Author Topic: Banks Failing: Is It 2008 Again? (Read 11453 times)

ExGingi · « **Reply #20 on:** March 10, 2023, 01:53:37 PM »

93%+ of SVB deposits exceeded the government bank deposit insurance scheme.

Which means you want to be the first to get your money out as you have no protection.

A self-fulfilling mechanism to a liquidity crisis.
— Alf (@MacroAlf) March 10, 2023

ExGingi · « **Reply #21 on:** March 10, 2023, 01:54:44 PM »

Talk about how SVB is a one-off reminds me of all those shoulders that shrugged in ‘07 when New Century Financial shuttered. 2 months later Bernanke said it would be “contained”. 4 months after that, it was Countrywide. It’s as if the word contagion doesn’t exist for some people.
— David Rosenberg (@EconguyRosie) March 10, 2023

avromie7 · « **Reply #22 on:** March 10, 2023, 01:59:28 PM »

Quote from: ExGingi on March 10, 2023, 01:54:44 PM

Talk about how SVB is a one-off reminds me of all those shoulders that shrugged in ‘07 when New Century Financial shuttered. 2 months later Bernanke said it would be “contained”. 4 months after that, it was Countrywide. It’s as if the word contagion doesn’t exist for some people.
— David Rosenberg (@EconguyRosie) March 10, 2023

If I had $250k+ in an FDIC insured account, I'd definitely be running to withdraw.

dm123 · « **Reply #23 on:** March 10, 2023, 01:59:49 PM »

Quote from: ExGingi on March 10, 2023, 01:26:37 PM

In one sentence: Mismatch of assets and liabilities terms coupled with rising interest rates.

yes but I guess I want to know what's the mismatch here? Something unique to SVB or a sector that is incorrectly valued and the bubble popping has started showing?

ExGingi · « **Reply #24 on:** March 10, 2023, 02:07:09 PM »

Quote from: dm123 on March 10, 2023, 01:59:49 PM

yes but I guess I want to know what's the mismatch here? Something unique to SVB or a sector that is incorrectly valued and the bubble popping has started showing?

The mismatch is present in ALL banks. The liabilities are short-term (demand deposit) while assets are mostly longer-term (mortgages, or other loans). An inverted yield curve (especially at the current extreme, where retail savers are pulling out bank deposits and buying T-Bills and notes, or banks have to pay more for their liabilities, while their assets are low yielding) exacerbates the problem. And when the tide goes out you discover who has been swimming naked.

YitzyS · « **Reply #25 on:** March 10, 2023, 02:12:26 PM »

So am I the silly one for "snagging" two SIVB stocks last night for a "deal price" of $82, down from $267 the previous day?

CountValentine · « **Reply #26 on:** March 10, 2023, 02:13:53 PM »

Quote from: ExGingi on March 10, 2023, 01:30:19 PM

This is part of the problem that SVB (and many other banks) faced. Deposits being pulled out (i.e. liabilities being realized) and parked in safe T-Bills which are yielding more than bank deposits (and are safer). If banks are forced to raise rates they pay for deposits, yet their assets are locked in long-term low-interest loans or bonds - "Houston, we've got a problem".

What about the mortgages at 3-4%? They can't give savings rates of 5%. That has to hurt, no?

ExGingi · « **Reply #27 on:** March 10, 2023, 02:14:07 PM »

Quote from: YitzyS on March 10, 2023, 02:12:26 PM

So am I the silly one for "snagging" two SIVB stocks last night for a "deal price" of $82, down from $267 the previous day?

It's called "catching a falling knife".

dm123 · « **Reply #28 on:** March 10, 2023, 02:14:35 PM »

Quote from: ExGingi on March 10, 2023, 02:07:09 PM

The mismatch is present in ALL banks. The liabilities are short-term (demand deposit) while assets are mostly longer-term (mortgages, or other loans). An inverted yield curve (especially at the current extreme, where retail savers are pulling out bank deposits and buying T-Bills and notes, or banks have to pay more for their liabilities, while their assets are low yielding) exacerbates the problem. And when the tide goes out you discover who has been swimming naked.

