days ago you might have thought that the banks had been fixed after the nightmare of the financial crisis in 2007-09. Now it is clear that they still have the power to cause a heart-stopping scare. A ferocious run at Silicon Valley Bank on March 9th saw $42bn in deposits flee in a day.was just one of three American lenders to collapse in the space of a week. Regulators worked frantically over the weekend to devise a rescue. Even so, customers are asking once again if their money is safe.
are vast: $620bn at the end of 2022, equivalent to about a third of the combined capital cushions of America’s banks. Fortunately, other banks are much further away from the brink thanThe financial crisis of 2007-09 was the result of reckless lending and a housing bust. Post-crisis regulations therefore sought to limit credit risk and ensure that banks hold assets that will reliably have buyers.
You might think that unrealised losses don’t matter. One problem is that the bank has bought the bond with someone else’s money, usually a deposit. Holding a bond to maturity requires matching it with deposits and as rates rise, competition for deposits increases. At the largest banks, like JPMorgan Chase or Bank of America, customers are sticky so rising rates tend to boost their earnings, thanks to floating-rate loans.
That alarming prospect explains why the Fed acted so dramatically last weekend. Since March 12th it has stood ready to make loans secured against banks’ bonds. Whereas it used to impose a haircut on the value of the collateral, it will now offer loans up to the bonds’ face value. With some long-term bonds, this can be more than 50% above market value. Given such largesse, it is all but impossible for the unrealised losses on a bank’s bonds to cause a collapse.
They are leveraging CDOs again.
shut up scammers
Banks’ morale hazard. Banks are too much commercialized. Need strong regulation by the government.
America will never be able to pay its debts...why...Fed is printing incredible money...which increases inflation..and the Fed raises interest rates...banks are collapsing... the economy is collapsing....the situation is very bad in America... .
Will definitely encourage*
The right answer to the moral hazard is to make sure all entities with an interest in the bank itself (i.e., the institution rather than the deposits) are wiped out. Equity & bond holders wiped out, and management dismissed and prohibited from future jobs in banking.
May?
No it’s not. It’s creating an even bigger mess. (Which is what they want to nationalize banking)
The system was made safer! It was dismantled in 2018!
How about regulators use the best safety system available: The fear of the hare, running from the fox. But of course, once you 'save' banks, they will take that insurance into account and behave even more riskily.
Interest is always a curse
Greed and folly. And economists. Obviously.
They should also build a punitive track for the risks of human venality at the leadership of the banks.
The hypocrisy of those who applauded financial deregulation since the eighties of the last century!
*Cough* Dodd-Frank Act *cough* dismantled by GOP
Well, in good old days of Sovjet Union...!
“regulators encouraged banks to…” I diagnosed the problem right there.
The bank had no risk management program--as best I can tell it had no interest rate swaps or options; no CRO. Totally imprudent. They act incredibly stupid like a lot of woke politically strong companies (eg Solyndra). If I were paranoid, I would say they did this on purpose.
Maybe they should stop doling out money to grifts and fraudulent causes.
Wish the Soviet Union was still around... someone has to give Comrade Powell the Order of Lenin for this.
Amazing how they sold stock and gave themselves a bonus first
completely speechless 🥴
to refix it again ... would be better, because it had been done
🧐
allstarcharts yeeeoooowww
How far is Zurich from Basel? Just a thought…
Ask Dodd or Frank..
It might be, and I’m just spit balling here, the greed of the managers when playing with other peoples money, mixed with a hubris of the investor bro culture thinking they can do no wrong.
they tanked the cannabisindustry over the last few years and now the banks will end up with record profits for buying in at 5 year/all time lows when they finally pass the SAFEBankingAct 'soon' LegalizeIt
What’s wrong with the economist?
Hi, I have two 1974 models of this coin for sale 😃
?
the economy is not fragile, these banks are completely mismanaging their money. credit suisse literally misreported their financials last year and continually mismanaged the increasing customer deposits that naturally occur during a recession
the economy is not fragile, these banks are completely mismanaging their money. credit suisse literally misreported their financials last year and continually mismanaged the increasing customer deposits that naturally occur during a recession
Liking the black hole graphic…I’d also bring this infamous animal back GoldmanSachs SVB Silicon_Valley_Bank guessing they made cash on that fire sale
This was all planned! That way they can usher in CBDC’s as a solution to a problem they created!
Let me Currect Bitcoin is Solution Fed Bankcollapse BitcoinFuture
Ask the bankers!
Investment or central? The former can leverage thanks to the latter printing money. Every time the bubble tries to turn into deleverage central bankers forget moral hazard to save their mates (& their own personal portfolios). Now debasement of currencies threatens.
Why espace?
Prosecute CEO’s of banks that fail.
Egregious profit taking. Just as you like it.
Be ready for 3th world war. Realy soon....
Its constant government manipulation don't act so surprised.
The banks and their shareholders are greedy, they get to use other people money for next to nothing, they control the system and that still ins't enough for them, Can their lust for profits ever be satisfied ?
Where’s the money, Lebowski?
the banks