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Who Else Is Ready For The Banking Crash And Ensuing Bailouts?

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  • Who Else Is Ready For The Banking Crash And Ensuing Bailouts?

    Anyone else been watching the SVB disaster? History continues to rhyme.
    https://www.reuters.com/business/fin...ut-2023-03-12/
    US marshalling 'material action' to stem SVB fallout -sources


    U.S. authorities were preparing "material action" on Sunday to shore up deposits in Silicon Valley Bank (SVB) and try to stem any broader financial fallout from the sudden collapse of the tech startup-focused lender, sources familiar with the matter told Reuters.

    Biden administration officials worked through the weekend to assess the impact of SVB Financial Group's (SIVB.O) Friday failure, with a particular eye on the venture capital sector and regional banks, the sources said.

    Details of an announcement expected on Sunday were not immediately available, but one of the sources said the Federal Reserve could take action similar to what it did to keep banks operating during the COVID-19 pandemic.

    "This will be a material action, not just words," one said.

    U.S. authorities are considering safeguarding all uninsured deposits at SVB, weighing an intervention to prevent what they fear would be panic in the country's financial system, the Washington Post reported, citing three people with knowledge of the matter.

    Officials at the Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation discussed the idea this weekend, the report said.

    CNBC reported that the Fed and the FDIC are discussing two different facilities to manage the fallout from the closure of SVB if no buyer materializes.

    SVB's collapse has also sent reverberations around the world, with the British government racing to limit any fallout stemming from the bank's UK subsidiary and worries in countries like Israel and India where tech firms have relied on the bank.

    Earlier, U.S. Treasury Secretary Janet Yellen said she was working with banking regulators to respond after SVB became the largest bank to fail since the 2008 financial crisis.

    As fears deepened of a broader fallout across the U.S. regional banking sector and beyond, Yellen said she was working to protect depositors, but ruled out a bailout.

    "We want to make sure that the troubles that exist at one bank don't create contagion to others that are sound," Yellen told CBS's "Face the Nation."

    "During the financial crisis, there were investors and owners of systemic large banks that were bailed out ... and the reforms that have been put in place means we are not going to do that again," Yellen added.

    In March 2020 when the coronavirus pandemic and lockdowns triggered financial panic, the Federal Reserve announced a series of measures to keep credit flowing by lowering borrowing costs and lengthening the terms of its direct loans.

    By the end of that month, use of the Fed's discount window facility shot up to more than $50 billion.

    Through the middle of last week, before SVB's collapse, there had been no indications of usage picking up, with Fed data showing weekly outstanding balances of $4 billion to $5 billion since the start of the year.

    FINDING A BUYER


    Although the Federal Deposit Insurance Corporation (FDIC) protects deposits of up to $250,000, there are worries about SVB deposits above that level, one source said, adding that many smaller businesses were at risk of being unable to pay staff.

    U.S. officials are also keeping close watch amid increased withdrawals from other regional banks.

    But with $209 billion in assets, Santa Clara, California-based SVB was the 16th largest U.S. bank, and some industry executives said such a deal would likely require regulators to give special guarantees and make other allowances.

    U.S. House of Representatives Speaker Kevin McCarthy told Fox News' Sunday Morning Futures program that President Joe Biden's administration and the Federal Reserve were working to come up with announcement before markets open on Monday.

    The Fed and FDIC did not respond to requests for comment.
    COMMUNITY BANKS


    Some analysts and prominent investors warned that without a resolution by Monday, other banks could come under pressure.

    The FDIC kicked off an auction process late on Saturday, Bloomberg reported, citing people familiar with the matter, with final bids due by Sunday afternoon.

    The report added that the FDIC was rushing to sell SVB assets and make a portion of its uninsured deposits available as soon as Monday.

    Shockwaves from SVB's collapse were evident in the S&P 500 regional banks index (.SPLRCBNKS) which dropped 4.3% on Friday to end the week down 18%, its worst week since 2009.

    Signature Bank (SBNY.O) dropped about 23%, while San Francisco-based First Republic Bank (FRC.N) fell 15%. Western Alliance Bancorp (WAL.N) dropped 21% and PacWest Bancorp (PACW.O) slid 38%. Charles Schwab (SCHW.N) fell more than 11%.

    Signature Bank, First Republic Bank, PacWest Bank and Charles Schwab did not immediately respond to requests for comment. Western Alliance Bank declined to comment.

    Some banks could look to preemptively raise capital to fortify their balance sheets or try to strike deals of their own, industry executives said.

    When IndyMac and Washington Mutual collapsed in 2008, the FDIC found other firms to take on the assets and keep deposits intact. If no buyer is found for SVB, uninsured depositors will probably be left with a portion of whatever funds the FDIC can raise selling off the bank's assets.

    GLOBAL DOMINOES


    In Britain, where SVB has a local subsidiary, finance minister Jeremy Hunt said on Sunday he was working with Prime Minister Rishi Sunak and the Bank of England to "avoid or minimise damage" resulting from the chaos.

    "We will bring forward very soon plans to make sure people are able to meet their cash flow requirements to pay their staff," Hunt told Sky News.

    More than 250 British tech firm executives signed a letter calling for state intervention, a copy seen by Reuters shows.

    Advisory firm Rothschild & Co is exploring options for Silicon Valley Bank UK Limited, two people familiar with the talks told Reuters on Saturday. The BoE has said it is seeking a court order to place the UK arm into an insolvency procedure.

    In Israel, shares on the Tel Aviv Stock Exchange slid more than 4% on Sunday, led by financial firms. Israel's tech sector is the country's main growth engine, and its relationship with the Silicon Valley region is strong. Many Israeli startups had accounts at SVB, although the amounts are not fully known.

    In India, the state minister for technology said on Sunday he will meet with start-ups this week to assess the impact from the lender's collapse.
    And it ain't the only one:
    https://www.cnn.com/2023/03/12/inves...ead/index.html

    US banks sitting on unrealized losses of $620 billion






    Silicon Valley Bank’s collapse last week sent tingles of panic down investors’ spines as it highlighted a larger problem across the banking sector: The widening gap between the value large lenders place on the bonds they hold and what they’re actually worth on the market.

    SVB’s downfall was tied, in part, to the plunge in the value of bonds it acquired during boom times, when it had a lot of customer deposits coming in and needed somewhere to park the cash.

    But SVB isn’t the only institution with that issue. US banks were sitting on $620 billion in unrealized losses (assets that have decreased in price but haven’t been sold yet) at the end of 2022, according to the FDIC.



    What’s happening: Back when interest rates were near zero, US banks scooped up lots of Treasuries and bonds. Now, as the Federal Reserve hikes rates to fight inflation, those bonds have declined in value.

    When interest rates rise, newly issued bonds start paying higher rates to investors, which makes the older bonds with lower rates less attractive and less valuable.

    The result is that most banks have some amount of unrealized losses on their books.

    “The current interest rate environment has had dramatic effects on the profitability and risk profile of banks’ funding and investment strategies,” said FDIC Chairman Martin Gruenberg in prepared remarks at the Institute of International Bankers last week.

    “Unrealized losses weaken a bank’s future ability to meet unexpected liquidity needs,” he added.

    In other words, banks might find they have less cash on hand than they thought — especially when they need it — because their securities are worth less than they expected.

    “Many institutions — from central banks, commercial banks and pension funds — sit on assets that are worth significantly less than reported in their financial statements,” said Jens Hagendorff, a finance professor at King’s College London. “The resulting losses will be large and need to be financed somehow. The scale of the problem is starting to cause concern.”

    Still, there’s no need to panic yet, say analysts.

    “[Falling bond prices are] only really a problem in a situation where your balance sheet is sinking quite quickly… [and you] have to sell assets that you wouldn’t ordinarily have to sell,” said Luc Plouvier, senior portfolio manager at Van Lanschot Kempen, a Dutch wealth management firm.

    Most large US banks are in good financial condition and won’t find themselves in a situation where they’re forced to realize bond losses, said Gruenberg.

    Shares of larger banks stabilized Friday after plunging to their worst day in nearly three years on Thursday.

