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Using a throwaway b/c I have worked on wall st. in the past and may do so again in the future. Bank of America is the most likely bank of the big 4 US banks to

Using a throwaway b/c I have worked on wall st. in the past and may do so again in the future. Bank of America is the most likely bank of the big 4 US banks to explode from all this. They are sitting on 113.5 billion (yes with a b) in losses in the hold to maturity account. See page 110 of their most recent 10-K linked below. At this point the whole hold to maturity thing seems more and more like a tobashi, and we should just do what Europe does, mark everything to market, and force the banks to raise more capital with CoCos or something similar. Also note that all the other big 3 banks stock price popped after earnings, but not BoA. Second most likely of the big 4 is Wells Fargo, but that is due to commercial real estate exposure, which will take a couple more years to play out. https://investor.bankofamerica.com/regulatory-and-other-filings/annual-reports/content/0000070858-23-000092/0000070858-23-000092.pdf https://investor.bankofamerica.com/regulatory-and-other-fili... https://en.wikipedia.org/wiki/Tobashi_scheme https://en.wikipedia.org/wiki/Tobashi_scheme

bagacrap 3y ago
The only thing that could cause this to become a problem is if they're forced to sell which only happens during a bank run. The government explicitly protects these large banks from runs. Thus I think your fear mongering is unwarranted. And while the tone of your comment is conspiratorial, as if no one else has noticed the htm losses, the stock is not valued at a level that indicates much risk of failure. So wall street has collectively spoken and the consensus is that bofa profits may be challenged but that there is little risk of receivership or anything like that. I swear, the negative nancies on the internet never seem to get tired of finding new reasons the sky is falling.
- throwawayhdbck 3y ago
  In fact the movement of their stock price has shown that many others have noticed the hold to market losses, so there is no hidden conspiracy here. However, I do object to the notion that the government is explicitly protecting large banks from runs. Unless your arguing to big to fail means depositors are prevented from withdrawing funds into e.g. money market accounts[0] somehow? I would posit that the government is in effect inducing the loss of deposits from the banking system by offering higher interest rates on overnight reverse repos and Tbills than banks which are sitting on low yielding long term assets are able to match. My argument here is that by forcing mark to market accounting across the board, banks would have to recognize these losses earlier and we wouldn't need to socialize the losses as frequently as we are have been in the past few months. Furthermore, while you're free to argue that I am a "negative nanc[y]" who believes "the sky is falling", the words "more likely" are doing a good bit of work in my earlier comment. If you really want to argue that BoA and Wells balance sheets are honky dory[1], I happy to hear your analysis, but I can do without the name calling. 0: https://www.bloomberg.com/news/articles/2023-03-31/why-us-bank-deposits-are-moving-to-money-market-funds https://www.bloomberg.com/news/articles/2023-03-31/why-us-ba... 1: https://www.americanbanker.com/list/20-banks-and-thrifts-with-the-largest-mortgage-backed-securities-portfolios https://www.americanbanker.com/list/20-banks-and-thrifts-wit...
  - bagacrap 3y ago
    Bank runs result from depositors who suddenly lose confidence in the safety of their money. MMFs are not causing runs per se, but maybe bank walks. However the officially released data has shown that this isn't happening in recent weeks. I agree the gov't screwed over the banks here. I'm not sure how forcing MTM alone would help. What we'd have needed is better regulation, or simply more thoughtful monetary policy. For BoA, if you stare at the balance sheet, sure it looks not great. If no one ever looks at it, things probably work out just fine, because again, only thing that is going to cause an issue is if alarmists start spreading FUD and folks start yanking deposits.
    - throwawayhdbck 3y ago
      Yeah fair. I think MTM helps here because it forces the regulators hands a bit. If all these banks had to go out and raise capital in the summer and fall of 2022, because their regulator comes in and say "Hey, your undercapitalized, fix that.", then they probably don't go under 6 months later. Where I think we need to agree to disagree is you seem to think the run it's self is the problem, whereas I believe the insolvency which spooked the herd is the issue.
      - bagacrap 3y ago
        Announcing a capital raise is what pushed SVB over the edge (triggered the run). I don't see how doing that in summer or fall of last year would have helped. If anything their position was slightly improved by the time of the run as compared to October when the ten year yield was peaking.

bagacrap 3y ago

The only thing that could cause this to become a problem is if they're forced to sell which only happens during a bank run. The government explicitly protects these large banks from runs. Thus I think your fear mongering is unwarranted. And while the tone of your comment is conspiratorial, as if no one else has noticed the htm losses, the stock is not valued at a level that indicates much risk of failure. So wall street has collectively spoken and the consensus is that bofa profits may be challenged but that there is little risk of receivership or anything like that. I swear, the negative nancies on the internet never seem to get tired of finding new reasons the sky is falling.

throwawayhdbck 3y ago
In fact the movement of their stock price has shown that many others have noticed the hold to market losses, so there is no hidden conspiracy here. However, I do object to the notion that the government is explicitly protecting large banks from runs. Unless your arguing to big to fail means depositors are prevented from withdrawing funds into e.g. money market accounts[0] somehow? I would posit that the government is in effect inducing the loss of deposits from the banking system by offering higher interest rates on overnight reverse repos and Tbills than banks which are sitting on low yielding long term assets are able to match. My argument here is that by forcing mark to market accounting across the board, banks would have to recognize these losses earlier and we wouldn't need to socialize the losses as frequently as we are have been in the past few months. Furthermore, while you're free to argue that I am a "negative nanc[y]" who believes "the sky is falling", the words "more likely" are doing a good bit of work in my earlier comment. If you really want to argue that BoA and Wells balance sheets are honky dory[1], I happy to hear your analysis, but I can do without the name calling. 0: https://www.bloomberg.com/news/articles/2023-03-31/why-us-bank-deposits-are-moving-to-money-market-funds https://www.bloomberg.com/news/articles/2023-03-31/why-us-ba... 1: https://www.americanbanker.com/list/20-banks-and-thrifts-with-the-largest-mortgage-backed-securities-portfolios https://www.americanbanker.com/list/20-banks-and-thrifts-wit...
- bagacrap 3y ago
  Bank runs result from depositors who suddenly lose confidence in the safety of their money. MMFs are not causing runs per se, but maybe bank walks. However the officially released data has shown that this isn't happening in recent weeks. I agree the gov't screwed over the banks here. I'm not sure how forcing MTM alone would help. What we'd have needed is better regulation, or simply more thoughtful monetary policy. For BoA, if you stare at the balance sheet, sure it looks not great. If no one ever looks at it, things probably work out just fine, because again, only thing that is going to cause an issue is if alarmists start spreading FUD and folks start yanking deposits.
  - throwawayhdbck 3y ago
    Yeah fair. I think MTM helps here because it forces the regulators hands a bit. If all these banks had to go out and raise capital in the summer and fall of 2022, because their regulator comes in and say "Hey, your undercapitalized, fix that.", then they probably don't go under 6 months later. Where I think we need to agree to disagree is you seem to think the run it's self is the problem, whereas I believe the insolvency which spooked the herd is the issue.
    - bagacrap 3y ago
      Announcing a capital raise is what pushed SVB over the edge (triggered the run). I don't see how doing that in summer or fall of last year would have helped. If anything their position was slightly improved by the time of the run as compared to October when the ten year yield was peaking.