he's right you know...

The regional banking system is at risk. SVB's depositors' bad weekend woke up uninsured depositors everywhere. The rapid rise in rates impaired assets and drained deposits. Zeroing out shareholders and bondholders massively increased the banks’ cost of capital. CRE losses loom.…

— Bill Ackman (@BillAckman) May 3, 2023

Diggity said:

---

He's a parody of his former self.

---

not a fan of ackman... but even a broken clock is right twice a day

Aggie09Derek said:

---

Absolutely insane FDIC is only 250k

Should be 10x that amount for any regulated bank

---

yep, this is a BIG deal. and banks are probably around 800 billion and growing (in debt).

not a bad time to own (or buy) gold and silver.

Aggie09Derek said:

---

Absolutely insane FDIC is only 250k

Should be 10x that amount for any regulated bank

---

Too late to deal with this now.

Will get fixed with the shift to CBDC / digital dollar.

Any improvements made now is putting lipstick on a pig. The plan is to let the system collapse under it's own weight.

Things were humming along in 2019 but amazingly 81 million voted to build back better.

The people about to get what they want.

Stat Monitor Repairman said:

---

---

The situation is pretty bad, but this is a terribly designed and misleading chart. Representing data with area tricks our brains, and none of that is adjusted for inflation. In March 2023 dollars, the WaMu failure was $423B, for instance.

Here is a better chart, but also not adjusted for inflation. Even using inflation adjusted metrics might be off, should maybe be normalized to GDP.



https://www.fdic.gov/bank/historical/bank/

That's a pretty legit graph for understanding the situation with a single image, glimpse.

Good to see the monitor for these stats has been repaired.

Seriously though, thanks for posting.

$250k is not bad, You can get to 2,500k by opening accounts with ten bank. Not hard, but not convenient especially for businesses.

the $250k covers most people and it is to keep the people with highest impact (probably less knowledge of risk) from getting wiped out completely.

We have to get people used to understanding that they have risk. Especially businesses. They have customer and vendor risk, they should also be able to handle bank risk. Or they can directly manage the risk by starting a bank.

These banks would have never let it get his bad, if businesses assessed their bank risk and were asking questions of their banking partner earlier. We have this general thought that banks are safe and great at managing money. they keep letting us down.

Or how about if something is regulated we don't have to worry about $$ over $250k being wiped out.

$250k is nothing especially for a business who has payroll.

So maybe you would be good with every business using 2-3 banks that the government 100% aren't going to let fail?

Others have mentioned, but if you are a business and have significant cash reserves, then you have sweep accounts. If personal, you probably already work with more than one financial institution with more than one account and can get up to $1MM to $2MM without much fuss. If you have more than that in your personal accounts, you likely have someone managing this risk for you.

Phat32 said:

---

It appears many are willing the 4-mega bank scenario into existence by putting FUD into the market and short selling all regionals.

Regional banks are a super important part of our economy. Mega banks are terrible at small business and local lending.

---

Agreed. I personally don't have a need for a regional bank but many, many do.

I use a mega bank (if Fidelity is considered that) simply because a lot of our investments are there, and I was centralizing my finances as much as possible.

Phat32 said:

---

It appears many are willing the 4-mega bank scenario into existence by putting FUD into the market and short selling all regionals.

Regional banks are a super important part of our economy. Mega banks are terrible at small business and local lending.

---

agreed. Guys like Ackman don't make statements like this (repeatedly) if they don't have an angle.

Aggie09Derek said:

---

Absolutely insane FDIC is only 250k

Should be 10x that amount for any regulated bank

---

FDIC is in a weird spot. Their mandate is to protect the insurance fund.

If you guarantee all deposits, you are explicitly destroying the fund because there is no way to backstop all of it (short of nationalizing the system). Guaranteeing all deposits would also require congress.

If you keep the guarantee low, you risk more bank runs which inevitably harms the insurance fund.

This whole thing should be a huge black eye to the SF Fed and particularly Mary Daly (pronounced: dumba**), who probably still thinks inflation is transitory.

Sims said:

---

Aggie09Derek said:

---

Absolutely insane FDIC is only 250k

Should be 10x that amount for any regulated bank

---

FDIC is in a weird spot. Their mandate is to protect the insurance fund.

If you guarantee all deposits, you are explicitly destroying the fund because there is no way to backstop all of it (short of nationalizing the system). Guaranteeing all deposits would also require congress.

If you keep the guarantee low, you risk more bank runs which inevitably harms the insurance fund.

This whole thing should be a huge black eye to the SF Fed and particularly Mary Daly (pronounced: dumba**), who probably still thinks inflation is transitory.

---

I think alot of the rules we have in place assume that mob mentality and reaction will not be a factor. It assumes there is general public stability and an unwritten agreement that humans are going to behave rationally. They are in place to handle outliers under these assumptions.

As we are all aware, those assumptions are becoming more and more tenuous as society slowly breaks down.

Aggie09Derek said:

---

Or how about if something is regulated we don't have to worry about $$ over $250k being wiped out.

$250k is nothing especially for a business who has payroll.

So maybe you would be good with every business using 2-3 banks that the government 100% aren't going to let fail?

---

I run a family office and that's precisely what we do.

There are 6 different LLCs under the umbrella and I use 3 banks, each with treasury sweep options. I've been on the bank side before and fully understand the continuum that is out there with respect to well run and poorly run banks. