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>"The q4 numbers came in showing the US economy was still expanding and now those same papers are telling me we're in a banking crisis on the basis of like two

>"The q4 numbers came in showing the US economy was still expanding and now those same papers are telling me we're in a banking crisis on the basis of like two and a half banks, with SVB and CS both being fully rescued." Why would GDP(a lagging indicator) and a current event(a wave of banks over the last two week) be mutually exclusive? You also seem to have overlooked some significant details and context. To date there have been four bank rescues not two - Signature Bank, First Republic, SVB and Credit Suisse. The Credit Suisse collapse resulted in 17 billion in AT1 bonds being written down.[1]. SVB’s uninsured deposits(anything over 250k) accounted for 94% of its total deposits and the FDIC took the extraordinary step of insuring those deposit after the fact. We witnessed the US Treasury Secretary this week suggest that the government would backstop all uninsured deposits at smaller banks.[2]. She then later had to walk that back. The First Republic rescue saw three of the largest US banks depositing 30 billion dollars into it in order to prop it up. [1] https://www.reuters.com/business/finance/credit-suisse-writes-down-17-bln-bonds-zero-angering-holders-2023-03-19/ https://www.reuters.com/business/finance/credit-suisse-write... [2] https://www.reuters.com/markets/us/treasurys-yellen-says-committed-protecting-bank-deposits-more-actions-may-be-2023-03-21/ https://www.reuters.com/markets/us/treasurys-yellen-says-com...

arcticbull 4y ago
> SVB’s uninsured deposits(anything over 250k) accounted for 94% of its total deposits and the FDIC took the extraordinary step of insuring those deposit after the fact. Did they need to? It's not clear anyone would have lost anything at all because depositors are senior to equity and bond holders. All the bank's equity would have been wiped out sure (and it was anyways) but losses to depositors would likely be slim to none. If folks lost anything it would worst case have been like a 5-10% haircut, not 100% of un-insured deposits. The FDIC was using this as an opportunity to say "we've got your back no matter what" to reassure the public. It's extremely unlikely anyone, anywhere, would be at risk of losing any deposits - insured or uninsured - in this day and age in the US regardless of the FDIC's 'new' position. > The first republic rescue saw three of the largest US banks depositing 30 billion dollars to prop it up. The only real issue at banks right now is that they're in long-term government debt which has significant mark to market losses - which are an issue if folks are trying to withdraw since they can't be liquidated for face value. However if they're held to maturity there's no loss. So the Fed provided a facility where banks can borrow against the maturity value of long-term debt instead of market value. That makes the problem basically solved.
- JediLuke 4y ago
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- bogomipz 4y ago
  >"Did they need to? It's not clear anyone would have lost anything at all because depositors are senior to equity and bond holders." Do you realize how many tech companies used SVB as their primary banking facility? There were plenty of companies who would not have made pay role. So yes real regular people would have been affected. >"It's extremely unlikely anyone, anywhere, would be at risk of losing any deposits - insured or uninsured - in this day and age in the US regardless of the FDIC's 'new' position." The FDIC invoked a "systemic risk exception" in order to make SVB and Signature Bank depositors whole. Federal law requires the FDIC to resolve failed banks by choosing the method the least costly to the Deposit Insurance Fund. Here "resolved" means making only insured depositors whole. The only exception to this is the systemic risk exception. This is law not just some shit you can make up. >"The only real issue at banks right now is that they're in long-term government debt which has significant mark to market losses " Uh no, the issue that is that there's a lot of uncertainty. I don't think nobody really knows the extent of it at this point because a lot of midsize banks haven't really been under strong regulatory scrutiny until very recently. A crisis of confidence is still a crisis. A crisis of confidence is precisely what causes a run on banks.
  - nytesky 4y ago
    I’m so tired of the fake make pay role canard. All depositors had $250k guaranteed at the bat. But sure maybe that’s short for 2 weeks of payroll for many companies. Well FDIC was already cash payout warrants against the size of of their deposit assets (something like 50% would be available). If you need more than 50% of available cash to make payroll, you were already a dead firm walking. With liquid assets like long term treasuries, they could have been liquidated quickly, and at worst most companies would have seen a 10-15% haircut. A haircut hurts. But running a business includes all sorts of risks. You could have a lawsuit. You could have a fire. Your cloud provider could shutdown. They knew about the risk of being uninsured (since many companies have corporate treasurers who manage multiple banks and portfolio of treasury bills to manage bank risk), and this was just the one risk their company faced that came to fruition.
Avshalom 4y ago
>>four bank rescues not two - Signature Bank, First Republic, SVB and Credit Suisse. so when I said two and a half banks with two rescued it was actually two and a half banks with two and a half rescued. feels to me like even less of a banking crisis.
- arcticbull 4y ago
  Indeed - Credit Suisse isn't a retail bank (outside Switzerland), they're an investment bank so they're completely different and shouldn't be lumped in with the other 3. Two small crypto institutions and SVB. [edit] Not to mention Credit Suisse was holding $5B dollars of losses from Bill Hwang's Archegos shenanigans.
  - bogomipz 4y ago
    None of SVB, First Republic or Signature were retail banks either they were commercial banks. Regardless nowhere have I seen it reported that the current sequence of events is somehow a "retail banking crisis". It's amusing that you feel an investment bank somehow shouldn't be included in a discussion about a potential banking crisis. You might want to read up on the 2008 financial crisis and shadow banking. Bear Stearns and AIG weren't banks at all.
    - deleted 4y ago
      [deleted]
- bogomipz 4y ago
  I provided numerous points that show how the events of the last two weeks are of significance but it seems you want to cherry pick just one. At any rate, all four of those banks were rescued. The FDIC arranging for a healthy bank to take over an unhealthy bank is a form of rescue. This type of rescue has roots in the 2008 crisis. It's interesting how confident you seem to be in your assertion that all of this is non-issue yet your comments indicate you might not understand very much about banking or the banking system.
christophilus 4y ago
> Why would GDP(a lagging indicator) and a current event(a wave of banks over the last two week) be mutually exclusive? Exactly. Jeff Snyder pointed out that folks were puzzled over this exact thing in the 08-09 timeframe. And in fact, Janet Yellen talked about why it wasn’t a contradiction. She seems to have forgotten her own analysis, though.

