What happened over the weekend is bigger than Silicon Valley Bank; once again the wealthiest, most politically connected companies and executives are proving the rules don't apply to them.
I wonder of the fed would have come riding to the rescue if that bank had been in Ohio and not chocked full of depositors and board members who were major contributors to the democrats
Crazy how the "experts" were "cooling off" the economy when it was only the little people suffering, but as soon as the donor base was threatened, it's PRINT PRINT PRINT. Can't have your buddies going broke!
It really is a shame that the government won't help the people of East Palestine, OH, yet finds billions of dollars for Ukraine, and is also able to bail-out multi-millionaires who were dumb enough to exceed the insured amount at a bank. Literally zero repercussions for SVB. Meanwhile a freight train spills toxic chemicals in a working town in Ohio , and "you're on your own."
Alex - I really hope you'll stay with this topic because I think there are many people, myself included, who appreciate having it researched/analyzed/explained in plain language. There's starting to be a whiff over all this analogous to the Covid sham.
If the Fed had simply let SVB go into receivership even the big depositors would have been paid off at something like 80% to 90% on the dollar. The biggest haircuts would have been taken by the biggest shareholders - the officers and directors - in other words, the people who deserved it. But nooooo . . .!
Thank you for bringing this to our attention. Yes, the valuing the assets at par IS the bailout of the elites. Most people are too ignorant of what that means... but it is the smoking gun of elites getting bailed out.
And again, stunning how STUPID the population is...they really don't see anything wrong...NOTHING to see here...business as usual...no worries...no big deal...Credit Suisse is in dutch...nothing to see there...Moody has downgraded the ENTIRE US banking system...NOPE - no worries...ARE YOU KIDDING me? sigh...I know people in meetings at one of the big three this week. They have put all major and seemingly minor projects on hold....ya...can't imagine what that's about...ahem....Mark my words..."they" are all just waiting to see it all tumble so "they" can install the digital currency...wait for it...
Alex-Please stay on this topic. I know little of banking, but it seems to me that what we have here is a huge scandal that the mainstream media would really like to play down. Biden, Yellon, et al may well say none of the burden falls on the Average Joe but rather on banks who would be paying a special assessment to clean up the wreck at SVP. So banks' costs go up. And to whom will banks pass through those costs though higher service fees or lower returns on consumer accounts? The Average Joe, yes? Rules are rules, except when they might be applied to anyone who will help the Dems in each next election. Grads who don't pay their college loans. The smart boys and girls in Silicon Valley who maybe aren't so smart. Time was when the minions of a city political machine would knock on townhouse doors, had out fivers, and say: "We know you'll do the right thing on election day." The essential difference in our own time is that the bribes run into the billions. A final thought: Letting some rich depositors take their losses and even letting some poorly managed banks go down could only lead to better discipline on the part of depositors and bankers both--moral hazard and all that. Final question: Does Congress have a way to reverse this bailout?
3/8/23 if you have not got e-mail fax snail mail letters or a visit from your bank President or Manger and you have zero debt you should be covered for all your liquid assets. When you have large amounts of assets you should divide into 5 different banks to protect yourself if 1 bank should fall asleep into trouble. Obama created this crisis by not learning from 2008 crisis his and Uncle Joe Biden Policymakers Policies Regulations have failed American people again. Banks are doing what our Government has told them what to do like they did done with Viral Pneumonia and called it Covid. People are being Played by evil People.
Eisinger's tweet slightly reworked fits another manufactured crisis as follows: One of the lessons is that if enough medical/public health types say they are panicking it creates the appearance of a crisis, which then becomes indistinguishable from an actual crisis and requires a govt response like vaccine mandates, mask mandates, lockdowns, and business closures.
So the Fed is going to provide the funds to make up the difference between the current value of low yielding bonds and par. A bond that will yield 100 at maturity might only be worth 80 today. A bank may have paid 95 for it when interest rates were lower. The Fed has agree to make up the difference between the 80 the bond is worth and the 100 that is par.
One might ask (must ask) where is the Fed going to get the money to make up the difference between 80 and 100?
Well, they are going to use that wonderful money machine they have and add some zeroes to the digital balance. By a keystroke, more money is created.
Now here is the rub, as the Bard would say. When the Fed creates more money, that is inflation (by definition). As that newly created money starts to show up in prices (which it will at some point), that causes the Fed's PCE (CPI, whatever you want to use) to rise. And that means the Fed is supposed to raise interest rates higher.