    SP7IcRb.png
    Attached Files

  • #2
    It's already been blamed on Trump, because he signed a bipartisan bill during his presidency:

    https://www.foxbusiness.com/politics...ipartisan-bill

    And, if anyone thinks that the left has stopped with the fake news about blaming Ohio Train derailment on Trump:


    Source: https://twitter.com/itsJeffTiedrich/status/1634577077977448449?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1634577077977448449%7Ctwgr%5E40087b42b54cd46615da9a0d3e7200718967627e%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.foxbusiness.com%2Fpolitics%2Fliberals-blame-trump-silicon-valley-bank-collapse-citing-2018-bipartisan-bill

    Donald Trump slashed rail regulations and a toxic train derailed. Donald Trump slashed banking regulations and a major bank failed. if only we could find some common thread linking these events

    © Copyright Original Source

    Comment


    • #3

      I'm always still in trouble again

      "You're by far the worst poster on TWeb" and "TWeb's biggest liar" --starlight (the guy who says Stalin was a right-winger)
      "Overall I would rate the withdrawal from Afghanistan as by far the best thing Biden's done" --Starlight
      "Of course, human life begins at fertilization that’s not the argument." --Tassman

      Comment


      • #4
        I would be very surprised if they're not bought out by a white knight that swoops in and saves the day. Biden admin has worked too hard to gaslight and lie about the economy to have it unravel this quick. The bigger issue is that there are probably dozens, if not hundreds of banks loaded with these vulnerable securities. This is especially true in the tech sector, because that sector encompasses the majority of investor morons. The bigger question is what is Jerome Powell going to do.

        Comment


        • #5
          Originally posted by seanD View Post
          I would be very surprised if they're not bought out by a white knight that swoops in and saves the day. Biden admin has worked too hard to gaslight and lie about the economy to have it unravel this quick. The bigger issue is that there are probably dozens, if not hundreds of banks loaded with these vulnerable securities. This is especially true in the tech sector, because that sector encompasses the majority of investor morons. The bigger question is what is Jerome Powell going to do.
          Now Elon Musk says he's 'open to the idea' of buying crisis-hit Silicon Valley Bank and turning Twitter into a digital bank

          Also of interest: Yellen: No federal bailout for collapsed Silicon Valley Bank

          I'm always still in trouble again

          "You're by far the worst poster on TWeb" and "TWeb's biggest liar" --starlight (the guy who says Stalin was a right-winger)
          "Overall I would rate the withdrawal from Afghanistan as by far the best thing Biden's done" --Starlight
          "Of course, human life begins at fertilization that’s not the argument." --Tassman

          Comment


          • #6
            President Trump tried to warn us.

            "If [Joe Biden] gets in, you will have a depression the likes of which you’ve never seen ... you’re going to end up with a disaster, to be honest."

            Some may call me foolish, and some may call me odd
            But I'd rather be a fool in the eyes of man
            Than a fool in the eyes of God


            From "Fools Gold" by Petra

            Comment


            • #7
              Originally posted by Mountain Man View Post
              President Trump tried to warn us.

              "If [Joe Biden] gets in, you will have a depression the likes of which you’ve never seen ... you’re going to end up with a disaster, to be honest."

              From the Obamessiah: "Don't underestimate Joe's ability to [f-bomb] things up."

              I'm always still in trouble again

              "You're by far the worst poster on TWeb" and "TWeb's biggest liar" --starlight (the guy who says Stalin was a right-winger)
              "Overall I would rate the withdrawal from Afghanistan as by far the best thing Biden's done" --Starlight
              "Of course, human life begins at fertilization that’s not the argument." --Tassman

              Comment


              • #8
                Originally posted by rogue06 View Post
                From the Obamessiah: "Don't underestimate Joe's ability to [f-bomb] things up."
                It's not a recession thing though. It's financial banking problem that will exacerbate a recession. Biden is responsible in the sense that everyone (democrat and republican alike) was responsible for closing down their economies during covid and forcing central banks to print and inject masses amount of money into the financial system and keeping interest rates low for so long. It's that those are now the chickens coming home to roast. All this was inevitable regardless of who was in WH.

                Comment


                • #9
                  Was Trump's banking deregulation to blame?

                  Bernie thinks so:
                  Statement by Bernie Sanders:

                  “Let’s be clear. The failure of Silicon Valley Bank is a direct result of an absurd 2018 bank deregulation bill signed by Donald Trump that I strongly opposed. Five years ago, the Republican Director of the Congressional Budget Office released a report finding that this legislation would ‘increase the likelihood that a large financial firm with assets of between $100 billion and $250 billion would fail.’

