all the subsequently revolutions, springs and realignments throughout The Middle East could be akin to the aftermath of the first world war.

Mar 20, 2023 17:26:05 GMT c said:

Wow, Fed reserve warned of problems at SVB for four years, but lacked the power to do anything about it outside stop it from making acquisitions. They sent letters warning they did not have the cash on hand needed in the event that an adverse event occured that could start a bank run. Which is exactly what wiped them out.

Will leave this for iNCY , more details of past shit without partisanship.

May want to watch those bank hearings coming. Will be a lot of theater, but also likely the best indication of where this all is going in how certain people respond.

www.sanjoseinside.com/business/federal-reserves-repeated-warnings-were-not-enough-to-save-silicon-valley-bank/

It doesn't really have anything to do with cash reserves.
If there is a bank run whether you run out of money in one hour or two, it doesn't really make a difference.

The issue is the book value of the debt versus it's current marker value.

Imagine if you borrowed 10 million dollars to buy Tesla stock here when rates were 0.05%



Today they are worth half as much and you are down about 50% but you don't actually lose money unless you sell your shares.
The banks are looking precarious because through the QE period they made thousands of loans just like these.

While the customer is making interest payments the bank is okay, but should the customer default the bank takes a big hit.

One of the obvious accounting practices that while it is obvious, completely blows my mind.
If the bank lends you a million dollars, that shows as an asset on their books, not as a liability.
But the asset is only an IOU and based entirely on the customer's ability to repay.

Where we are completely rooted at the moment is that the focus of the Fed is to remove inflation by taking money out of the economy.
For that to happen it means that they need to collapse the speculative asset bubbles.
If this happens, the banks are screwed because it is all funded by debt.

So now because bank bonds are toxic we have the fed opening up it's coffers to keep the market liquid.

It is so crazy, I don't see how we can avoid something ugly.

Mar 20, 2023 21:53:35 GMT NATH45 said:

So are we heading towards a GFC or what?

Yes... But...

Depending how the government plays this we could push it another 5 years down the track and make the problem worse but deal with it later.
This issue we are facing now is not a now problem it is the Covid and GFC issue we kicked down the track 5 years last time.
Where it is getting scary is how high the US government debt is, they cannot print money indefinitely... If it wasn't for the world needing US dollars their dollar would have likely already collapsed.

I finally found a graph that explains my point:




When the government creates money via QE they make money cheaper through lower interest rates, it is deliberately inflationary.
So people borrow that money and buy things... Because all of a sudden there is more money they market rises to soak it up.
This is inflation.

c speaks a lot about "Corporate greed" and setting aside whether he is right or wrong...
Imagine you run a lawn mowing company and you charge $50 to cut the grass.
Except you work in Silicone valley and the people whose grass you cut all got paid a million dollars this year in bonuses.
Do you continue to charge them $50, or do you put your prices up a bit because they can afford it?



The market is like a Shamwow, if you spill an excess of money into the market, it will soak it all up through rising prices... This is inflation.
When you then go to wring the Shamwow out in the sink this is disinflation, except what is going down the drain is money people paid a lot to borrow.

I drew the red line, but this is the amount of money that is moving around in the economy.
With my line I am trying to show how much money SHOULD be in the economy versus what we actually have



You can see we downturned a bit through interest rates this year... But that's 4 trillion dollars of excess cash

Gonna be in for a bad time if you expect the US to change. Even if we cut our discretionary spending completely we are in the red. We did warn about this during the Bush and Trump tax cuts. Changing mandatory spending needs 60 in the Senate to touch the third rail of politics. Not gonna happen in our life times.

We will continue on knowing we are too big to fail.

///

On the graphs I see Biden's plan to start to reel this all in working.  Feds should continue to raise rates and increase bank reserve amounts.

Mar 21, 2023 0:45:44 GMT c said:

Gonna be in for a bad time if you expect the US to change. Even if we cut our discretionary spending completely we are in the red. We did warn about this during the Bush and Trump tax cuts. Changing mandatory spending needs 60 in the Senate to touch the third rail of politics. Not gonna happen in our life times.

We will continue on knowing we are too big to fail.

///

On the graphs I see Biden's plan to start to reel this all in working.  Feds should continue to raise rates and increase bank reserve amounts.

Do you feel the need to pivot back to partisan nonsense every 3 or 4 posts?

This is not public debt, this is private debt, it has precisely ZERO to do with tax cuts.

Because when you talk about the treasury printing money or US deficit these are political matters :dunno:

And if you want to talk about private debt the average person may be a few thousand in debt. With buy, borrow and die, billionaires are billions in debt. Even if all of the middle and lower class stopped using debt, very little would change.

Fun numbers:  The top 1% holds 4.6% of all debt.  The bottom 50% have only 36% of the debt.  Want to reduce debt you are not going to do shit starting at the bottom when the top 10% hold 30% of the debt in the US.