***OFFICIAL*** Bank Failure/Crisis Thread (2 Viewers)

[Don't Toews Me]

2-year Treasury yield posts biggest 3-day decline since aftermath of 1987 stock crash

U.S Treasury yields declined on Monday as investors assessed the state of the economy after the collapse of Silicon Valley Bank.

www.cnbc.com

The yield on the 2-year Treasury was last trading at 4.06% down 53 basis points. (1 basis point equals 0.01%. Prices move inversely to yields.)

The yield has fallen 100 basis points, or a full percentage point, since Wednesday, marking the largest three-day decline since Oct. 22, 1987, when the yield fell 117 basis points. That move followed the Oct. 19, 1987 stock market crash — known as “Black Monday” in which the S&P 500 plunged 20% for its worst one-day drop. The move was bigger than the 2-year yield slide of 63 basis points that took place in three days following the 9/11 attacks.

 

[eoMMan]

I think the lesson here for people and small businesses is to try and not have more than $250k in a single bank. It's definitely more difficult for a business to stay under the $250k limit (especially one that moves volume) but they should have their higher dollar accounts in larger banks, imo.

This is the EXACT thinking that is THE problem we are facing right now. (no offense to you @eoMMan there is no fault in it for you to think this way). A flight of cash out of fear from sound banks to consumer unfriendly 'too big to fail' banks that feed the behemoths and put the smaller banks in danger. And this is often as a result of not understanding how FDIC insurance works. It is very easy for a family to have millions in coverage with FDIC coverage. Unless you are a hermit, you can easily protect yourself and not have to bow down to the overlords like Dimon who expect you to bank with them because they are Chase- offering crap and nothing in return. While banks that actually offer value go from being sound to failure because of the drain of deposits.

Meh. People need to take care of themselves and their family/businesses. If lowering their risk means having multiple bank accounts at different banks, so be it. They are just playing by the rules they didn't establish.

 

[Chadstroma]

I think the lesson here for people and small businesses is to try and not have more than $250k in a single bank. It's definitely more difficult for a business to stay under the $250k limit (especially one that moves volume) but they should have their higher dollar accounts in larger banks, imo.

This is the EXACT thinking that is THE problem we are facing right now. (no offense to you @eoMMan there is no fault in it for you to think this way). A flight of cash out of fear from sound banks to consumer unfriendly 'too big to fail' banks that feed the behemoths and put the smaller banks in danger. And this is often as a result of not understanding how FDIC insurance works. It is very easy for a family to have millions in coverage with FDIC coverage. Unless you are a hermit, you can easily protect yourself and not have to bow down to the overlords like Dimon who expect you to bank with them because they are Chase- offering crap and nothing in return. While banks that actually offer value go from being sound to failure because of the drain of deposits.

Meh. People need to take care of themselves and their family/businesses. If lowering their risk means having multiple bank accounts at different banks, so be it. They are just playing by the rules they didn't establish.

Without understanding the rules.

 

[Don't Toews Me]

https://twitter.com/jeannasmialek/status/1635279138784448512?cxt=HHwWgMDU_c3t1rEtAAAA

This Fed program is a big deal. The Fed is basically taking interest rate risk from the private banking sector and temporarily offsetting it: Giving banks a chance to get one-year loans in exchange for securities at their original value.

“The Fed has basically just written insurance on interest rate risk for the whole banking system,”
@StevenKelly49 told me. This could allow the Fed to keep raising interest rates - or at least keep rates high -- without causing a bunch of further SVB-like blowups.

That's relevant, bc the Fed has one tool to fight inflation: Rates. And hig rates can cause vulnerability. “There’s an old saying: Whenever the Fed hits the brakes, someone goes through the windshield,” Michael Feroli at JPM told me. “You just never know who it’s going to be.”

 

[Don't Toews Me]

https://twitter.com/lloydblankfein/status/1635290525942284289?cxt=HHwWgoDQ9baE3LEtAAAA

A few banks may have issues like SVB, but only a few. Govt actions removed reasons for bank runs. Biggest banks have much tougher regulation and stress testing. Anxiety and volatility high, but sharply lower interest rates, fed likely on hold, are strong positives for markets.

 

[Joe Bryant]

small depositors have absolutely nothing to worry about.

Is "small" defined as less than the $250k covered by FDIC insurance?

 

[Joe Bryant]

My bad GB. Just stressed after 72 hours of trying to keep partners afloat.

If you don't mind me asking, what do you do and how are keeping partners afloat?

Thanks for your insights here.

 

[Don't Toews Me]

I expect First Republic Bank to fail next, if there is a failure, even with injection of funds from the Fed and Chase. Stock price is a good indicator of faith in a bank and FRC is down 70% right now. Keep an eye on Western Alliance Bank as well. Down 62% rigth now. Both improved from opening but this indicates a complete lack of confidence in the bank. Deposits should be fleeing in droves from them.

Just saw this: https://twitter.com/FedGuy12/status/1635263272705470467

 

[Mitchie]

small depositors have absolutely nothing to worry about.

