Credit deflation and the reflation cycle to come (part 5)

[Long time lurking]

 

[HousePriceMania]

39 minutes ago, sancho panza said:

Wolf covered this yesterday.I see no reason why depositors shouldn't be made whole in principle.Currency is a mdium of excange and a mathod of storing savings for most and they need to have faith that a) they'll get their capiatl back and b) the regulators are doing their jobs.

I accept that possibly when the scale of the losses are that big that depositors legally could be made to shoulder some of the burden but what's happening here is infintiely preferable

Just to be clear,it looks like there is still some fat left in terms of secured bondholders to bail in before depositors are at risk.

worth noting that signature bank got closed as well.$110bn in assets $90bn in deposits.

https://www.reuters.com/business/finance/new-york-state-regulators-close-signature-bank-2023-03-12/

https://wolfstreet.com/2023/03/12/silicon-valley-banks-uninsured-depositors-bailed-out-crypto-signature-bank-shut-down-all-depositors-bailed-out-senior-execs-fired-all-shareholders-some-bondholders-bailed-in/

The way it seems to work, with lots of tough love in the statement:

1. The Fed gives the money to the FDIC as needed.
2. The FDIC makes all deposits available on Monday.
3. The FDIC then sells the assets of the banks, which takes some time.
4. The difference between the cost of bailouts of the depositors and the proceeds from the asset sales is the actual amount the FDIC lost.
5. The FDIC charges other banks a “special assessment” to cover those losses, “as required by law.”
6. And it may then pay the Fed back with those funds it collected from other banks?

Signature Bank was shut down on Sunday by New York Department of Financial Services, which announced that it took possession of the bank and that it appointed the FDIC as receiver of the bank.

Depositors of Signature bank are included in the bailout, as the joint statement by Yellen, Powell, and FDIC spelled out:

Shareholders and some unsecured bondholders of both banks get bailed in. Should have done your homework, darn. The joint statement said for both banks: “Shareholders and certain unsecured debtholders will not be protected,” with Tough Love from Powell, Yellen, and Gruenberg.

Senior management gets axed. No word about claw-backs or indictments or anything, but nevertheless at least they weren’t promoted and put in charge of the bailouts. “Senior management has also been removed,” the statement said.

Other banks with a run-on-the-bank can get funding from the Fed.

It's hard to see the Fed continuing with QT,reverse repo and raising rates at current trajectories given what's happened and that the tightening cycle clearly played a part.

The Fed is really boxed in here with inflation running.Goona get messy down the line.

Gold up another $22 this morning.

Welcome back to 2008

[Axeman123]

4 minutes ago, sancho panza said:

However,this is not the end of it.Timing wise,I feel we're about where we were when Bear Stearns went under.As Dowd and Buckner pointed out in 2020,the regulatory authorities haven't actually dealt with the underlying leverage problems that caused 08 in fact they've likely allowed them tomget worse.)

Very true. Powell has talked tough until his bluff was called, this bail-in is Yellen talking tough. Her bluff will be called when a bigger bank has the same underlying problem come home to roost.

In fairness both will have been tougher than most expected, and built up credibility that they wouldn't otherwise have. They will likely need it in the next few years.

29 minutes ago, Long time lurking said:

This starting to look like they are herding everyone towards government bonds 

With the cost of government borrowing rising they really don't have a choice IMO. I suspect they also want banks to use the discount window, and effecively wind their own business up by destroying their credibility with other institutions.

Consolidation of the banking industry would probably make it easier to oversee, although at the expense of slower economic growth. Yet another signpost of the US being a post growth economy.

[honkydonkey]

Another large cap, value, EM fund. DEM. Asia leaning, Taiwan, China.

https://www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P000195VU&InvestmentType=FE

[sancho panza]

9 minutes ago, Axeman123 said:

The final banking option for crypto AIUI, and likely a clear message to other institutions not to get involved. BTC is essentially sanctioned in the US banking system now.

Likely it will come out that this was entirely unjustified and opportunist, as you say assets exceeded deposits. The rumours of problems will likely have been planted in the media by the same regulators that then used the reporting to justify action.

I'm not so sure.The banking system in the US is very fragmented.$110bn in assets isn't that big but as the NYT lays out,these banks operate in niches and don't really have the breadth of business to mainatin stability if things go slightly worng in their niche.It's depositor base was 80% uninsured,20% exposed to crypto.It had structural problems

Once a bank run starts,it's hard to stop especially when the depositor base is mainly well connected individuals and companies.

Look at CS.I think in teh UK a lot of the smaller BS's will go to the wall with what's coming.

We've been over the Coventry BS before,because  it really is the psoter boy for the last 5 years of complete and utter excess in the UK property market ie expanding it's balance sheet up on the back of increasing BTL lending given the clear regulatory headwinds

https://www.nytimes.com/2023/03/12/business/signature-bank-collapse.html

[Calcutta]

Spent the morning emptying all the savings accounts I had with these dodgy little banks. 

When the fed admit they won't raise rates the market should have a little rally, give us time to get out of the bits and pieces of divi payers I've been collecting. Then it's game on.

We've been waiting for this for 15 years. Savour the moment. 

"All I know is, I'm getting paid, and someone's getting torn open."

[WICAO]

3 hours ago, HousePriceMania said:

That's the whole point of it, meanwhile their system is broken and they can't fix it 

 

Get every fooking penny out the banking system because when it blows, full on collapse or hyperinflation then you'll lose 99p in the £ 

Then where do you put it?  Genuine question.

Full disclosure: I stay under the bank compensation limits and diversify my wealth.  As a family we currently have 4.5 years of spending in Savings Accounts with Banks.