But when the Fed raises interest rates, they create a bigger drop in bond prices. Now that bond that was worth 80 (that the Fed paid par 100 for) is only worth 70. Now the Fed has to create MORE money in order to make up the difference to par. And that is MORE inflation. Now they have to raise interest rates even higher. And the cycle continues. The Fed cannot put out an inflation fire with more inflation but that is exactly what this policy is attempting.
In SVB's case, they had used money from depositors to buy Treasurys at low yields because the Fed pushed banks to buy them (with 10-year maturities) during the pandemic. In 10 years, $100 is worth about $110 - not great, but OK. If they are forced to sell it today, right this second, they may be worth $90 because the interest on them is so low, and the associated future-value of money stuff. So in essence we are looking at those Treasuries and saying "yeah, it's worth $110 in 2031, but right now we are only counting it as $90, so you lost money." See, they didn't actually realize a loss, but we are forcing them to pretend they are selling it now for valuation purposes. Then when we do that, the FDIC says "hey, you lost $10, and you only have $90 instead of $100, so you are broke if we look at it this way". Finally, somebody goes on TV or the internet and says, "SVB has unrealized losses, and they are broke. Go grab your money" What you have is a manufactured run on the bank.
Second, yes, cash assets and liabilities were about the same, but that excludes the value of the ongoing (otherwise profitable) business, the goodwill/brand, the branches, and the customer list they had. The taxpayer won't be suffering any real losses because when all of those things are eventually liquidated and sold off, there will probably be right about enough money to actually pay off every depositors' money back. We'll have killed off the bank (banks suck, don't get me wrong) and everybody will be made whole, but it didn't have to be this way. We can manufacture a full financial collapse by doing the same thing to every bank in America if we want, but I'm better prepared to live in a third-world America than most people.
In my opinion, the most interesting parts of the story of the failures of SVB and Signature remain untold and mostly unexamined. They are as follows: (1). Why was SVB classified as a systemic risk?, (2). What entity (or entities) submitted an offer to purchase SVB, and why were the offer(s) rejected?, and (3) What caused the insolvency of Signature? Something is rotten in Denmark. The entire series of events/actions makes little economic sense. I hope enterprising reporters search for and uncover the truth.
I wonder of the fed would have come riding to the rescue if that bank had been in Ohio and not chocked full of depositors and board members who were major contributors to the democrats
Crazy how the "experts" were "cooling off" the economy when it was only the little people suffering, but as soon as the donor base was threatened, it's PRINT PRINT PRINT. Can't have your buddies going broke!
It really is a shame that the government won't help the people of East Palestine, OH, yet finds billions of dollars for Ukraine, and is also able to bail-out multi-millionaires who were dumb enough to exceed the insured amount at a bank. Literally zero repercussions for SVB. Meanwhile a freight train spills toxic chemicals in a working town in Ohio , and "you're on your own."
Alex - I really hope you'll stay with this topic because I think there are many people, myself included, who appreciate having it researched/analyzed/explained in plain language. There's starting to be a whiff over all this analogous to the Covid sham.
If the Fed had simply let SVB go into receivership even the big depositors would have been paid off at something like 80% to 90% on the dollar. The biggest haircuts would have been taken by the biggest shareholders - the officers and directors - in other words, the people who deserved it. But nooooo . . .!
Thank you for bringing this to our attention. Yes, the valuing the assets at par IS the bailout of the elites. Most people are too ignorant of what that means... but it is the smoking gun of elites getting bailed out.
Time to end the Fed.
Once again the progressives swoop in to hurt the little guys with all their promises of we’ll take care of you rich elites!
And again, stunning how STUPID the population is...they really don't see anything wrong...NOTHING to see here...business as usual...no worries...no big deal...Credit Suisse is in dutch...nothing to see there...Moody has downgraded the ENTIRE US banking system...NOPE - no worries...ARE YOU KIDDING me? sigh...I know people in meetings at one of the big three this week. They have put all major and seemingly minor projects on hold....ya...can't imagine what that's about...ahem....Mark my words..."they" are all just waiting to see it all tumble so "they" can install the digital currency...wait for it...
It seems to me the easy solution to the banking problems is put them all in jail. There's plenty of room since the criminals are all set free.
