Fed response: sneaky QE, through the discount window. More easy money for a presently uneasy sector.
Buying some stocks today
25% of assets in crypto, Signature has been listing for awhile. I wonder how depositors get made whole when the deposit insurance fund gets all tapped out.
https://www.nytimes.com/2023/03/12/b...-collapse.htmlon Friday, with customers panicking about their money, Signature saw a torrent of deposits leaving its coffers, according to a person with knowledge of the matter. Its stock, along with the stocks of some of its peers, also continued to tank.
Still, the bank’s leaders expected to be able to weather the storm because the outflows had slowed by Sunday morning, the person said. When regulators told bank executives that they were effectively seizing the bank, which had 40 branches across the country, some of them were shocked. In shuttering the bank, New York bank regulators, acting in concert with the F.D.I.C., also removed its executive team.
The demise of Signature, with assets of under $100 billion, is a blow to many of the professional services firms that have come to rely on it. The bank long specialized in providing banking services to law firms, providing escrow accounts for holding client money and other services.
...
One of Signature’s specialties was financing the purchase of taxi medallions, which authorize holders to operate cabs. It was known in New York for providing banking services to law firms and real estate companies, and for catering to wealthy families in the area.
...
Regulatory filings show that more than $79 billion, or close to nine-tenths, of Signature Bank’s roughly $88 billion in deposits were uninsured at the end of last year. As of last week, Signature said more than 80 percent of it deposits were from law firms, accounting firms, health care companies, manufacturers and real estate management companies.
The bank also said its digital asset-related client deposits stood at $16.52 billion. Signature was one of the few financial ins utions that had opened its doors to taking deposits of crypto assets, a business it entered into in 2018.
That ended up being a fateful decision because the bottom fell out of crypto assets after the collapse of FTX and an ensuing criminal investigation. Another cryptocurrency-focused bank, Silvergate Bank, was forced to voluntarily close last week.
“This story has more to do with crypto, huge error in judgment by veteran bankers,” said Christopher Whalen of Whalen Global Advisors, which specializes in analyzing and consulting on financial ins utions. “Result was the same in a deposit run.”
small businesses my ass, they're protecting stupid rich people with uninsured deposits.
https://www.nbcnews.com/news/us-news...ates-rcna74642Trading was halted in multiple bank stocks Monday, renewing fears that the fallout from the collapse of Silicon Valley Bank has yet to be fully contained.
Shares in the San Francisco-based First Republic Bank, whose wealthy clientele has included Facebook founder Mark Zuckerberg, plunged more than 60% before being suspended.
Also halted were other financial firms based in the West Coast, including Western Alliance Bancorp., which fell more than 70%; and PacWest Bancorp, which fell more than 40%.
Traders fear these banks' stocks could be wiped out if regulators are forced to take control of their uninsured bank deposits, or those larger than the $250,000 Federal Deposit Insurance Corp. limit.
Extraordinary public and ins utional help for foolish private financial decisions, we all should be so lucky. So much for the genius of creative destruction.
When rich folks get scared, it's all hands on deck, same dynamic as spring 2020.
prime example
Per CNN
SVB employees received bonuses hours before bank shutdown, reports say
https://www.cnn.com/business/svb-fdic-employees
this is the bailout, tbh
The Fed broadly foreshadowed rate hikes last year, but this is quibble
Sounds reasonable, but it's doubtful anything but the first thing will happen.
One tier 2 bank failure just changed our whole banking system. Somehow, that does not inspire me with fresh confidence.
Last edited by Winehole23; 03-13-2023 at 12:08 PM.
"Nice economy you've got there, it would be a shame if anything happened to it"
Trump was right
Biden would crash the market
And those hands have hats in them, at government's front door.
They are sucking
Biden president not trump
Trump crashed the economy way before this
So COVID is Trump’s fault
tl;dr
it's a bailout
https://www.nakedcapitalism.com/2023...unwinding.htmlUS regulators have been carefully to rule out a bailout aware of public distaste for such actions. However, authorities are moving to implement measures indistinguishable from the dreaded ‘B’ word:
- US President Joseph Biden and Treasury Secretary Janet Yellen have not ruled out safeguarding all uninsured deposits at SVB and presumably any other bank to prevent a run on US financial system. If this is implemented then it would mean that the state would be assuming a contingent liability in the order of $20 trillion being the total of US bank deposits.
- The Federal Reserve eased the terms of banks’ access to its discount window, allowing firms to use assets that have lost value to raise cash to avoid the outcome at SVB.
- The Fed has also unveiled a new $25 billion facility – the Bank Term Funding Program (“BTFP”)- to provide loans of up to 1-year to banks, savings associations, credit unions, and other eligible depository ins utions against security of U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. Unusually, these assets will be valued at par, not as usual at market value, ignoring the unrealised net losses. In effect, the Fed will be lending $100 against securities worth say $80 at current market prices – an interesting loan-to-value ratio.
The UK government considered ins uting measures designed to keep cash flowing to tech groups. One option was to provide guarantees for banks to offer new loans to companies with money locked in SVB accounts. Ultimately, this proved unnecessary as HSBC took over the operation of SVB’s UK operations which were solvent.
Policymakers argue that taxpayers are not exposed to any losses with shareholders and certain unsecured debtholders forced to absorb losses. Nevertheless, why the blanket guarantee of deposits does not entail exposure is not clear? In the US, officials floated the idea that any shortfall would be covered by a levy on the rest of the banking industry. If this were to be the case, then in practical terms banks would treat this is an operating cost, all or part of which would be passed on to customers.
The measures are inconsistent with the contained nature of the SVB problem and the adequacy of existing regulations. There are suggestions Janet Yellen, US Treasury secretary, had invoked a “systemic risk exception” to justify the measures.
Like Humpty Dumpty, regulators take the view that words mean “just what they choose it to mean—neither more nor less”.
Amusingly, Silicon Valley’s famed libertarians who resist any form of government regulation are pleading for action to prevent an “extinction event”. Some 3,500 CEOs and founders representing some 220,000 workers signed a pe ion started by Y Combinator appealing directly to the US Treasury Secretary to backstop depositors, warning that more than 100,000 jobs could be at risk.
The moral hazards around bailouts are well known. It seems now that tech start-ups like banks, auto businesses and anybody with an effective lobbyists are too big to fail even if they are too difficult to understand or to properly manage. As Herbert Spencer put it: “The ultimate result of shielding men from the effects of folly, is to fill the world with fools.”
Over the last decade and a half, the economic system and financial practices have become geared around low rates, abundant liquidity and the authorities underwriting risk taking. Moving away from this state of affairs was never going to easy, that is, if it is possible at all.
This is getting stupid. At least try reinstating a semblance of Dodd-Frank since we decided smaller banks can destroy the economy.
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