[JMD]

17 hours ago, Axeman123 said:

Depends on the ECB IMO. They seem far behind the curve and seem set for 2-3 50bps ones, even if the Fed pauses IMO. The interesting thing (that is totally off the radar so far) is what is going on in EU banks. Many of them will likely have bought negtive yielding bonds for example...

Within the EU, wasn't it Germany and Austria who issued most of the negative and 100 year bonds? 

The EU/ECB must be heading toward a monetary/fiscal reset? The 'two sides' will i think be frugal Germany/Austria 'against' profligate France. And if the politics follows the economics, as this thread says always must happen, the political fallout also will be massive within the EU. Maybe having effects outside the EU, raproachment with Russia perhaps. Impossible to predict when the reset might happen, but surely it's only a matter of time?

Perhaps France feeling slightly cold shouldered and maybe that's the reason why Macron has been cosying up to Rishi recently!

Edited March 13, 2023 by JMD

[Loki]

 

WHY MUST YOU HURT ME SO

[Noallegiance]

This is OK though, right?

[JMD]

16 hours ago, HousePriceMania said:

UK is totally fucked either way. When property owning MPs are suppressing mortgage rates, introducing scams to push more people into debt, paying index linked benefits to anyone in the world, buying votes with index linked pension payments, ignoring democracy, silencing dissenting voices, bailing out some woman who's done a menopause app while you can't drive down a street without writing your car off hitting a fucking pot hole, controlling the Plebs Via a money saving expert who encourages people to save money on anything other than the thing he's invested in... the game is up.

 

We are kidding ourselves if we think the UK as was is ever coming back. It's prep time for When the unstoppable collapse comes.

I agree with you.

But I'm interested, what's the money-s(L)aving-expert investment reference about? 

[Long time lurking]

1 hour ago, HousePriceMania said:

Welcome back to 2008

Well it`s close ,we are still heading into recession /depression though

The FED has been flat out trying to manufacture a recession ,they are going to get what they want on that one i`m not to sure about controlling the inflation though ,while they`er still sanctioning themselves/the western world 

Edited March 13, 2023 by Long time lurking

[HousePriceMania]

9 minutes ago, JMD said:

I agree with you.

But I'm interested, what's the money-s(L)aving-expert investment reference about? 

Martin Lewis, up to his neck in property investments, has some dodgy looking 13M mortgage debt ( from himself ? ) is sat demanding "help" for people with mortgages ( and indirectly his investments ).  His tongue is so far up Sunak's arse Sunak's tongue is now white.

When people like this are being given air time and not being question by the MSM you know the game is rigged, he's there to convince poor idiots that the right thing to do is help the poor pay their debts to the rich...he's the rich.

[HousePriceMania]

40 minutes ago, WICAO said:

Then where do you put it?  Genuine question.

Full disclosure: I stay under the bank compensation limits and diversify my wealth.  As a family we currently have 4.5 years of spending in Savings Accounts with Banks.

Housing, gold, silver, car, get rid of debt, store food, follow the share advice on here, buy energy companies etc.

Buy a field, grow spuds on it.

Anything useful because the end of the era of the useless is coming.

[Sugarlips]

Brandon to speak 9am Eastern. So shortly then.

Free ice creams for all US citizens?

[HousePriceMania]

8 minutes ago, Sugarlips said:

Brandon to speak 9am Eastern. So shortly then.

Free ice creams for all US citizens?

Price of ice cream to double 

[Sugarlips]

 

 

[Lightly Toasted]

23 hours ago, Axeman123 said:

Have you ever read "guns, germs, and steel"? That author makes a very good case for why the west got such a headstart on other continents. There is no inherrent superiority IMO, just the fading advantage of a headstart on industrialisation.

Then you'd have to believe that a bunch of Han Chinese and a bunch of Australian Aboriginals randomly selected and put on identical unfamiliar islands (so neither had applicable experience) would fare similarly.

Superiority is a tricky word though. Maybe it includes "genetic and cultural inheritors of those who created a way of living, are superior at navigating that way of living?" There should be nothing controversial about that IMO, and if there is a source of "white*" privilege then that is it.

More broadly: "Likely to be better at certain things?" sure; "Inherently more deserving of human respect and dignity"? Nope.

* the woke US school/college classification of East Asians as white or even white++ tells me that the "better at navigating the world" scale, i.e. unearned privilege, is really about what your ancestors had [opportunities] to do in order to succeed. The privilege is the informational inheritance you received from them.

NB the ideas explored in Guns Germs and Steel, e.g. different plants available for cultivation thousands of years ago, will surely have influenced the genetic and cultural development of the various groups, so perhaps the book is making a false argument along the lines is "there is no difference because the difference was caused by luck."

Edited March 13, 2023 by Lightly Toasted

[Sugarlips]

 

 

[Long time lurking]

Does this mean it`s game over ?

 

[ThoughtCriminal]

I think senator Massive just let slip that this thing is about to blow

[Underwhelmed]

16 minutes ago, Sugarlips said:

 

 

bought for £1 but didn't have time to go through the books so any toxic shit, could be millions or billions, will be borne by the UK govt ie taxpayer bailout 

[dnb24]

 

Not looking good for WAL

 

Edit1 -and trading has been halted.

 

Edit 2- Charles Schwab and First republic halted too.

Edited March 13, 2023 by dnb24

[belfastchild]

5 minutes ago, dnb24 said:

 

Not looking good for WAL

Jim Cramer tipped First Republic. I guess thats that fucked too.

[dnb24]

1 minute ago, belfastchild said:

Jim Cramer tipped First Republic. I guess thats that fucked too.

Just halted!!!