Is "small" defined as less than the $250k covered by FDIC insurance?

yes (it's actually 250k per bank)

 

[belljr]

when did the FDIC insurance go from 100k to 250K ?? i am operating in olden times

 

[Alex P Keaton]

My bad GB. Just stressed after 72 hours of trying to keep partners afloat.

If you don't mind me asking, what do you do and how are keeping partners afloat?

Thanks for your insights here.

I work for an insurance company, and we have some minority investments (sizeable but still minority) and a handful of these firms were crazy enough to keep $20, $30, $50m of their funds in SVB. And couldn’t meet payroll today. And in some cases, SVB was actually the vendor handling their payroll and some other back office finance ops. I’ve inherited these investments from a former colleague who left the company last year……good times.

 

[Juxtatarot]

when did the FDIC insurance go from 100k to 250K ?? i am operating in olden times

2008, I think.

 

[FreeBaGeL]

I see the Fed is doing a closed door emergency session Monday. I would not be surprised if they don't swing to a rate cut and buying MBS again. The bank run killed SVB but what caused the bank run was the Fed's aggressive rate hikes which put them in a bad bind. The Fed is notorious for being unable to forward think and being reactionary. One of the consequences for having a bunch of academics run it.

I think the complete opposite of this. SVB is the one that was short-sighted and lacked forward thinking.

SVB signed itself into long term bonds because they were too short sighted to realize that interest rates might not be super low forever.

These rate hikes were BADLY needed and BADLY overdue. The longer we waited and the slower we did it the worse it is all going to be in the end. If a tech bank going under while all of their depositors are made whole is the fallout of this then jesus we got off easy. But it will get worse I'm sure, and rightfully so.

15 years of hand holding and screwing over the future so people could get buckets of money, and then 8 months of things being a little bit hard (but still historically not bad at all) and somehow people are struggling? WTH did they do with all that easy mode money from the last 15 years?

The reality is things need to get bad. People need a swift kick in the nuts. They need to learn that they can't just spend like crazy and make stupid risky investments and right when they're about to get punished for it, the fed will just screw over the future to make sure they're okay. Every time they do that it just compounds and makes the issue bigger next time, which means they have to take even bigger steps next time, which then makes the issue even bigger the next time, and so on.

And eventually that leads to inflation, which overwhelmingly impacts the people that WEREN'T the ones that screwed everything up in the first place. The only real "trickle down" in economics is that when the fed spends a decade shaping their policy around protecting the upper middle class and above from their own stupidity and dependence it trickles down to real problems for the people whose lives are actually changed by things like a loaf of bread costing $6.50.

The bolded is absolutely true and is the core of my argument. The Fed, once again, screwed up. Their inactivity well after it was obvious to everyone except the Fed that inflation was a massive issue is what laid the foundation for this problem. Sure, SVB and Signature screwed up but the real problem is faith. If depositors don't have faith in the system then there will be a significant shift of funds out of many banks. I wasn't really worried about a run on the banking system at large but with that second domino falling, it is a real threat. I think the only thing that will calm everyone is a shift to ease rates. If it is not done now and you start having a number of banks fail then you are looking at a mini-repeat of 2008 but the problem that causes it won't be lending but the Fed making mistake over mistake.

I think we are mostly on the same page. But where I disagree is that October 2021 when inflation was obvious to everyone is not when the fed screwed up. Of course, they did screw up then, but it was way too late by then anyway. 2018 when they backed off rate hikes too early is when they screwed up, and that's exactly why they're not going to ease off this time. The fed has a history of overcorrecting for their past mistakes so they'll likely go to the extreme in the opposite direction this time, but we're not there yet.

A massive correction with some collateral damage is the only way out of this at this point. We could've MAYBE gotten away with a soft landing in 2018, but a soft landing now would just mean we're going to have to do this all over again in a couple years, but worse. They're shooting for a hard landing, they just know they can't say that out loud.

I do very much agree with your point about smaller vs. larger banks though, and how consolidation into fewer, larger banks is not a good outcome. It's all just a mess.

 

[Grace Under Pressure]

2018 when they backed off rate hikes too early is when they screwed up, and that's exactly why they're not going to ease off this time.

They also lowered interest rates 3 times in 2019. No one knew a pandemic was coming, but that decision making seems pretty short-sighted in retrospect. (easy to be a Monday morning QB of course.)

 

[TripItUp]

A series of mistakes by both the govt, voters, politicians, appointed officials, private businesses and obviously SVB.

Seems we are relearning some of the lessons from 2008.

 

[Joe Bryant]

I work for an insurance company, and we have some minority investments (sizeable but still minority) and a handful of these firms were crazy enough to keep $20, $30, $50m of their funds in SVB. And couldn’t meet payroll today. And in some cases, SVB was actually the vendor handling their payroll and some other back office finance ops. I’ve inherited these investments from a former colleague who left the company last year……good times.

Dang. Thanks and hang in there GB.

