Federal Reserve and banking thread

[ThirstyBarbarian]

@Dotini wants to talk about the Federal Reserve and banking failures. So here’s a thread for that.

News Flash!!

The Fed has raised interest rates again.

Given the speed of communications and our herd mentality, there could be a run on the banks.

 

[Blast it Tom!]

Watch the markets go up...

 

[ThirstyBarbarian]

I kind of doubt the “run on the banks” scenario. Maybe for certain kinds of commercial banks with very large depositors and with too many low-yield bonds. I don’t personally have $250,000 in a bank, so my deposits are insured.

 

[shockie]

I kind of doubt the “run on the banks” scenario. Maybe for certain kinds of commercial banks with very large depositors and with too many low-yield bonds. I don’t personally have $250,000 in a bank, so my deposits are insured.

Who does the insuring? A government corporation(FDIC) financed by taxpayer monies.

The FDIC, courtesy of Joe Biden just bailed out millionaire and billionaire accounts above the FDIC limits on the SVB collapse. Must be nice to be rich. You can't allow the 1% to lose a few million or billion. Especially when the 1% owns the politicians and the government.

 

[jderimig]

Who does the insuring? A government corporation(FDIC) financed by taxpayer monies.

FDIC is financed by premiums paid by banks. Taxpayers are indirectly affected when banks pass those cost to us in the form of lower savings interest rates and higher fees and loan interest.

 

[fyrwrxz]

I kind of doubt the “run on the banks” scenario. Maybe for certain kinds of commercial banks with very large depositors and with too many low-yield bonds. I don’t personally have $250,000 in a bank, so my deposits are insured.

I don't personally have $2.50 in the bank. I invested in rocket motors. I have some very nice AP aged in oak barrels.
Just be advised white oak will become scarce within the next 50 years or sooner. Maybe coopersmiths will become scarce first. Perfect investment opportunity. I am all for raising interest rates. On a scale of 0-10, my interest rate for rockets is 11. Just try to raise that! What I know about banking would fit on one side of a dollar bill in my wallet with room left over for a picture of some dead dude. All I know is if you put all the bankers end to end, that would be a start. I used to have liquid assets, but sold all my hybrid stuff. My interest in the Dow is if my bathtub leaks or not. I am not a Luddite, just old school. I used to have an income, now it's just outgo. Okay, bored now, going to build a rocket. Please carry on about banking.

 

[ThirstyBarbarian]

Who does the insuring? A government corporation(FDIC) financed by taxpayer monies.

The FDIC, courtesy of Joe Biden just bailed out millionaire and billionaire accounts above the FDIC limits on the SVB collapse. Must be nice to be rich. You can't allow the 1% to lose a few million or billion. Especially when the 1% owns the politicians and the government.

My credit union membership voted and opted out of Federal insurance on deposits maybe 10 years ago, and our deposits are insured to a higher than $250,000 limit in a Federally approved insurance plan. I don’t know if that changed back to the Federal plan for credit unions at some point or not. In any case, I’m not worried about my deposits.

My understanding is that banks don’t fail by losing all of the depositors’ money. They fall below the ability to cover some mandated amount, then the government assumes control and sells the bank assets to another bank, with insurance covering the shortfall, if any. It’s a bit less dramatic than people think. I have a friend who has been through 2 bank failures. First was WaMu, whenever that was, and second was the recent First Republic. In both cases, Chase is who ultimately ended up with his accounts. He thinks Chase is chasing him and really wants him as a customer. Anyway, from his experience, it’s totally painless from a customer perspective. Just keep using your accounts as usual until the new checks and cards arrive.

 

[ThirstyBarbarian]

I don't personally have $2.50 in the bank. I invested in rocket motors. I have some very nice AP aged in oak barrels.
Just be advised white oak will become scarce within the next 50 years or sooner. Maybe coopersmiths will become scarce first. Perfect investment opportunity. I am all for raising interest rates. On a scale of 0-10, my interest rate for rockets is 11. Just try to raise that! What I know about banking would fit on one side of a dollar bill in my wallet with room left over for a picture of some dead dude. All I know is if you put all the bankers end to end, that would be a start. I used to have liquid assets, but sold all my hybrid stuff. My interest in the Dow is if my bathtub leaks or not. I am not a Luddite, just old school. I used to have an income, now it's just outgo. Okay, bored now, going to build a rocket. Please carry on about banking.

