Silicon Valley Bank and FTX Fail. Inflation is Transitory.

[MickintheHam]

Treasury Secretary Janet Yellen is focused on Pensions in Ukraine, Abortion, Climate Change, and Equity.

Nothing wrong in the Biden Administration. Move along to the next thread. No worries here.

[Catonahottinroof]

Just the first domino to fall......

Treasury Secretary Janet Yellen is focused on Pensions in Ukraine, Abortion, Climate Change, and Equity.

Nothing wrong in the Biden Administration. Move along to the next thread. No worries here.

[MickintheHam]

Just the first domino to fall......

I am afraid you are correct. I have little confidence this administration knows what to do. Who needs a Treasury Secretary talking climate change, abortion and Equity when Rome is burning? We have so few people in DC who are competent in the areas where they are required to make decisions and demonstrate leadership.

[bigsky]

Military too: see the sniper who would have killed the bomber, or the whole class of warships scrapped.

[MickintheHam]

Our Military leaders testifying before Congress have been an embarrassment.

[Doc]

The government is run by a bunch of #ucking morons

[bigsky]

Will there be a regional bank run? Appears to be getting talked up by huge depositors in SVB wanting a bailout bigger than FDIC limits. Depositors like Big Tech companies whose CFOs should know better, or Harry and Megan, maybe Tom Brady, and other pseudo celebrities.

The first $250k is covered. And managing cash is a pain for CFOs and even County Treasurers. I used to cut out and paste in a book every quarterly bank report all of which had to be published, (why I became a “cut paste and affix or CPA) and in fact pulled taxpayer money out of a local bank that did have to be purchased at a fire sale to save depositor money.

It is what you do! You can get caught gathering cash to pay bonds or payroll. Altho you should be evaluating banks like I did. That does not appear to be what big tech was doing tho, just leaving tens or hundreds of millions in one bank.

Pay attention!

[bigsky]

https://www.fdic.gov/about/financial...xBREK3UDegKxb8 As Mick said, everythin but what needs to be evaluated

[MickintheHam]

Will there be a regional bank run? Appears to be getting talked up by huge depositors in SVB wanting a bailout bigger than FDIC limits. Depositors like Big Tech companies whose CFOs should know better, or Harry and Megan, maybe Tom Brady, and other pseudo celebrities.

The first $250k is covered. And managing cash is a pain for CFOs and even County Treasurers. I used to cut out and paste in a book every quarterly bank report all of which had to be published, (why I became a “cut paste and affix or CPA) and in fact pulled taxpayer money out of a local bank that did have to be purchased at a fire sale to save depositor money.

It is what you do! You can get caught gathering cash to pay bonds or payroll. Altho you should be evaluating banks like I did. That does not appear to be what big tech was doing tho, just leaving tens or hundreds of millions in one bank.

Pay attention!

Speaking of Payroll and getting caught.” The size of the bonuses have not been determined but Glassdoor.com states that they typically range from $12,000 for associates to $140,000 for managing directors.” Bonuses were paid on Friday, the day the FDIC shut them down.

[bigsky]

Bail out the billionaire tech democrat donors, gotta bailout the students with loans. But I’m not sure the same people decide.

[VirginiaCat]

This was inevitable in a rising interest rate environment they way banking rules are written.

Basically, Banks have to maintain a certain liquidity. And they had locked in what was "decent returns" in some bonds for a low interest rate environment. Bonds at 1.75% when they were paying depositors 1/2 of a percent. Decent spread....but when you have Tbonds paying 5% depositors pulled out their money and went to the higher returns. Banks had to sell their investment at a loss to meet liquidity requriements and to make up the difference tried to issue stock which would have diluted existing shareholders so they did the natural thing...sold their shares.....driving the share price down further exacerbating the liquidity issue. Typical run on a bank just done electronically.

And it is a farce to think this type of issue is limited to SVB. All banks are over streached on their low interest investments....

[Catonahottinroof]

Domino #2
https://www.msn.com/en-us/money/pers...ry/ar-AA18znoy

[VirginiaCat]

BTW, 60% of all US Consumer Solar Financing went through SVB...AND over 1500 Clean Energy companies bank with SVB....