 

[Chadstroma]

I expect First Republic Bank to fail next, if there is a failure, even with injection of funds from the Fed and Chase. Stock price is a good indicator of faith in a bank and FRC is down 70% right now. Keep an eye on Western Alliance Bank as well. Down 62% rigth now. Both improved from opening but this indicates a complete lack of confidence in the bank. Deposits should be fleeing in droves from them.

Just saw this: https://twitter.com/FedGuy12/status/1635263272705470467

We are addressing the symptoms and not the core issue.
If CPI comes in continued with a down trend in inflation (which I am confident it will) then a 25 bps point cut would go a long way to stabilize everything.

 

[Chadstroma]

My bad GB. Just stressed after 72 hours of trying to keep partners afloat.

If you don't mind me asking, what do you do and how are keeping partners afloat?

Thanks for your insights here.

I work for an insurance company, and we have some minority investments (sizeable but still minority) and a handful of these firms were crazy enough to keep $20, $30, $50m of their funds in SVB. And couldn’t meet payroll today. And in some cases, SVB was actually the vendor handling their payroll and some other back office finance ops. I’ve inherited these investments from a former colleague who left the company last year……good times.

uhhhhhhh..... why are you posting on here right now?

 

[Chadstroma]

small depositors have absolutely nothing to worry about.

Is "small" defined as less than the $250k covered by FDIC insurance?

yes (it's actually 250k per bank)

No.

It is $250K per depositor, per institution, per ownership form.

So, this means that your account with your wife is not insured to $250K but actually $500K. Consumers can get millions of dollars of FDIC insurance on their accounts all with one bank by structuring several accounts differently with family members.

 

[culdeus]

This is a little bit of an existential crisis for crypto. I think we are beyond the point where anyone will ever use crypto as anything but a forex like trade. Problem is you exchange USD for it, and then where does that USD end up? Eventually you probably want to give your crypto back for USD, but if that bank puts it in to the safest treasuries possible and yield goes to pot now what?

So how much of a hedge is crypto to fiat really if the risk correlation is stronger than anyone thought?

I mean we saw what SBF did with the deposits, gambled and lost on more crypto. SVB gambled and lost on interest rates, what's next?

 

[Chadstroma]

when did the FDIC insurance go from 100k to 250K ?? i am operating in olden times

2008, I think.

Around there... I do believe a little later. I want to say 2009 though. Maybe even 2010. I can't remember for sure.

 

[St. Louis Bob]

@Chadstroma and @massraider nailed it

This stood out to me the most "upper middle class and above from their own stupidity".

On my short walks in the morning it has been amazing the last couple of years the amount of fancy in ground pools with upper class landscaping to match, gutted houses getting upgrades, Porsche's, Mercedes, Audi's etc. seemingly everywhere all of a sudden. We live in a nice neighborhood but not THAT nice. It was a big warning sign to me just like when the house I purchased in 2003 was "worth" 50% more in 2007.

We need more ants in this country and less grasshoppers.

Good luck GB @eoMMan and everyone else sorting this mess out. :(

 

[fruity pebbles]

A series of mistakes by both the govt, voters, politicians, appointed officials, private businesses and obviously SVB.

Seems we are relearning some of the lessons from 2008.

Why wouldn’t you make the same mistakes if there’s always a backstop.

 

[Chadstroma]

A series of mistakes by both the govt, voters, politicians, appointed officials, private businesses and obviously SVB.

Seems we are relearning some of the lessons from 2008.

Very, very different though the end result is similar.

The big difference here is that these banks are not failing due to poor lending practices that imploded because RE did not continue to the risk adjustments for them.

If there was not a run on the bank, SVB would still be in business. This is all about fear and lost of faith. 2008 was much more tangible and fundamental.

 

[fruity pebbles]

I expect First Republic Bank to fail next, if there is a failure, even with injection of funds from the Fed and Chase. Stock price is a good indicator of faith in a bank and FRC is down 70% right now. Keep an eye on Western Alliance Bank as well. Down 62% rigth now. Both improved from opening but this indicates a complete lack of confidence in the bank. Deposits should be fleeing in droves from them.

Just saw this: https://twitter.com/FedGuy12/status/1635263272705470467

We are addressing the symptoms and not the core issue.
If CPI comes in continued with a down trend in inflation (which I am confident it will) then a 25 bps point cut would go a long way to stabilize everything.

I really can’t see them cutting right now. Still too much latent demand. We saw that when mortgage rates ticked down below 6% and we saw it again when Tesla cut the price of their cars.

 

[TripItUp]

A series of mistakes by both the govt, voters, politicians, appointed officials, private businesses and obviously SVB.

Seems we are relearning some of the lessons from 2008.

Very, very different though the end result is similar.

The big difference here is that these banks are not failing due to poor lending practices that imploded because RE did not continue to the risk adjustments for them.

If there was not a run on the bank, SVB would still be in business. This is all about fear and lost of faith. 2008 was much more tangible and fundamental.

I didn't say it was the exact same situation.

There are some mistakes that are the same imho, including 1) poor risk management 2) regulatory oversight and 3) govt macro mistakes.