My liquid assets used to be in oak, but now they’re all in bottles.

 

[Wayco]

God bless America, where my Social security check buys more rockets and propellant! Drove over to my Credit union today, they still seem to have plenty of money, even gave me some and all I had to do was show them my ID and sign the little pad.

 

[Lord Rory Gin]

My credit union membership voted and opted out of Federal insurance on deposits maybe 10 years ago, and our deposits are insured to a higher than $250,000 limit in a Federally approved insurance plan. I don’t know if that changed back to the Federal plan for credit unions at some point or not. In any case, I’m not worried about my deposits.

My understanding is that banks don’t fail by losing all of the depositors’ money. They fall below the ability to cover some mandated amount, then the government assumes control and sells the bank assets to another bank, with insurance covering the shortfall, if any. It’s a bit less dramatic than people think. I have a friend who has been through 2 bank failures. First was WaMu, whenever that was, and second was the recent First Republic. In both cases, Chase is who ultimately ended up with his accounts. He thinks Chase is chasing him and really wants him as a customer. Anyway, from his experience, it’s totally painless from a customer perspective. Just keep using your accounts as usual until the new checks and cards arrive.

So far its been Silvergate Bank, Silicon Valley Bank, Signature Bank, Credit Suisse was bought out, and now First Republic bought out. The incompetent media has only concentrated on telling you about SVB and Credit Suisse but there are easily a hundred US banks in serious doo-doo. Don't listen to idiots like Jim Cramer who doubled down on his recommendation and told everyone First Republic was safe. I strongly suspect that JPMC was "volun-told" by the Feds to buy out First Republic. It won't be the last they will be asked to buy out. This banking crisis has only BEGUN to reveal its ugly head.

Banks are also not loaning out much these days to consumers or to businesses. 2ndly, they are keeping savings interest rates very low because one of the income sources is in the spread of the interest they pay out on deposits and the interest received on loans/mortgages. Another source used to be on Bonds but with rising interest rates, they won't make a dime. And 3rd, banks aren't even lending to each other like they used to - that's way down from the beginning of the year because they don't trust each other! Banks largely fail because of a lack of confidence which leads to investors pulling their deposits and investments. Runs on SVB occurred not with the consumer level deposits but the high $ investors who pulled out billions. Exposure to the FTX crypto-currency scandal was also contributory to SVB's problems. SVB didn't have a risk director. They were stupid to the point of criminal recklessness with their investments. For crying out loud, SVB's CEO was a director on the San Francisco Fed Reserve that was charged with over-site of his own bank - talk about conflict of interest. First Republic lost a total of $100 billion, despite an infusion of $30 billion the Fed negotiated from other banks. In all cases, the regulators have blatently failed to do their jobs to monitor and police these banks.

Next up on the troubled bank list may be Charles Schwab and possibly even Deutsche Bank. Deutsche did a lot to repair themselves in the last few years but are still very suspect. If they go do down - the ENTIRE world banking system will be affected because they are the bank most exposed to derivatives. TD (Toronto Dominion bank) is leading the short sellers list because of their exposure to Charles Schwab and Canadian housing real estate while also in the process of buying out a US regional bank (First Horizon). REITs are going to take a major haircut because with the rise in interest rates and high vacancy rates (spurred on by Co vid and working-from-home policies). Their commercial office properties are worth 1/2 what they were in 2019.

Here is a list of a few other banks on the watch list. https://www.wenatcheeworld.com/aren...l&utm_source=readerShare&utm_campaign=bButton

 

[b.wieting]

Read Murphy's "Other People's Money: How Banking Worked in the Early American Republic", (from How Things Worked series). Seeing how banking worked before "The Fed", you'll understand how it works today. An epiphany.

 

[Donnager]

Banks are also not loaning out much these days to consumers or to businesses.