                  “Unfortunately, that is precisely what happened. During the debate over the legislation I said: ‘Are our memories so short that we learned nothing from the 2008 Wall Street crash? Have we learned nothing from the Savings and Loan disaster of the early 1990s or the thievery of Wells Fargo over the last couple of years or the dishonesty of Equifax or the accounting fraud at Enron and Arthur Anderson or the failure of Long-Term Capital Management or the billions of dollars in fines that financial institution after financial institution has paid out for illegal or deceptive activities?’ Sadly, the Republican Congress and the Trump Administration answered all of these questions with a resounding NO.
                  "I hate him passionately", he's "a demonic force" - Tucker Carlson, in private, on Donald Trump
                  "Every line of serious work that I have written since 1936 has been written, directly or indirectly, against totalitarianism and for democratic socialism" - George Orwell
                  "[Capitalism] as it exists today is, in my opinion, the real source of evils. I am convinced there is only one way to eliminate these grave evils, namely through the establishment of a socialist economy" - Albert Einstein

                  Comment


                  • #10
                    Originally posted by Starlight View Post
                    Was Trump's banking deregulation to blame?

                    Bernie thinks so:
                    Statement by Bernie Sanders:

                    “Let’s be clear. The failure of Silicon Valley Bank is a direct result of an absurd 2018 bank deregulation bill signed by Donald Trump that I strongly opposed. Five years ago, the Republican Director of the Congressional Budget Office released a report finding that this legislation would ‘increase the likelihood that a large financial firm with assets of between $100 billion and $250 billion would fail.’

                    “Unfortunately, that is precisely what happened. During the debate over the legislation I said: ‘Are our memories so short that we learned nothing from the 2008 Wall Street crash? Have we learned nothing from the Savings and Loan disaster of the early 1990s or the thievery of Wells Fargo over the last couple of years or the dishonesty of Equifax or the accounting fraud at Enron and Arthur Anderson or the failure of Long-Term Capital Management or the billions of dollars in fines that financial institution after financial institution has paid out for illegal or deceptive activities?’ Sadly, the Republican Congress and the Trump Administration answered all of these questions with a resounding NO.

                    Three-house Bernie will always think more regulation is the answer. He would never even consider the problem being poor investment by the bank. Who could have guess near 0% interest rates and massive govt spending could have lead to too much money in the money supply causing non-transitory inflation and thus requiring govt intervention that would lead to the devaluation of previously purchased instruments?


                    He's a hammer looking for a nail.
                    P1) If , then I win.

                    P2)

                    C) I win.

                    Comment


                    • #11
                      Originally posted by Starlight View Post
                      Was Trump's banking deregulation to blame?

                      Bernie thinks so:
                      Statement by Bernie Sanders:

                      “Let’s be clear. The failure of Silicon Valley Bank is a direct result of an absurd 2018 bank deregulation bill signed by Donald Trump that I strongly opposed. Five years ago, the Republican Director of the Congressional Budget Office released a report finding that this legislation would ‘increase the likelihood that a large financial firm with assets of between $100 billion and $250 billion would fail.’

                      “Unfortunately, that is precisely what happened. During the debate over the legislation I said: ‘Are our memories so short that we learned nothing from the 2008 Wall Street crash? Have we learned nothing from the Savings and Loan disaster of the early 1990s or the thievery of Wells Fargo over the last couple of years or the dishonesty of Equifax or the accounting fraud at Enron and Arthur Anderson or the failure of Long-Term Capital Management or the billions of dollars in fines that financial institution after financial institution has paid out for illegal or deceptive activities?’ Sadly, the Republican Congress and the Trump Administration answered all of these questions with a resounding NO.
                      Funny thing is, they just throw that accusation out there because they know progressives are some of the most ignorant, least informed folks about economics there is, but they never give specifics how that policy caused this. And the reason they don't give specifics is because it's a bunch of BS. Sanders, like Warren and AOC, is just a political opportunist who takes advantage of his ignorant base. SVB probably did the most conservative thing an investment bank can do -- invested in long term low yield government bonds and they got the shaft.

