Author Topic: Banks Failing: Is It 2008 Again?  (Read 31916 times)

Offline Abey

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Re: is it 2008 again?
« Reply #60 on: March 12, 2023, 03:22:51 AM »
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.
Mark to market fixes this.

Offline Abey

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Re: is it 2008 again?
« Reply #61 on: March 12, 2023, 03:24:03 AM »
Rumors can put a bank to sleep. If people pull out based on the rumors.
Do you expect people to be cool when a huge bank just went bust and and a large portion of money likely gone?

Offline Abey

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Re: is it 2008 again?
« Reply #62 on: March 12, 2023, 03:27:49 AM »
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?
Unlike ‘08 with MBS nor being worth sh*t this is a time problem. Simple solution? Buy back those treasuries at par. Otherwise this *could* become a big problem at which point options will be far limited

Offline liosac

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Re: is it 2008 again?
« Reply #63 on: March 12, 2023, 03:29:00 AM »
Mark to market fixes this.
No bank marks to market on assets they are holding till maturity. And that is a big part of the problem. The other is not diversifying your deposit base and mix of products like cds to match maturity dates.
« Last Edit: March 12, 2023, 03:33:45 AM by liosac »

Offline ilherman

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Re: is it 2008 again?
« Reply #64 on: March 12, 2023, 03:33:16 AM »
Rumors can put a bank to sleep. If people pull out based on the rumors.
+100.

All that needs to happen is a run on the bank, which means everyone running to take out their cash at once, no bank in the world can withstand that.

With banking supposedly regulated, how did SVB get away with that?
Again, when a run on the bank happens nothing will help. This is totally different than what happened in 08. At least at this point, people are not forecasting 2008 again, indeed because the regulations enacted after what happened then.

In a nutshell what happened with SVB is that after they announced that they needed to raise capital it caused hysteria especially since most of their customers were tech and startup companies which have no positive cash flow and in order to be able to continue doing payroll they were told to get their money out asap causing a run of the bank. And this may happen with Signature as well. I personally know a few big companies who wired out most of their assets from signature, if this trend continues they might very well be next, even though as a general matter the bank it self is doing fine.
You can say what you think when you think what you say.

Offline liosac

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Re: is it 2008 again?
« Reply #65 on: March 12, 2023, 03:33:20 AM »
Unlike ‘08 with MBS nor being worth sh*t this is a time problem. Simple solution? Buy back those treasuries at par. Otherwise this *could* become a big problem at which point options will be far limited

There are plenty of commercial RE loans that are in serious trouble but nothing like 2008. The Fed may be happy with a limited number of Bais that took extra risk going under so long as it is contained. That would take some easy credit out of the market and slow the economy down which the Fed wants to do anyway. The trick is keeping it to a soft landing.

Offline ilherman

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Re: is it 2008 again?
« Reply #66 on: March 12, 2023, 03:38:51 AM »
Do you expect people to be cool when a huge bank just went bust and and a large portion of money likely gone?
I believe most of their assets are strong and safe and at the end of the day people will get all or at least most of their money back. I am not saying that what is happening is not bad. It is very bad specially for the short term. Just adding context. When something like this happens that doesn't mean that peoples moneys are gone. Money in the bank is not like stocks which can go from 100 to 0....
You can say what you think when you think what you say.

Offline liosac

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Re: is it 2008 again?
« Reply #67 on: March 12, 2023, 03:41:01 AM »
+100.

All that needs to happen is a run on the bank, which means everyone running to take out their cash at once, no bank in the world can withstand that.
Again, when a run on the bank happens nothing will help. This is totally different than what happened in 08. At least at this point, people are not forecasting 2008 again, indeed because the regulations enacted after what happened then.

In a nutshell what happened with SVB is that after they announced that they needed to raise capital it caused hysteria especially since most of their customers were tech and startup companies which have no positive cash flow and in order to be able to continue doing payroll they were told to get their money out asap causing a run of the bank. And this may happen with Signature as well. I personally know a few big companies who wired out most of their assets from signature, if this trend continues they might very well be next, even though as a general matter the bank it self is doing fine.
It didn’t happen in a vacuum. The were foolish to cater to a very small customer base for their deposits. They took a chunk of those deposits and bought treasuries and the like. When their tech customers started cooling this year their deposits shrunk. To get money to pay their depositors they had to sell some of those securities.

The problem is that they bought the securities when rates were much lower. If they could have held on to them until maturity it would be ok anyway. But they suddenly had to sell, and no one wants to buy securities that have a far lower interest rate that what they can currently get on the market unless they are sold at a discount. SVB had to sell them at a loss of 1.8 billion dollars. That was the beginning of the end.

Offline ilherman

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Re: is it 2008 again?
« Reply #68 on: March 12, 2023, 03:48:12 AM »
It didn’t happen in a vacuum. The were foolish to cater to a very small customer base for their deposits. They took a chunk of those deposits and bought treasuries and the like. When their tech customers started cooling this year their deposits shrunk. To get money to pay their depositors they had to sell some of those securities.

The problem is that they bought the securities when rates were much lower. If they could have held on to them until maturity it would be ok anyway. But they suddenly had to sell, and no one wants to buy securities that have a far lower interest rate that what they can currently get on the market unless they are sold at a discount. SVB had to sell them at a loss of 1.8 billion dollars. That was the beginning of the end.
But without the hysteria, they could have swallowed the loss from selling those bonds if the run on the bank would not happen. I'm not saying that the bank did all good what I'm saying is that it's not that the bank ran some ponzi scheme, every bank loses money on some of its investments. This case might have been a bigger loss but still not something that would actually cause the bank to go bankrupt.
You can say what you think when you think what you say.