This has been true since 2008, with the obvious exception for vehicles and mortgages. Prior to that, for a construction business that did 2-5million/year would carry a 150-350k (sometimes a lot more) line of credit to handle payroll surges--usually for shutdown work. Those dried up by 2010. You MIGHT be able to get 20-30% of that now, if you average 2-4x cash reserves above the loan needs. If you need it, they don't want you as a customer.

Most businesses have to exist now by just-in-time payments managing cash, or using personal/business property or capital collateral, for business loans.

It ain't fun or pretty.

 

[Lord Rory Gin]

Pacific West banks shares dropped like a rock today (-50%) and they are in emergency mode trying to figure out their options. TD Bank said NO to buying out First Horizon this morning. Whether this was going to be a buy out or a merger, they were afraid the regulators were going to say no to deal, so they called it off. The original offer was about $25/share but First Horizon is now trading at around $10/share. The deal doesn't make sense now except as a discount. It would have made the successor into the 6th largest bank in the US. In hindsight, I think TD dodged a bullet because a lot of regional banks are going to be on fire sale prices soon and they can then take their pick.

Regional banks whose shares are falling include Zions Bancorp, whose stock has dropped more than 10% as of 3 p.m. ET; Comerica, with a more than 11% decline and KeyCorp, whose stock has dropped more than 6%. Western Alliance Bancorporation is down 38%.

Meanwhile Jerome Powell stated today that the banking system is fine, 'hunky dorey', no worries that the buy out of First Republic is an exception. He called on the regulators to action (despite them not doing their job in the first place). Commentators called him out on his statements immediately; none of whom believe the Fed who is trying to "calm" the markets with lies instead of honestly explaining the issues.

In other news, gold and silver have been up the last 2 days; gold is almost at an all time high. Investors and depositors have been pulling money from the regional banks and into the major banks where they believe their money will be safer.

May the Fourth be with you!

 

[jderimig]

Inflation solved.

 

[jderimig]

 

[cls]

why do posts in this thread disappear? mods afraid of something? spell it out, don't be chicken!

 

[jderimig]

Pacific West banks shares dropped like a rock today (-50%) and they are in emergency mode trying to figure out their options. TD Bank said NO to buying out First Horizon this morning. Whether this was going to be a buy out or a merger, they were afraid the regulators were going to say no to deal, so they called it off. The original offer was about $25/share but First Horizon is now trading at around $10/share. The deal doesn't make sense now except as a discount. It would have made the successor into the 6th largest bank in the US. In hindsight, I think TD dodged a bullet because a lot of regional banks are going to be on fire sale prices soon and they can then take their pick.

Regional banks whose shares are falling include Zions Bancorp, whose stock has dropped more than 10% as of 3 p.m. ET; Comerica, with a more than 11% decline and KeyCorp, whose stock has dropped more than 6%. Western Alliance Bancorporation is down 38%.

Meanwhile Jerome Powell stated today that the banking system is fine, 'hunky dorey', no worries that the buy out of First Republic is an exception. He called on the regulators to action (despite them not doing their job in the first place). Commentators called him out on his statements immediately; none of whom believe the Fed who is trying to "calm" the markets with lies instead of honestly explaining the issues.

In other news, gold and silver have been up the last 2 days; gold is almost at an all time high. Investors and depositors have been pulling money from the regional banks and into the major banks where they believe their money will be safer.

May the Fourth be with you!

On most of these issues there is a difference between the stock price and the financial health of the banks. Investors can be a nervous herd, short sellers often take advantage of this for great profit. Some of these may present great opportunities. Eventually those short shares need to be bought back.

I would be buying Key Bank here, if its not too late, Yesterday would have been the day to buy.

On the other hand, the banking business is a confidence business, not a numbers business. If depositors pull there money out of small banks en masse they are going to fail, regardless of regulatory environment.

 

[Hobie1dog]

If you REALLY want to understand how money works, and the history of the Federal Reserve( the worlds wealthiest bankers), then watch this documentary:

 

[b.wieting]

I recommend "Other People's Money: How Banking Worked in the Early American Republic (How Things Worked)" by S.A. Murphy. Learning how things worked in the US before the Fed made today clearer.

 

[Hobie1dog]

If you REALLY want to understand how money works, and the history of the Federal Reserve( the worlds wealthiest bankers), then watch this documentary:

Bump for people to get educated on this subject.