Run on the Banks
 

So far it looks concentrated in tech/silicon valley, with SVB and Signature Banking being seized by regulators. However, First Republic and smaller regional banks are now also seeing large withdrawals. Does this indicate broader weakening in the banking system, where post pandemic investments have heavily favored federal bonds?

What a jam the fed got itself in

I went in this morning to make my monthly cash withdrawal from a regional west coast bank that has solid footing and has stayed out of the limelight. They've always had no problem with it and advised if I needed more to call ahead so they'd be sure to have it. Today was different as they immediately balked and looked as if they seen a ghost, after offering half my request the teller muttered she was just doing what she was told, I guess things have changed. After some push back I was given my original withdrawal request but the awkward exchange sure didn't give me the warm fuzzy everything is OK.

SVB was very unique in what it did and why it collapsed... This video does a good job of explaining it.

https://www.youtube.com/watch?v=t5w5mk1_K3A

The problem with long term bonds - even government ones - is that if current long term interest rates rise the market value if your previously purchased bonds goes down precipitously. It matters not to the secondary market that those bonds must eventually be redeemed at face value, the issue is now, the potential alternative uses if that money, and the worry about what inflation may do to the value of the money you do get back on redemption. So if a run on the bank forces them to sell their government bonds at a loss, they may indeed not be able to cover their depositors accounts.

This really only matters if you get in a liquidity crunch. Otherwise, HODL until maturity.

Absolutely. But banks have a lot of noncallable loans and when your reserves are tied up in long term bonds and you DO get where you have a liquidity crunch (which SVB did) you need to start selling bonds at a loss and as soon as you start doing that people notice and you DO get a run on the bank)

Yes, this was a niche specialty unit, with some of it's foundations based on silicone valley exuberance and hype. The usual Fake-It-Till-You-Make-It business model in the Bay ran out of runway and this is fallout from that.

But it seems to be a good thing that the Fed is intervening, it would be awkward if this news started panic runs on other, healthy banks... few banks could actually cough up all or most of their deposits on a moments' notice.

True but the fed intervention should be limited to the FDIC insured amount. Why are these start ups in California getting special treatment? Any one of us would be taking a haircut on anything over 250K.

No, it's not the government's job to protect the banks, investors, and prop up bad business decisions.

Hmmmm, didn't think this years catastrophe would be another good old fashioned financial crisis. Thought it would be something more out of the ordinary considering the 2020-21 COVID and 2022 war crises.

I think it's OK for the gov to gently intervene to prevent a panic attack from spreading to all of the other banks which are operating under perfectly reasonable and widely accepted basis'.

I'm all about free market but it occasionally does need some guard rails. Just occasionally.

The US Constitution disagrees with you.

Have to abandon the free market in order to save the free market, right?

But anyway, from my understanding it looks like FDIC is using their pool of money to cover the gap for SVB between now and the time their bonds are available for liquidation.

Just out of curiosity, what are you doing making large, monthly cash withdrawals for? And how much cash do you take out that the bank was hesitant to do?!?

Let’s see. Invest heavily in mortgage securities. Government prints tons on money, Fed raises interest rates. Mortgage securities now losing tons of money. I think we’ve seen this play out before?

The Fed raised interest rates to slowly. They needed to stifle economic growth for a bit to slow the inflation. But the small increases along with the passage of the latest round of spending before the election kept everything too hot. They needed to raise the interest rates to 8% overnight last year but they didn’t.

Better file a lawsuit and get it in front of your Supreme Court since it's so against the Constitution. I'm sure all the conservative think tanks and law firms just missed that one.

Better watch out for nesting birds, straw man. 🦅

But, it isn’t a violation of OUR constitution. Libs mishandling the economy is more or less tradition.

To this “re-run” point, how did they pass the stress tests banks have to go through now? Maybe the stress test is not stressing the right stuff?? It is kinda refreshing that though we may have lost control of our republic to corporations we can shut the corporations down if we (the people) ask for our FDIC money back.

They probably did pass eye, depending on when the audit was run. They invested heavily in govt bonds that was effected due to the inverted yield curve and mortgaged backed securities. Any bank that has ever invested in those deserves their fate.

It's good to have some cash on hand, everyone should have a couple months worth.
I buy and sell cars, motorcycles, airplanes, heavy equipment, money talks and I have an empty stall in my shop.

He likes to throw around things he doesn't like as unconstitutional. Like taxes. It's designed to shutdown the conversation.

Over taxation is the reason why this country exists.

I thought it was taxation without representation

No time for details

Please cite the clause in the Constitution where the federal government has the power to bail out banks, create a central bank, insure depositors, print money, and/or manipulate interest rates?

I'll refer to my previous statement. If it's so unconstitutional and is completely contrary to your beliefs, contact any number of conservative or libertarian think tanks and have them file a lawsuit. I'm just surprised they haven't done so already since it's so very clearly unconstitutional. I mean, FDIC has only been around for almost a third of the time the US has been in existence. Thank goodness you caught that they've been unconstitutionally in existence for all this time.

So which clause in the Constitution allows for it?

Overtaxation without representation. Also coffee is better than tea.

This is correct. King george used the new world as his little piggy bank and the people here got sick of it. They don’t teach this in school anymore.


Doomed to repeat.

16th amendment

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

That doesn’t mean they should spend our money the way they have been. They work for us not the other way around.

You're right. They certainly don't teach this in school.

https://www.bostonteapartyship.com/b...ea-party-cause

Oooh. This is fun.

Please cite the clause that prohibits it.

If you’re interested, read Federalist #30 by Alexander Hamilton. That is the way taxation was intended in the Constitution.

I totally disagree with the way our money is spent, but it’s not illegal to be stupid. Vote with care, not emotion.

10th amendment.

If one doesn’t hold both parties equally responsible for our financial issues, then they are an emotional shell driven by their propaganda lords

That doesn't prohibit taxes. See also, 16th Amendment

Reading this makes me happy we have the 21st amendment.

You’re absolutely right. But if you couldn’t see this coming….

I thought we were talking about the fed, bank bailouts, etc.

those are powers left to the states (by exclusion) in an intentionally limiting document.

my bad.