arcticbull 4y ago

> SVB’s uninsured deposits(anything over 250k) accounted for 94% of its total deposits and the FDIC took the extraordinary step of insuring those deposit after the fact. Did they need to? It's not clear anyone would have lost anything at all because depositors are senior to equity and bond holders. All the bank's equity would have been wiped out sure (and it was anyways) but losses to depositors would likely be slim to none. If folks lost anything it would worst case have been like a 5-10% haircut, not 100% of un-insured deposits. The FDIC was using this as an opportunity to say "we've got your back no matter what" to reassure the public. It's extremely unlikely anyone, anywhere, would be at risk of losing any deposits - insured or uninsured - in this day and age in the US regardless of the FDIC's 'new' position. > The first republic rescue saw three of the largest US banks depositing 30 billion dollars to prop it up. The only real issue at banks right now is that they're in long-term government debt which has significant mark to market losses - which are an issue if folks are trying to withdraw since they can't be liquidated for face value. However if they're held to maturity there's no loss. So the Fed provided a facility where banks can borrow against the maturity value of long-term debt instead of market value. That makes the problem basically solved.

JediLuke 4y ago
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bogomipz 4y ago
>"Did they need to? It's not clear anyone would have lost anything at all because depositors are senior to equity and bond holders." Do you realize how many tech companies used SVB as their primary banking facility? There were plenty of companies who would not have made pay role. So yes real regular people would have been affected. >"It's extremely unlikely anyone, anywhere, would be at risk of losing any deposits - insured or uninsured - in this day and age in the US regardless of the FDIC's 'new' position." The FDIC invoked a "systemic risk exception" in order to make SVB and Signature Bank depositors whole. Federal law requires the FDIC to resolve failed banks by choosing the method the least costly to the Deposit Insurance Fund. Here "resolved" means making only insured depositors whole. The only exception to this is the systemic risk exception. This is law not just some shit you can make up. >"The only real issue at banks right now is that they're in long-term government debt which has significant mark to market losses " Uh no, the issue that is that there's a lot of uncertainty. I don't think nobody really knows the extent of it at this point because a lot of midsize banks haven't really been under strong regulatory scrutiny until very recently. A crisis of confidence is still a crisis. A crisis of confidence is precisely what causes a run on banks.
- nytesky 4y ago
  I’m so tired of the fake make pay role canard. All depositors had $250k guaranteed at the bat. But sure maybe that’s short for 2 weeks of payroll for many companies. Well FDIC was already cash payout warrants against the size of of their deposit assets (something like 50% would be available). If you need more than 50% of available cash to make payroll, you were already a dead firm walking. With liquid assets like long term treasuries, they could have been liquidated quickly, and at worst most companies would have seen a 10-15% haircut. A haircut hurts. But running a business includes all sorts of risks. You could have a lawsuit. You could have a fire. Your cloud provider could shutdown. They knew about the risk of being uninsured (since many companies have corporate treasurers who manage multiple banks and portfolio of treasury bills to manage bank risk), and this was just the one risk their company faced that came to fruition.

Avshalom 4y ago

>>four bank rescues not two - Signature Bank, First Republic, SVB and Credit Suisse. so when I said two and a half banks with two rescued it was actually two and a half banks with two and a half rescued. feels to me like even less of a banking crisis.

arcticbull 4y ago
Indeed - Credit Suisse isn't a retail bank (outside Switzerland), they're an investment bank so they're completely different and shouldn't be lumped in with the other 3. Two small crypto institutions and SVB. [edit] Not to mention Credit Suisse was holding $5B dollars of losses from Bill Hwang's Archegos shenanigans.
- bogomipz 4y ago
  None of SVB, First Republic or Signature were retail banks either they were commercial banks. Regardless nowhere have I seen it reported that the current sequence of events is somehow a "retail banking crisis". It's amusing that you feel an investment bank somehow shouldn't be included in a discussion about a potential banking crisis. You might want to read up on the 2008 financial crisis and shadow banking. Bear Stearns and AIG weren't banks at all.
  - deleted 4y ago
    [deleted]
bogomipz 4y ago
I provided numerous points that show how the events of the last two weeks are of significance but it seems you want to cherry pick just one. At any rate, all four of those banks were rescued. The FDIC arranging for a healthy bank to take over an unhealthy bank is a form of rescue. This type of rescue has roots in the 2008 crisis. It's interesting how confident you seem to be in your assertion that all of this is non-issue yet your comments indicate you might not understand very much about banking or the banking system.

christophilus 4y ago

> Why would GDP(a lagging indicator) and a current event(a wave of banks over the last two week) be mutually exclusive? Exactly. Jeff Snyder pointed out that folks were puzzled over this exact thing in the 08-09 timeframe. And in fact, Janet Yellen talked about why it wasn’t a contradiction. She seems to have forgotten her own analysis, though.