Is the stock market going to tank?

[Kevo]

If the Fed extends TARP to all deposits whatever their sum, then it's just QE by another name. No? Therefore Risk back on!

So it means STRONG BUY Btc and Doge. And WAL and FRC and ZION..

The only thing that matters is backstopping asset prices no matter the cost. Taming inflation doesn't matter.

Aspirant home buyers be damned. Low wage earners can go hungry. The boomer capital class will get their retirement and will live out their lives without another 2008 collapse. Kick. the. fucking. can!

[Brock Landers]

If the Fed extends TARP to all deposits whatever their sum, then it's just QE by another name. No? Therefore Risk back on!

So it means STRONG BUY Btc and Doge. And WAL and FRC and ZION..

Fair question. I get the “up to 250k” or some sort of number like that. Backstopping runs on banks and shit like that is necessary. The 99%ers need to have confidence in their deposits or the system doesn’t work.

The 97% of deposits at SIVB over 250k?? THAT is exactly what they’re trying to avoid with the sifi oversight. If the regulators have to backstop those deposits for fear it’ll trickle into an actual crisi of confidence of the financial system then almost by definition sivb is systemically important. And it shouldn’t be.

Call it QE call it whatever. Guy on our desk has $ that actual QE returns by Dec 2023.

I don’t know if it extends to the defi system though.

[Cono Este]

If we keep bailing out these bad banks, the ones making stupid bets, what’s to ever stop them from doing it again? I’m sure these guys all got stupid rich along the way. And I’ll remind everyone, in the last crisis, no one went to jail, not for even one day.

95% of these accts are insured. The rest knew the risk.

[MCS5280]

The only thing that matters is backstopping asset prices no matter the cost. Taming inflation doesn't matter.

Aspirant home buyers be damned. Low wage earners can go hungry. The boomer capital class will get their retirement and will live out their lives without another 2008 collapse. Kick. the. fucking. can!

Outside of mobs in the streets calling for their heads this will never change. All Fed members come from the elite class. They act purely through self-preservation and the cycle continues in perpetuity until they destroy everything.

[Brock Landers]

If we keep bailing out these bad banks, the ones making stupid bets, what’s to ever stop them from doing it again? I’m sure these guys all got stupid rich along the way. And I’ll remind everyone, in the last crisis, no one went to jail, not for even one day.

95% of these accts are insured. The rest knew the risk.

They didn’t bail out the bank. The bank failed. Poof. Done. They guaranteed the deposits.

Sivb was a weird animal because it had such a high % of its depositors over 250k. And they were all running in the same growth-company liquidity constrained circles. Concentration risk.

[Mustonen]

They didn’t bail out the bank. The bank failed. Poof. Done. They guaranteed the deposits.

Sivb was a weird animal because it had such a high % of its depositors over 250k. And they were all running in the same growth-company liquidity constrained circles. Concentration risk.

This.

Those guys don’t work there anymore.

But nobody was punished for trusting the US banking system. IMO they shouldn’t be. However, if and as this increases FDIC exposure the banking industry can expect additional oversight and regulation.

Good times to be had by all….

[climberevan]

My understanding is that SVB held its assets largely in treasury bonds, so the real issue was one of timing. It's not like there is some sort of safer option than T Bills, so what were they supposed to do? If the SV techbro herd hadn't tried to arbitrarily withdraw all at once the bank would probably have been fine, eventually.

The Fed wants to backstop depositors and let the investors in the actual bank business fall on their faces. This seems like a perfect outcome to me.

[LeeLau]

My understanding is that SVB held its assets largely in treasury bonds, so the real issue was one of timing. It's not like there is some sort of safer option than T Bills, so what were they supposed to do? If the SV techbro herd hadn't tried to arbitrarily withdraw all at once the bank would probably have been fine, eventually.

They could have hedged their bond position against interest rate risks

They could have managed the timing of the offering to bolster the balance sheet in a much better manner

[Brock Landers]

My understanding is that SVB held its assets largely in treasury bonds, so the real issue was one of timing. It's not like there is some sort of safer option than T Bills, so what were they supposed to do? If the SV techbro herd hadn't tried to arbitrarily withdraw all at once the bank would probably have been fine, eventually.

The Fed wants to backstop depositors and let the investors in the actual bank business fall on their faces. This seems like a perfect outcome to me.

All in treasuries. Actually NOT in t bills. They were longer dated. When they had to dip into the balance sheet to meet withdrawals, normally not ideal but something that could happen, they had to recognize a loss because of the extreme rate moves. Tried to offset it with an equity raise, depositors caught wind, boom run on the bank. May have actually helped having some other mortgage or credit risk on the book.

Shitty asset/liability matching. Probably shouldn’t have done the equity raise. Most depositors all correlated with each other and large in size.

[JimmyCarter]

They did it to themselves, it just didn’t have to be fatal

[Cono Este]

They didn’t bail out the bank. The bank failed. Poof. Done. They guaranteed the deposits.

Sivb was a weird animal because it had such a high % of its depositors over 250k. And they were all running in the same growth-company liquidity constrained circles. Concentration risk.

That makes sense, too niche to fail I guess. Still, Oprah is out 500 mm apparently, she probably told 199 other banks no, fuck off, or something like that, and paying above mkt price on treasuries to bail these guys out, is still a loss to taxpayers. Depending on the accounting you use, no pun intended.

[Mustonen]

All in treasuries. Actually NOT in t bills. They were longer dated. When they had to dip into the balance sheet to meet withdrawals, normally not ideal but something that could happen, they had to recognize a loss because of the extreme rate moves. Tried to offset it with an equity raise, depositors caught wind, boom run on the bank. May have actually helped having some other mortgage or credit risk on the book.