Ah so the problem here is the liabilities are being unexpectedly called at much higher than normal volume?
(basically it's CV's fault for going so heavy into Treasuries?

)

I saw on the thread posted earlier the big banks are covered, did that mean this isn't an issue for them/they have heavier regulation that protects from this happening or is it in reference to specifically overvalued tech?

Are big banks like Wells Fargo and JP Morgan in danger?

Michael Barr, the Fed’s vice chair for supervision, spoke on that yesterday: pic.twitter.com/ylej40Ktd6
— Genevieve Roch-Decter, CFA (@GRDecter) March 10, 2023

ExGingi · « **Reply #29 on:** March 10, 2023, 02:14:51 PM »

Quote from: CountValentine on March 10, 2023, 02:13:53 PM

What about the mortgages at 3-4%? They can't give savings rates of 5%. That has to hurt, no?

Exactly, as I wrote:

Quote from: ExGingi on March 10, 2023, 02:07:09 PM

The mismatch is present in ALL banks. The liabilities are short-term (demand deposit) while assets are mostly longer-term (mortgages, or other loans). An inverted yield curve (especially at the current extreme, where retail savers are pulling out bank deposits and buying T-Bills and notes, or banks have to pay more for their liabilities, while their assets are low yielding) exacerbates the problem. And when the tide goes out you discover who has been swimming naked.

CountValentine · « **Reply #30 on:** March 10, 2023, 02:15:36 PM »

Quote from: YitzyS on March 10, 2023, 02:12:26 PM

So am I the silly one for "snagging" two SIVB stocks last night for a "deal price" of $82, down from $267 the previous day?

I am the stupid one for not listen to someone in a private group we call a guru.

ExGingi · « **Reply #31 on:** March 10, 2023, 02:16:21 PM »

Quote from: dm123 on March 10, 2023, 02:14:35 PM

I saw on the thread posted earlier the big banks are covered,

Quote from: ExGingi on March 10, 2023, 01:54:44 PM

Talk about how SVB is a one-off reminds me of all those shoulders that shrugged in ‘07 when New Century Financial shuttered. 2 months later Bernanke said it would be “contained”. 4 months after that, it was Countrywide. It’s as if the word contagion doesn’t exist for some people.
— David Rosenberg (@EconguyRosie) March 10, 2023

As far as I can recall, in the aftermath of 2008 some analysts were pointing out how banks regularly fail (due to the mismatches).

CountValentine · « **Reply #32 on:** March 10, 2023, 02:17:23 PM »

Quote from: dm123 on March 10, 2023, 02:14:35 PM

(basically it's CV's fault for going so heavy into Treasuries? )

Not my fault as 90%+ of the funds came from CU's.

Banks are so yesterday.

dm123 · « **Reply #33 on:** March 10, 2023, 02:19:07 PM »

Quote from: ExGingi on March 10, 2023, 02:16:21 PM

So what did Barr mean by saying larger institutions are insulated against the same deposit outflow?

ExGingi · « **Reply #34 on:** March 10, 2023, 02:21:04 PM »

Quote from: dm123 on March 10, 2023, 02:19:07 PM

So what did Barr mean by saying larger institutions are insulated against the same deposit outflow?

What did Bernanke mean when he said it would be "contained"?

Can you imagine the size of bank runs that would happen today if anyone would hint that this is systemwide?

CountValentine · « **Reply #35 on:** March 10, 2023, 02:21:46 PM »

Quote from: ExGingi on March 10, 2023, 01:54:44 PM

Talk about how SVB is a one-off reminds me of all those shoulders that shrugged in ‘07 when New Century Financial shuttered. 2 months later Bernanke said it would be “contained”. 4 months after that, it was Countrywide. It’s as if the word contagion doesn’t exist for some people.
— David Rosenberg (@EconguyRosie) March 10, 2023

Bank of England keeps close watch as Silicon Valley Bank shut by regulators
https://www.msn.com/en-us/money/other/bank-of-england-keeps-close-watch-as-silicon-valley-bank-shut-by-regulators/ar-AA18skVl?ocid=msedgdhp&pc=U531&cvid=ba3b93a1378042a38cbd4ac38cc3f0d8&ei=8