Offline liosac

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Offline avromie7

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Re: is it 2008 again?
« Reply #70 on: March 12, 2023, 07:56:30 AM »
I believe most of their assets are strong and safe and at the end of the day people will get all or at least most of their money back. I am not saying that what is happening is not bad. It is very bad specially for the short term. Just adding context. When something like this happens that doesn't mean that peoples moneys are gone. Money in the bank is not like stocks which can go from 100 to 0....
We'll have to see how much they get access to this week. The FDIC said they will get "an advance" in the neat week.

Getting their money back eventually doesn't help when paying 20% interest. Even worse, they may not have access to new capital to operate until they "eventually" get their money back.
I wonder what people who type "u" instead of "you" do with all their free time.

Offline AsherO

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Re: is it 2008 again?
« Reply #71 on: March 12, 2023, 08:16:12 AM »
There are plenty of commercial RE loans that are in serious trouble but nothing like 2008. The Fed may be happy with a limited number of Bais that took extra risk going under so long as it is contained. That would take some easy credit out of the market and slow the economy down which the Fed wants to do anyway. The trick is keeping it to a soft landing.

How does the fed do that? If like ilherman said, a bank run can cause this to happen at any bank, what could the fed do to stop that if this keeps happening at more and more banks?
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Offline shapsam

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Re: is it 2008 again?
« Reply #72 on: March 12, 2023, 08:44:43 AM »
How does the fed do that? If like ilherman said, a bank run can cause this to happen at any bank, what could the fed do to stop that if this keeps happening at more and more banks?
FDIC statement that they will insure higher amounts

Offline aygart

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Re: is it 2008 again?
« Reply #73 on: March 12, 2023, 08:53:47 AM »
Do you expect people to be cool when a huge bank just went bust and and a large portion of money likely gone?
This was not a huge bank
Feelings don't care about your facts

Offline AsherO

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Re: is it 2008 again?
« Reply #74 on: March 12, 2023, 09:13:00 AM »
FDIC statement that they will insure higher amounts

It will have to be a big bump to move the needle. I guess it depends on the distribution of account sizes, my guess SVB might’ve skewed larger than other banks because of the kinds of account holders they had.
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Offline avromie7

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Re: is it 2008 again?
« Reply #75 on: March 12, 2023, 09:34:34 AM »
It will have to be a big bump to move the needle. I guess it depends on the distribution of account sizes, my guess SVB might’ve skewed larger than other banks because of the kinds of account holders they had.
It may not have helped SVB, but in general the more money people feel is "safe from fleeing", the more people will keep their money there
I wonder what people who type "u" instead of "you" do with all their free time.

Offline PlatinumGuy

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Re: is it 2008 again?
« Reply #76 on: March 12, 2023, 09:41:00 AM »
Anything less than 90% guarantee of all deposits risks a domino effect on other banks and the end of life as we know it (crypto would overtake fiat for example). Would be idiotic for the government not to do it, the downside is minimal as long as shareholders aren't protected.
״וזה כלל גדול: שישנא אדם כל דבר שקר. וכל מה שיוסיף שנאה לדרכי השקר – יוסיף אהבה לתורה.״ - אורחות צדיקים

Offline Abey

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Re: is it 2008 again?
« Reply #77 on: March 12, 2023, 09:46:21 AM »
This was not a huge bank
not huge in east coast but big in the west coast especially in SF I believe 210 B of deposits, definitely not some neighborhood establishment.
I believe most of their assets are strong and safe and at the end of the day people will get all or at least most of their money back. I am not saying that what is happening is not bad. It is very bad specially for the short term. Just adding context. When something like this happens that doesn't mean that peoples moneys are gone. Money in the bank is not like stocks which can go from 100 to 0....
No depositor expects to get back “most “ of their assets they expect all of it and for a bank to have reasonable cash reserves to withdraw at any time. Expecting every depositor to do risk underwriting of a bank is a ridiculous notion. Like I said mark to market fixes most of this

Offline Abey

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Re: is it 2008 again?
« Reply #78 on: March 12, 2023, 09:54:46 AM »
Anything less than100% guarantee of all deposits risks a domino effect on other banks and the end of life as we know it (crypto would overtake fiat for example). Would be idiotic for the government not to do it, the downside is minimal as long as shareholders aren't protected.
There I fixed it for you

Offline Abey

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Re: is it 2008 again?
« Reply #79 on: March 12, 2023, 09:59:07 AM »
But without the hysteria, they could have swallowed the loss from selling those bonds if the run on the bank would not happen. I'm not saying that the bank did all good what I'm saying is that it's not that the bank ran some ponzi scheme, every bank loses money on some of its investments. This case might have been a bigger loss but still not something that would actually cause the bank to go bankrupt.
Hysteria implies some unreasonable fear. This is very reasonable. And yes there’s enough to cover 95% of deposits at SVB but that’s the human nature why risk your money? Some VC’s made a show of support saying they will keep their cash at SVB how did that turn out ? Those out the door first are safest and that the reasonable thing to do even if the scramble makes things far worse nobody wants to be the sacrificial lamb