Shitty asset/liability matching. Probably shouldn’t have done the equity raise. Most depositors all correlated with each other and large in size.

The general consensus is that they were pretty shitty at ALM and didn’t take ALCO seriously. It’s not so much about asset/liability matching - almost nobody really does that, but it is about NMD forecasting and sensitivity analysis. Homogenous deposit base and lots of large accounts that move quickly and inadequate liquidity analysis, grossly underestimating how much could move how quickly and not maintaining adequate sources of liquidity to cover it. Most financial institutions keep 5% to 10% of emergency liquidity sources. These guys obviously needed closer to 25%+. Plus normal liquidity to fund ops expressed as some percentage of quarterly or annual projected cash needs.

[Mustonen]

That makes sense, too niche to fail I guess. Still, Oprah is out 500 mm apparently, she probably told 199 other banks no, fuck off, or something like that, and paying above mkt price on treasuries to bail these guys out, is still a loss to taxpayers. Depending on the accounting you use, no pun intended.

No, the taxpayers really aren’t paying for this, doesn’t matter what accounting you use. The FDIC fund is taking care of this, and the FDIC is funded by banks, not the government. If the FDIC went bankrupt then we bring in taxpayer funding…but things would be pretty dystopian if we ever got there such that taxpayer funding the FDIC making depositors whole is the least of your worries.

[Kevo]

Outside of mobs in the streets calling for their heads this will never change. All Fed members come from the elite class. They act purely through self-preservation and the cycle continues in perpetuity until they destroy everything.

Sadly this is what I have come to believe as well. I really think that the average person is screwed going forward.

[Mustonen]

If the Fed extends TARP to all deposits whatever their sum, then it's just QE by another name. No? Therefore Risk back on!

So it means STRONG BUY Btc and Doge. And WAL and FRC and ZION..

But TARP to deposits doesn’t even make sense, does it? TARP took the form of backstopping weakened collateral and capital infusions and etc. Not to promote or defend or castigate TARP… it just doesn’t even seem to fit in the analysis. This is telling a person (or business) that they’ll get their money that is in their savings account so they can make payroll next week.

You guys are smart, though, so it feels like I’m missing something. What am I missing?

[Brock Landers]

Sadly this is what I have come to believe as well. I really think that the average person is screwed going forward.

Yeah life is so hard

[Mani_UT]

Sadly this is what I have come to believe as well. I really think that the average person is screwed going forward.

When was the average person NOT screwed? I can't recall any good old time when it was the case. Yet, here we are living pretty decent lives. Count our blessings I guess?

[JimmyCarter]

No, the taxpayers really aren’t paying for this, doesn’t matter what accounting you use. The FDIC fund is taking care of this, and the FDIC is funded by banks, not the government. If the FDIC went bankrupt then we bring in taxpayer funding…but things would be pretty dystopian if we ever got there such that taxpayer funding the FDIC making depositors whole is the least of your worries.

Well, the reality is the FDIC is going to levy an additional charge to the banks to cover this event. That charge will inevitably be passed on to consumers, I assume in the form of a standard fee on all accounts. And the people with massive accounts at the banks tend to get the account fees waived, so it may very well end up being paid for directly by your average taxpayer.

[BobMc]

Why is that we always hear about fees, taxes, costs, etc. all being passed on to consumers, but we never hear about executive compensation being "passed on" to consumers?

[Mustonen]

Well, the reality is the FDIC is going to levy an additional charge to the banks to cover this event. That charge will inevitably be passed on to consumers, I assume in the form of a standard fee on all accounts. And the people with massive accounts at the banks tend to get the account fees waived, so it may very well end up being paid for directly by your average taxpayer.

Oh sure. Though it certainly won’t be a standard fee but ROA is ROA and whether you see that in reduced dividends and increased interest rates and whatever else, the bank is going to fund operations and chase their profitability goals.

What do you think the cost to all FDIC banks will be, on an asset basis, to cover even $20B in losses (it won’t be anywhere close to $20B, ultimately)?

Also consider that this is hitting the FDIC, not the NCUA (credit unions). So even if you imagined a significant assessment that hits all banks relatively equally, it’s not going to hit the entire financial system evenly which will have a chilling effect on any obvious fees or pricing adjustments, at least when you’re discussing normal consumers.

But as has been covered plenty, the money is there, it just isn’t there Right Now. Nobody anticipates significant losses that will need to be passed on.

ETA: Do you know what would cost the taxpayer more? Having to substantially increase liquidity targets will have a more significant effect on the bottom line than any assessment, with actual costs to the consumer that WOULD hit the entire financial sector. Maybe that’s necessary and good, but it ain’t free.

[MCS5280]

But as has been covered plenty, the money is there, it just isn’t there Right Now.

I tried this with my landlord, didn't work.

[Mustonen]

I tried this with my landlord, didn't work.

Funny. But also… right, so you get a loan to make rent. The cost isn’t the rent payment, it’s the loan….which is quite a bit less than the rent payment. I don’t know what the opportunity cost is on the FDIC balance sheet for funding the shortfall, but probably a lot less than you can get a signature loan for.

[Mazderati]

Why is that we always hear about fees, taxes, costs, etc. all being passed on to consumers, but we never hear about executive compensation being "passed on" to consumers?

Do not look behind the curtain!

[Cono Este]

From now on, I’m going to bank wherever Oprah banks. Quite possibly bulletproof to any administration.

Remember the free cars she gave her audience?

[mcphee]

Bob Barker bought more stuff for his audience