[bigsky]

Bailin out the tv streamer and other tech bros. Half a billion Roku cash in one bank.

Disgusting. The $250k fdic limit is now $500 million.

[MickintheHam]

THis whole banking situation is an indictment of the Fed Reserve and Biden administration policies to fight inflation. As you guys have pointed out most all banks are caught with long term low interest loans on the books in a radically rising interest rate environment. This is proof positive that spending cuts have to be part of the. Battle on Inflation. This is a bitter pill for the Democrats to swallow. It will be interesting to see how much longer Chairman Powell and Janet Yellen talk about rising interest rates. Sudden changes in interest rates are never good for the long term economy.

[VirginiaCat]

From David Sacks:



The Fed may or may not realize it but it has created a two-tier banking system:

1. Tier 1: Systemically Important Banks. These are the "too big to fail" biggest banks. If you have money there, it's a true deposit. You can't lose it.

2. Tier 2: Everyone Else. If you have money there, it's not a true deposit. It's an unsecured loan to that bank. You can lose it in a bank failure.

Now tell me, why would anyone use Tier 2?

[VirginiaCat]

THis whole banking situation is an indictment of the Fed Reserve and Biden administration policies to fight inflation. As you guys have pointed out most all banks are caught with long term low interest loans on the books in a radically rising interest rate environment. This is proof positive that spending cuts have to be part of the. Battle on Inflation. This is a bitter pill for the Democrats to swallow. It will be interesting to see how much longer Chairman Powell and Janet Yellen talk about rising interest rates. Sudden changes in interest rates are never good for the long term economy.

Not just Dems. The Reps are in trouble too because their pet funding will have to go. At a terrible time given external threats we may have to cut Defense. Just think about that for a moment.

The only palatable thing right now may be accepting 8% inflation.

[dan_bgblue]

Yeah but, (yall remember yeah but, don't ya") during sleepy joe's public address this morning, he said no depositor was going to be hurt because the banks insurance policy would make sure that no one (he failed to mention the 250,000 dollar) ceiling on deposits that would be covered. I guess he will write a check for the shortage right?

[MickintheHam]

Not just Dems. The Reps are in trouble too because their pet funding will have to go. At a terrible time given external threats we may have to cut Defense. Just think about that for a moment.

The only palatable thing right now may be accepting 8% inflation.

Anyone touting government spending needs to rethink their position, but right now it is the Democrats’ policies that have put us in this mess. There must be a broader approach to fighting inflation than making radical increases to interest rates. Remember, it was Yellen who for almost a year didn’t believe inflation was real.

[Catonahottinroof]

Barney Frank is on the board of failed Signature Bank…..

https://nypost.com/2023/03/13/barney...ignature-bank/

George Carlin had a quote about it being a club, and you ain’t in it……

[dan_bgblue]

Bernie Marcus, co-founder of Home Depot, blasted the "woke bank" while speaking with Fox News' Neil Cavuto."

"I feel bad for all of these people that lost all their money in this woke bank. You know, it was more distressing to hear that the bank officials sold off their stock before this happened. It's depressing to me. Who knows whether the Justice Department would go after them? They're a woke company, so I guess not. And they'll probably get away with it," he said.


Linkage

[CitizenBBN]

This was inevitable in a rising interest rate environment they way banking rules are written.

Basically, Banks have to maintain a certain liquidity. And they had locked in what was "decent returns" in some bonds for a low interest rate environment. Bonds at 1.75% when they were paying depositors 1/2 of a percent. Decent spread....but when you have Tbonds paying 5% depositors pulled out their money and went to the higher returns. Banks had to sell their investment at a loss to meet liquidity requriements and to make up the difference tried to issue stock which would have diluted existing shareholders so they did the natural thing...sold their shares.....driving the share price down further exacerbating the liquidity issue. Typical run on a bank just done electronically.

And it is a farce to think this type of issue is limited to SVB. All banks are over streached on their low interest investments....

This. SVB also had some riskier loans and other underlying issues specific to them, but basically this exact problem will hit every bank.

Even their business and home loans are locked in on 5+ year terms at rates lower than what you can get with a 30 day T Bill. So money is moving out of banking deposits, where they can't possibly offer that rate on short term CDs due to them being stuck with low rate assets, and then they don't have the liquidity.