 

[Chadstroma]

I see the Fed is doing a closed door emergency session Monday. I would not be surprised if they don't swing to a rate cut and buying MBS again. The bank run killed SVB but what caused the bank run was the Fed's aggressive rate hikes which put them in a bad bind. The Fed is notorious for being unable to forward think and being reactionary. One of the consequences for having a bunch of academics run it.

I think the complete opposite of this. SVB is the one that was short-sighted and lacked forward thinking.

SVB signed itself into long term bonds because they were too short sighted to realize that interest rates might not be super low forever.

These rate hikes were BADLY needed and BADLY overdue. The longer we waited and the slower we did it the worse it is all going to be in the end. If a tech bank going under while all of their depositors are made whole is the fallout of this then jesus we got off easy. But it will get worse I'm sure, and rightfully so.

15 years of hand holding and screwing over the future so people could get buckets of money, and then 8 months of things being a little bit hard (but still historically not bad at all) and somehow people are struggling? WTH did they do with all that easy mode money from the last 15 years?

The reality is things need to get bad. People need a swift kick in the nuts. They need to learn that they can't just spend like crazy and make stupid risky investments and right when they're about to get punished for it, the fed will just screw over the future to make sure they're okay. Every time they do that it just compounds and makes the issue bigger next time, which means they have to take even bigger steps next time, which then makes the issue even bigger the next time, and so on.

And eventually that leads to inflation, which overwhelmingly impacts the people that WEREN'T the ones that screwed everything up in the first place. The only real "trickle down" in economics is that when the fed spends a decade shaping their policy around protecting the upper middle class and above from their own stupidity and dependence it trickles down to real problems for the people whose lives are actually changed by things like a loaf of bread costing $6.50.

The bolded is absolutely true and is the core of my argument. The Fed, once again, screwed up. Their inactivity well after it was obvious to everyone except the Fed that inflation was a massive issue is what laid the foundation for this problem. Sure, SVB and Signature screwed up but the real problem is faith. If depositors don't have faith in the system then there will be a significant shift of funds out of many banks. I wasn't really worried about a run on the banking system at large but with that second domino falling, it is a real threat. I think the only thing that will calm everyone is a shift to ease rates. If it is not done now and you start having a number of banks fail then you are looking at a mini-repeat of 2008 but the problem that causes it won't be lending but the Fed making mistake over mistake.

I think we are mostly on the same page. But where I disagree is that October 2021 when inflation was obvious to everyone is not when the fed screwed up. Of course, they did screw up then, but it was way too late by then anyway. 2018 when they backed off rate hikes too early is when they screwed up, and that's exactly why they're not going to ease off this time. The fed has a history of overcorrecting for their past mistakes so they'll likely go to the extreme in the opposite direction this time, but we're not there yet.

A massive correction with some collateral damage is the only way out of this at this point. We could've MAYBE gotten away with a soft landing in 2018, but a soft landing now would just mean we're going to have to do this all over again in a couple years, but worse. They're shooting for a hard landing, they just know they can't say that out loud.

I do very much agree with your point about smaller vs. larger banks though, and how consolidation into fewer, larger banks is not a good outcome. It's all just a mess.

I am willing to give somewhat of a pass due to the pandemic but coming out of that they acted too slowly with their heads in the sand. They then overreacted to make up for them being slow. It is like driving down the road.... not paying attention because you are texting. Looking up and seeing an animal in the road at the last minute and they yanked the steering wheel so hard that they drove the car headlong into the huge tree on the side of the road.

 

[Chadstroma]

I expect First Republic Bank to fail next, if there is a failure, even with injection of funds from the Fed and Chase. Stock price is a good indicator of faith in a bank and FRC is down 70% right now. Keep an eye on Western Alliance Bank as well. Down 62% rigth now. Both improved from opening but this indicates a complete lack of confidence in the bank. Deposits should be fleeing in droves from them.

Just saw this: https://twitter.com/FedGuy12/status/1635263272705470467

We are addressing the symptoms and not the core issue.
If CPI comes in continued with a down trend in inflation (which I am confident it will) then a 25 bps point cut would go a long way to stabilize everything.

I really can’t see them cutting right now. Still too much latent demand. We saw that when mortgage rates ticked down below 6% and we saw it again when Tesla cut the price of their cars.

They won't. I think I was more optimistic the Fed would have balls and be forward thinking than I have any real business giving them. It would be a ballsy move but in my view, the right one. I think CPI will remain high but it will show a downward trend, which I think will be from all the previous rate cuts that are still working through the financial system. The 25 would not impact that in my view and it would do wonders to stabilize the banking system.

 

[fruity pebbles]

I expect First Republic Bank to fail next, if there is a failure, even with injection of funds from the Fed and Chase. Stock price is a good indicator of faith in a bank and FRC is down 70% right now. Keep an eye on Western Alliance Bank as well. Down 62% rigth now. Both improved from opening but this indicates a complete lack of confidence in the bank. Deposits should be fleeing in droves from them.