Alex-Please stay on this topic. I know little of banking, but it seems to me that what we have here is a huge scandal that the mainstream media would really like to play down. Biden, Yellon, et al may well say none of the burden falls on the Average Joe but rather on banks who would be paying a special assessment to clean up the wreck at SVP. So banks' costs go up. And to whom will banks pass through those costs though higher service fees or lower returns on consumer accounts? The Average Joe, yes? Rules are rules, except when they might be applied to anyone who will help the Dems in each next election. Grads who don't pay their college loans. The smart boys and girls in Silicon Valley who maybe aren't so smart. Time was when the minions of a city political machine would knock on townhouse doors, had out fivers, and say: "We know you'll do the right thing on election day." The essential difference in our own time is that the bribes run into the billions. A final thought: Letting some rich depositors take their losses and even letting some poorly managed banks go down could only lead to better discipline on the part of depositors and bankers both--moral hazard and all that. Final question: Does Congress have a way to reverse this bailout?
3/8/23 if you have not got e-mail fax snail mail letters or a visit from your bank President or Manger and you have zero debt you should be covered for all your liquid assets. When you have large amounts of assets you should divide into 5 different banks to protect yourself if 1 bank should fall asleep into trouble. Obama created this crisis by not learning from 2008 crisis his and Uncle Joe Biden Policymakers Policies Regulations have failed American people again. Banks are doing what our Government has told them what to do like they did done with Viral Pneumonia and called it Covid. People are being Played by evil People.
Eisinger's tweet slightly reworked fits another manufactured crisis as follows: One of the lessons is that if enough medical/public health types say they are panicking it creates the appearance of a crisis, which then becomes indistinguishable from an actual crisis and requires a govt response like vaccine mandates, mask mandates, lockdowns, and business closures.
So the Fed is going to provide the funds to make up the difference between the current value of low yielding bonds and par. A bond that will yield 100 at maturity might only be worth 80 today. A bank may have paid 95 for it when interest rates were lower. The Fed has agree to make up the difference between the 80 the bond is worth and the 100 that is par.
One might ask (must ask) where is the Fed going to get the money to make up the difference between 80 and 100?
Well, they are going to use that wonderful money machine they have and add some zeroes to the digital balance. By a keystroke, more money is created.
Now here is the rub, as the Bard would say. When the Fed creates more money, that is inflation (by definition). As that newly created money starts to show up in prices (which it will at some point), that causes the Fed's PCE (CPI, whatever you want to use) to rise. And that means the Fed is supposed to raise interest rates higher.
But when the Fed raises interest rates, they create a bigger drop in bond prices. Now that bond that was worth 80 (that the Fed paid par 100 for) is only worth 70. Now the Fed has to create MORE money in order to make up the difference to par. And that is MORE inflation. Now they have to raise interest rates even higher. And the cycle continues. The Fed cannot put out an inflation fire with more inflation but that is exactly what this policy is attempting.
In SVB's case, they had used money from depositors to buy Treasurys at low yields because the Fed pushed banks to buy them (with 10-year maturities) during the pandemic. In 10 years, $100 is worth about $110 - not great, but OK. If they are forced to sell it today, right this second, they may be worth $90 because the interest on them is so low, and the associated future-value of money stuff. So in essence we are looking at those Treasuries and saying "yeah, it's worth $110 in 2031, but right now we are only counting it as $90, so you lost money." See, they didn't actually realize a loss, but we are forcing them to pretend they are selling it now for valuation purposes. Then when we do that, the FDIC says "hey, you lost $10, and you only have $90 instead of $100, so you are broke if we look at it this way". Finally, somebody goes on TV or the internet and says, "SVB has unrealized losses, and they are broke. Go grab your money" What you have is a manufactured run on the bank.
Second, yes, cash assets and liabilities were about the same, but that excludes the value of the ongoing (otherwise profitable) business, the goodwill/brand, the branches, and the customer list they had. The taxpayer won't be suffering any real losses because when all of those things are eventually liquidated and sold off, there will probably be right about enough money to actually pay off every depositors' money back. We'll have killed off the bank (banks suck, don't get me wrong) and everybody will be made whole, but it didn't have to be this way. We can manufacture a full financial collapse by doing the same thing to every bank in America if we want, but I'm better prepared to live in a third-world America than most people.
In my opinion, the most interesting parts of the story of the failures of SVB and Signature remain untold and mostly unexamined. They are as follows: (1). Why was SVB classified as a systemic risk?, (2). What entity (or entities) submitted an offer to purchase SVB, and why were the offer(s) rejected?, and (3) What caused the insolvency of Signature? Something is rotten in Denmark. The entire series of events/actions makes little economic sense. I hope enterprising reporters search for and uncover the truth.