This is a given problem when you jack up rates like we have this fast after years and years of basically interest free money.

There are other issues, like the ESG stuff, their loan portfolio, etc. but this basic strain will hit every bank in the system.

[CitizenBBN]

Anyone touting government spending needs to rethink their position, but right now it is the Democrats’ policies that have put us in this mess. There must be a broader approach to fighting inflation than making radical increases to interest rates. Remember, it was Yellen who for almost a year didn’t believe inflation was real.

The only way rate hikes solves inflation is by tanking your economy. The cure is as bad as the disease.

The only real solution is to stop the levels of spending, open up oil and gas as fast as you can, stop paying people to not work, and get people back in jobs.

The inflation is due primarily to economic inputs, specifically oil/gas prices and labor price pressure. When you have to pay more for gas and heat and transport and then the labor rates soar b/c 7 million able bodied men in this country, just the legal ones, are sitting on their butts, you get this huge price pressure that people in Washington call inflation.

But it's all b/c of the labor shortage and the oil/gas constriction. Those are the two most basic inputs into the entire economy, and our government brilliantly strangled the flow of both at the same time.

Raising rates has the effect of reducing demand for both labor and fuels but only b/c you are constricting the economy by constricting investment and disposable consumer spending. You get lower inflation but the price you pay is a recession.

Start drilling for oil in every place including Rick Pitino's hairline, cut out the endless help for people who don't lift a finger to work so they go get a job and this problem goes away as if by magic.

[MickintheHam]

Barney Frank is on the board of failed Signature Bank…..

https://nypost.com/2023/03/13/barney...ignature-bank/

George Carlin had a quote about it being a club, and you ain’t in it……

Barney Frank also said in Response to Brandon that tha failures had nothing to do with Trump policies.

[Catonahottinroof]

Is Credit Suisse the next domino?

https://www.msn.com/en-us/money/othe...ns/ar-AA18BAUq

[MickintheHam]

Is Credit Suisse the next domino?

https://www.msn.com/en-us/money/othe...ns/ar-AA18BAUq

It would be foolish to dismiss Kiyosaki. The bond market scares the hell out of me. After a decade of low interest rates, one can’t just start jacking up rates. Short term rates have seen ridiculous increases, long term rates are historically low.

[VirginiaCat]

It would be foolish to dismiss Kiyosaki. The bond market scares the hell out of me. After a decade of low interest rates, one can’t just start jacking up rates. Short term rates have seen ridiculous increases, long term rates are historically low.

And here in lies the true issue. The moves the Fed (and the International Banking Community) Made in 2008-2012 to set interest rates for borrowing at a virtual zero (or in some cases negative) was the move of a Junior Econ major. You are trading current stabilization for future crisis. Then when it was exacerbated by Goverment(s) policy of spending you were creating an environment that spawns rapid inflation with no tools to actively manage because anyone can tell you you cannot raise Interest rates too fast or you have..well what you are seeing. It really is not rocket science.

[CitizenBBN]

And here in lies the true issue. The moves the Fed (and the International Banking Community) Made in 2008-2012 to set interest rates for borrowing at a virtual zero (or in some cases negative) was the move of a Junior Econ major. You are trading current stabilization for future crisis. Then when it was exacerbated by Goverment(s) policy of spending you were creating an environment that spawns rapid inflation with no tools to actively manage because anyone can tell you you cannot raise Interest rates too fast or you have..well what you are seeing. It really is not rocket science.

I had an econ class taught by one of the senior economic advisors to the Fed. He sat on the St. Louis Fed and was very influential in monetary policy. He was a massive IS/LM guy (to the point it was his personalized license plate).

He was smart as could be, and also dumb as a fencepost. He got all the big math, but could not accept the basic common sense stuff that really underlies an economy.

They have blinders on, and see only monetary policy, and don't see the big picture.

The thing is this is even basic monetary policy.

There are a lot of very dumb "smart people" in the world, who can do fancy math but have no common sense. The Fed and DC are chocked full of them.

[bigsky]

“Most days it’s so hard to be here…” says the promotion video from this bank, sung by some people covered with feathers.

[VirginiaCat]

SVB gave over $73MM to BLM......