Just saw this: https://twitter.com/FedGuy12/status/1635263272705470467

We are addressing the symptoms and not the core issue.
If CPI comes in continued with a down trend in inflation (which I am confident it will) then a 25 bps point cut would go a long way to stabilize everything.

I really can’t see them cutting right now. Still too much latent demand. We saw that when mortgage rates ticked down below 6% and we saw it again when Tesla cut the price of their cars.

They won't. I think I was more optimistic the Fed would have balls and be forward thinking than I have any real business giving them. It would be a ballsy move but in my view, the right one. I think CPI will remain high but it will show a downward trend, which I think will be from all the previous rate cuts that are still working through the financial system. The 25 would not impact that in my view and it would do wonders to stabilize the banking system.

I usually agree with you but not here. I think a rate cut would be incredibly destructive. It would be party time all over again. The market would soar, rates would plummet, housing would turn red hot again. Essentially would be back to square one without the strong economy to fall back on. Still too much demand that hasn’t been extinguished in the upper middle class on up. Commodities and then inflation would hockey stick up imo. It’d be feel good for a bit then all hell would break loose. I’d short the market for the first time in my life.

 

[beer 30]

I’ve inherited these investments from a former colleague who left the company last year

I would find them and send them a very nice gift basket filled with flaming dog poo.

 

[John123]

I think the lesson here for people and small businesses is to try and not have more than $250k in a single bank. It's definitely more difficult for a business to stay under the $250k limit (especially one that moves volume) but they should have their higher dollar accounts in larger banks, imo.

This is the EXACT thinking that is THE problem we are facing right now. (no offense to you @eoMMan there is no fault in it for you to think this way). A flight of cash out of fear from sound banks to consumer unfriendly 'too big to fail' banks that feed the behemoths and put the smaller banks in danger. And this is often as a result of not understanding how FDIC insurance works. It is very easy for a family to have millions in coverage with FDIC coverage. Unless you are a hermit, you can easily protect yourself and not have to bow down to the overlords like Dimon who expect you to bank with them because they are Chase- offering crap and nothing in return. While banks that actually offer value go from being sound to failure because of the drain of deposits.

Meh. People need to take care of themselves and their family/businesses. If lowering their risk means having multiple bank accounts at different banks, so be it. They are just playing by the rules they didn't establish.

Without understanding the rules.

I don't really understand your stance here Chad. Let me ask you a simple question. If I have say a million dollars at a single institution and I choose to change that and distribute that money across several institutions at 250k per institution, am *I* NOT playing by the rules or am I playing by the rules?

 

[Juxtatarot]

when did the FDIC insurance go from 100k to 250K ?? i am operating in olden times

2008, I think.

Around there... I do believe a little later. I want to say 2009 though. Maybe even 2010. I can't remember for sure.

Looks like it was raised in 2008 temporarily but that was made permanent in 2010. Back in 2006 they raised it for IRAs to $250K. I had forgotten about that.

 

[Mitchie]

small depositors have absolutely nothing to worry about.

Is "small" defined as less than the $250k covered by FDIC insurance?

yes (it's actually 250k per bank)

No.

It is $250K per depositor, per institution, per ownership form.

So, this means that your account with your wife is not insured to $250K but actually $500K. Consumers can get millions of dollars of FDIC insurance on their accounts all with one bank by structuring several accounts differently with family members.

ok whatever, and settle down Beavis.

 

[Chadstroma]

I expect First Republic Bank to fail next, if there is a failure, even with injection of funds from the Fed and Chase. Stock price is a good indicator of faith in a bank and FRC is down 70% right now. Keep an eye on Western Alliance Bank as well. Down 62% rigth now. Both improved from opening but this indicates a complete lack of confidence in the bank. Deposits should be fleeing in droves from them.

Just saw this: https://twitter.com/FedGuy12/status/1635263272705470467

We are addressing the symptoms and not the core issue.
If CPI comes in continued with a down trend in inflation (which I am confident it will) then a 25 bps point cut would go a long way to stabilize everything.

I really can’t see them cutting right now. Still too much latent demand. We saw that when mortgage rates ticked down below 6% and we saw it again when Tesla cut the price of their cars.

They won't. I think I was more optimistic the Fed would have balls and be forward thinking than I have any real business giving them. It would be a ballsy move but in my view, the right one. I think CPI will remain high but it will show a downward trend, which I think will be from all the previous rate cuts that are still working through the financial system. The 25 would not impact that in my view and it would do wonders to stabilize the banking system.

I usually agree with you but not here. I think a rate cut would be incredibly destructive. It would be party time all over again. The market would soar, rates would plummet, housing would turn red hot again. Essentially would be back to square one without the strong economy to fall back on. Still too much demand that hasn’t been extinguished in the upper middle class on up. Commodities and then inflation would hockey stick up imo. It’d be feel good for a bit then all hell would break loose. I’d short the market for the first time in my life.

Disagreement is allowed. I am still right though.