                      Comment


                      • #12
                        Originally posted by seanD

                        Funny thing is, they just throw that accusation out there because they know progressives are some of the most ignorant, least informed folks about economics there is, but they never give specifics how that policy caused this. And the reason they don't give specifics is because it's a bunch of BS. Sanders, like Warren and AOC, is just a political opportunist who take advantage of their ignorant base.
                        What's hilarious is that if Trump's deregulation was likely to increase bank failures, why did it take 5 years for a bank to fail because of Trump's actions?
                        P1) If , then I win.

                        P2)

                        C) I win.

                        Comment


                        • #13
                          Originally posted by Diogenes View Post
                          Three-house Bernie
                          Losers always attack left-leaning politicians for being either too rich (thought to show they're not really leftist) or too poor (thought to show they're bad at managing money or both simultaneously. It just shows there's no 'correct' amount of money for a left-leaning politician to have and that the people attacking them for this are losers doing so in bad faith.

                          will always think more regulation is the answer.
                          Obviously Bernie is right that after 2008, a bill to deregulate banks under Trump was at face value ludicrous. I won't say that it's logically impossible for it to have been sensible legislation, but there's a huge hill to climb to demonstrate that it wasn't insane to do that.

                          He would never even consider the problem being poor investment by the bank.
                          That does appear to have been the problem, so I'm not sure that Bernie's right to say that Trump's foolish deregulation caused this specific issue. The bank apparently had a lot of depositors when the interest rates were low, so deliberately took out long term low-interest treasury bonds in order to pay depositors some interest when everyone else was paying pretty much no interest. Now that treasury bond yields have gone way up in price, the band was sitting on those long-term low-interest bonds and it was crushing them. As usual with banking crashes, it looks like a short-term profit focus led to long term failure. I would be interested in seeing the details of why Bernie thinks the Trump deregulation was directly relevant to this instance.
                          "I hate him passionately", he's "a demonic force" - Tucker Carlson, in private, on Donald Trump
                          "Every line of serious work that I have written since 1936 has been written, directly or indirectly, against totalitarianism and for democratic socialism" - George Orwell
                          "[Capitalism] as it exists today is, in my opinion, the real source of evils. I am convinced there is only one way to eliminate these grave evils, namely through the establishment of a socialist economy" - Albert Einstein

                          Comment


                          • #14
                            Originally posted by Diogenes View Post

                            What's hilarious is that if Trump's deregulation was likely to increase bank failures, why did it take 5 years for a bank to fail because of Trump's actions?
                            SVB got screwed for investing in long term government debt, ironically the same debt created by democrat spending.
                            Last edited by seanD; 03-12-2023, 10:23 PM.

                            Comment


                            • #15
                              Originally posted by Starlight View Post
                              Losers always attack left-leaning politicians for being either too rich (thought to show they're not really leftist) or too poor (thought to show they're bad at managing money or both simultaneously. It just shows there's no 'correct' amount of money for a left-leaning politician to have and that the people attacking them for this are losers doing so in bad faith.

                              Rich socialists are always a red flag. They are easily spotted as part of the New Class/Nomenklatura/Red Bourgeoisie. I would assume then you've never brought up a rich Christian (even if it was done by a poor interpretation).

                              Obviously Bernie is right that after 2008, a bill to deregulate banks under Trump was at face value ludicrous. I won't say that it's logically impossible for it to have been sensible legislation, but there's a huge hill to climb to demonstrate that it wasn't insane to do that.
                              I have no issue with the Dodd-Frank Act and would agree Trump's deregulation was stupid. However, Bernie'a ideology necessarily advocates more and more govt oversight regardless of the context.

                              That does appear to have been the problem, so I'm not sure that Bernie's right to say that Trump's foolish deregulation caused this specific issue. The bank apparently had a lot of depositors when the interest rates were low, so deliberately took out long term low-interest treasury bonds in order to pay depositors some interest when everyone else was paying pretty much no interest. Now that treasury bond yields have gone way up in price, the band was sitting on those long-term low-interest bonds and it was crushing them. As usual with banking crashes, it looks like a short-term profit focus led to long term failure. I would be interested in seeing the details of why Bernie thinks the Trump deregulation was directly relevant to this instance.

                              Thank you for agreeing Trump's deregulation had nothing to do with the bank failure in this instance and ergo Bernie is just an opportunist hack.
                              P1) If , then I win.

                              P2)

                              C) I win.

                              Comment

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