 

[Chadstroma]

I think the lesson here for people and small businesses is to try and not have more than $250k in a single bank. It's definitely more difficult for a business to stay under the $250k limit (especially one that moves volume) but they should have their higher dollar accounts in larger banks, imo.

This is the EXACT thinking that is THE problem we are facing right now. (no offense to you @eoMMan there is no fault in it for you to think this way). A flight of cash out of fear from sound banks to consumer unfriendly 'too big to fail' banks that feed the behemoths and put the smaller banks in danger. And this is often as a result of not understanding how FDIC insurance works. It is very easy for a family to have millions in coverage with FDIC coverage. Unless you are a hermit, you can easily protect yourself and not have to bow down to the overlords like Dimon who expect you to bank with them because they are Chase- offering crap and nothing in return. While banks that actually offer value go from being sound to failure because of the drain of deposits.

Meh. People need to take care of themselves and their family/businesses. If lowering their risk means having multiple bank accounts at different banks, so be it. They are just playing by the rules they didn't establish.

Without understanding the rules.

I don't really understand your stance here Chad. Let me ask you a simple question. If I have say a million dollars at a single institution and I choose to change that and distribute that money across several institutions at 250k per institution, am *I* NOT playing by the rules or am I playing by the rules?

It depends. Are you married? Do you have kids?

 

[John123]

I think the lesson here for people and small businesses is to try and not have more than $250k in a single bank. It's definitely more difficult for a business to stay under the $250k limit (especially one that moves volume) but they should have their higher dollar accounts in larger banks, imo.

This is the EXACT thinking that is THE problem we are facing right now. (no offense to you @eoMMan there is no fault in it for you to think this way). A flight of cash out of fear from sound banks to consumer unfriendly 'too big to fail' banks that feed the behemoths and put the smaller banks in danger. And this is often as a result of not understanding how FDIC insurance works. It is very easy for a family to have millions in coverage with FDIC coverage. Unless you are a hermit, you can easily protect yourself and not have to bow down to the overlords like Dimon who expect you to bank with them because they are Chase- offering crap and nothing in return. While banks that actually offer value go from being sound to failure because of the drain of deposits.

Meh. People need to take care of themselves and their family/businesses. If lowering their risk means having multiple bank accounts at different banks, so be it. They are just playing by the rules they didn't establish.

Without understanding the rules.

I don't really understand your stance here Chad. Let me ask you a simple question. If I have say a million dollars at a single institution and I choose to change that and distribute that money across several institutions at 250k per institution, am *I* NOT playing by the rules or am I playing by the rules?

It depends. Are you married? Do you have kids?

That has nothing to do with my decision. I get that you're suggesting I open accounts in everyone's name and distribute the money amongst those accounts. That's not what I'm asking. I'm asking if I'm allowed, by the rules, to diversify in another way - by distributing MY money amongst multiple financial institutions. This is a pretty simple question.

 

[Chadstroma]

small depositors have absolutely nothing to worry about.

Is "small" defined as less than the $250k covered by FDIC insurance?

yes (it's actually 250k per bank)

No.

It is $250K per depositor, per institution, per ownership form.

So, this means that your account with your wife is not insured to $250K but actually $500K. Consumers can get millions of dollars of FDIC insurance on their accounts all with one bank by structuring several accounts differently with family members.

ok whatever, and settle down Beavis.

It is a very important part of all of this though. In fact, it is at the core of this entire situation. Though it is not why SVB failed, it is exactly the reason why there is pressure on all these other banks right now because people don't understand this. All they know is $250K. It is why I say that they need to simplify it and increase the amount insured.

 

[massraider]

They've never had to have safeguards in place because people can take out money too fast, but now, with technology, a bank can get run on and collapse in a day, even if it would eventually be able to make people whole. You don't need people crowding at bank tellers.

Now if enough people get little beeps on their phone, they can clean out their account in seconds.

 

[Don't Toews Me]

Something broke, but the Fed is still expected to go through with rate hikes

Markets still expect the Fed to keep up its inflation-fighting efforts, despite high-profile bank failures that have rattled the financial system.

www.cnbc.com

While market pricing was volatile Monday, the bias was towards a Fed that would continue tightening monetary policy. Traders assigned an 85% probability of a 0.25 percentage point interest rate increase when the Federal Open Market Committee meets March 21-22 in Washington, according to a CME Group estimate. For a brief period last week, markets were expecting a 0.5-point move, following remarks from Fed Chair Jerome Powell indicating the central bank was concerned over recent hot inflation data.

Goldman Sachs on Monday said it does not expect the Fed to hike at all this month, though there were few, if any, other Wall Street forecasters who shared that position. Both Bank of America and Citigroup said they expect the Fed to make the quarter-point move, likely followed by a few more.

Moreover, even though Goldman said it figures the Fed will skip in March, it still is looking for quarter-point hikes in May, June and July.

“We think Fed officials are likely to prioritize financial stability for now, viewing it as the immediate problem and high inflation as a medium-term problem,” Goldman told clients in a note.

Krosby said the Fed is likely at least to discuss the idea of holding off on an increase.

Citigroup economist Andrew Hollenhorst said pausing — a term Fed officials generally dislike — now would send the wrong message to the market.
“Fed officials are unlikely to pivot at next week’s meeting by pausing rate hikes, in our view,” Hollenhorst said in a client note. “Doing so would invite markets and the public to assume that the Fed’s inflation fighting resolve is only in place up to the point when there is any bumpiness in financial markets or the real economy.”

Bank of America said it remains “watchful” for any signs that the current banking crisis is spreading, a condition that could change the forecast.

“If the Fed is successful at corralling the recent market volatility and ringfencing the traditional banking sector, then it should be able to continue its gradual pace of rate hikes until monetary policy is sufficiently restrictive,” Michael Gapen, BofA’s chief U.S. economist, told clients. “Our outlook for monetary policy is always data dependent; at present it is also dependent on stresses in financial markets.”

 

[Zow]

i have no idea what y'all are talking about, but i find it interesting.

Yeah this is one of those threads where I feel pretty stupid. I think I "get it," but I am nowhere near sure.

 

[Don't Toews Me]

https://twitter.com/SalehaMohsin/status/1635329225824825344?cxt=HHwWgMDTwYfR7bEtAAAA

Wonder who made the bid. Wasn't PNC.

 

[Chadstroma]

I think the lesson here for people and small businesses is to try and not have more than $250k in a single bank. It's definitely more difficult for a business to stay under the $250k limit (especially one that moves volume) but they should have their higher dollar accounts in larger banks, imo.

This is the EXACT thinking that is THE problem we are facing right now. (no offense to you @eoMMan there is no fault in it for you to think this way). A flight of cash out of fear from sound banks to consumer unfriendly 'too big to fail' banks that feed the behemoths and put the smaller banks in danger. And this is often as a result of not understanding how FDIC insurance works. It is very easy for a family to have millions in coverage with FDIC coverage. Unless you are a hermit, you can easily protect yourself and not have to bow down to the overlords like Dimon who expect you to bank with them because they are Chase- offering crap and nothing in return. While banks that actually offer value go from being sound to failure because of the drain of deposits.

Meh. People need to take care of themselves and their family/businesses. If lowering their risk means having multiple bank accounts at different banks, so be it. They are just playing by the rules they didn't establish.

Without understanding the rules.

I don't really understand your stance here Chad. Let me ask you a simple question. If I have say a million dollars at a single institution and I choose to change that and distribute that money across several institutions at 250k per institution, am *I* NOT playing by the rules or am I playing by the rules?

It depends. Are you married? Do you have kids?

That has nothing to do with my decision. I get that you're suggesting I open accounts in everyone's name and distribute the money amongst those accounts. That's not what I'm asking. I'm asking if I'm allowed, by the rules, to diversify in another way - by distributing MY money amongst multiple financial institutions. This is a pretty simple question.

You can do whatever you want of course. That isn't a real question.
My point of not understanding the rules is all about not understanding how FDIC Insurance works.
The ENTIRE reason for the FDIC is NOT to protect your funds. It is to protect against fear and thus keeping the banking system from having bank runs. It is a fairly rare thing now (well since at least the 2008 Financial Crisis at least) but pre-dating FDIC, it was actually a fairly common thing to have bank runs.
If fear runs the system then we are screwed. Unwarranted fear is extremely destructive.
Small and regional banks are going to be under pressure right now. Commercials funds will flow out of their deposits and into the Chase, BofA, Citi type banks.
This is not a good thing for the country. It is horrible.
Not understanding that you are protected with correct structuring of your accounts and encouraging fear because people have this $250K number in their head is bad and it is ignoring the rules of how FDIC insurance works.

 

[Chadstroma]

https://twitter.com/SalehaMohsin/status/1635329225824825344?cxt=HHwWgMDTwYfR7bEtAAAA

Wonder who made the bid. Wasn't PNC.

$1 by Chase. Because Dimon is that kind of demon.... and I wouldn't be shocked if he helped flame the fires of rumors to start this all.

 

[Runkle]

This is a little bit of an existential crisis for crypto. I think we are beyond the point where anyone will ever use crypto as anything but a forex like trade. Problem is you exchange USD for it, and then where does that USD end up? Eventually you probably want to give your crypto back for USD, but if that bank puts it in to the safest treasuries possible and yield goes to pot now what?

So how much of a hedge is crypto to fiat really if the risk correlation is stronger than anyone thought?

I mean we saw what SBF did with the deposits, gambled and lost on more crypto. SVB gambled and lost on interest rates, what's next?

The sooner the crypto fever dream dies, the better.

 

[Mitchie]

small depositors have absolutely nothing to worry about.

Is "small" defined as less than the $250k covered by FDIC insurance?

yes (it's actually 250k per bank)

No.

It is $250K per depositor, per institution, per ownership form.

So, this means that your account with your wife is not insured to $250K but actually $500K. Consumers can get millions of dollars of FDIC insurance on their accounts all with one bank by structuring several accounts differently with family members.

ok whatever, and settle down Beavis.

It is a very important part of all of this though. In fact, it is at the core of this entire situation. Though it is not why SVB failed, it is exactly the reason why there is pressure on all these other banks right now because people don't understand this. All they know is $250K. It is why I say that they need to simplify it and increase the amount insured.

i was answering a question from a specific poster, i think he got the gist of things, anyone who has that much in cash shouldn't be asking that on a message board. which is also why this is not "the core of the entire situation", the people who invested this money knew this. you're like those people on twitter who ends all their posts with " noone but me understands this".

 

[Chadstroma]

small depositors have absolutely nothing to worry about.

Is "small" defined as less than the $250k covered by FDIC insurance?

yes (it's actually 250k per bank)

No.

It is $250K per depositor, per institution, per ownership form.

So, this means that your account with your wife is not insured to $250K but actually $500K. Consumers can get millions of dollars of FDIC insurance on their accounts all with one bank by structuring several accounts differently with family members.

ok whatever, and settle down Beavis.

It is a very important part of all of this though. In fact, it is at the core of this entire situation. Though it is not why SVB failed, it is exactly the reason why there is pressure on all these other banks right now because people don't understand this. All they know is $250K. It is why I say that they need to simplify it and increase the amount insured.

i was answering a question from a specific poster, i think he got the gist of things, anyone who has that much in cash shouldn't be asking that on a message board. which is also why this is not "the core of the entire situation", the people who invested this money knew this. you're like those people on twitter who ends all their posts with " noone but me understands this".

ok, whatever, and settle down Beavis.
(BTW, the laughing was not at you but with you but apparently you took offense to it)

 

[Todem]

It’s truly amazing how mismatched their asset-liability duration was. I can’t even fathom how they thought that made sense. It’s incredibly basic.

I know nothing about all of this except when I hear about a bank failing I assume either 1. somebody stole something or 2. they are idiots at managing money. I thought after 2008 we put stuff in place to keep and eye on the banks to kind of guard against stuff like this, no? I mean my company is privately held by a public company in England but we get audited every year and have to answer a lot of painful questions when we do stupid ****. Is that not the case for a company that manages billions of dollars?

They put all their eggs in long term US Treasuries at 1.5% rates.....they got steamrolled these last 10 months as the FED put the pedal to metal on hikes. Those bond prices cratered......major clients made a run on their deposits.....and here we are.

This is capitalism. It’s not full proof. The BOD of this bank were negligent.

FDIC is covering eligible deposits.

But everyone needs to know......you have 250K per depositor per ownership form per bank. Read up on FDIC to make sure you are fully covered. I have plenty of clients who have deposits at multiple banks to make sure it is all under the FDIC umbrella.

This is a sad case of a bank being mis managed. And this does happen every year. But when a regional bank or higher fails....you hear about it like wildfire. Local banks? There are local small bank failures yearly......you never hear about them of course.

In any case.....the risk management at SVB was incompetent. They invested like interest rates would stay at zero for 10 more years......it’s all on them.

 

[Alex P Keaton]

I work for an insurance company, and we have some minority investments (sizeable but still minority) and a handful of these firms were crazy enough to keep $20, $30, $50m of their funds in SVB. And couldn’t meet payroll today. And in some cases, SVB was actually the vendor handling their payroll and some other back office finance ops. I’ve inherited these investments from a former colleague who left the company last year……good times.

Dang. Thanks and hang in there GB.

All good. Thx Joe. Some of this is first world problems, at least for me/my company.

 

[Alex P Keaton]

My bad GB. Just stressed after 72 hours of trying to keep partners afloat.

If you don't mind me asking, what do you do and how are keeping partners afloat?

Thanks for your insights here.

I work for an insurance company, and we have some minority investments (sizeable but still minority) and a handful of these firms were crazy enough to keep $20, $30, $50m of their funds in SVB. And couldn’t meet payroll today. And in some cases, SVB was actually the vendor handling their payroll and some other back office finance ops. I’ve inherited these investments from a former colleague who left the company last year……good times.

uhhhhhhh..... why are you posting on here right now?

. Fair question!! Was stuck on a runway waiting to take off, in a taxi, etc. Lots of time between video calls today….

 

[Chadstroma]

My bad GB. Just stressed after 72 hours of trying to keep partners afloat.

If you don't mind me asking, what do you do and how are keeping partners afloat?

Thanks for your insights here.

I work for an insurance company, and we have some minority investments (sizeable but still minority) and a handful of these firms were crazy enough to keep $20, $30, $50m of their funds in SVB. And couldn’t meet payroll today. And in some cases, SVB was actually the vendor handling their payroll and some other back office finance ops. I’ve inherited these investments from a former colleague who left the company last year……good times.

uhhhhhhh..... why are you posting on here right now?

. Fair question!! Was stuck on a runway waiting to take off, in a taxi, etc. Lots of time between video calls today….

Best of luck brother. Hang in there. This too shall pass.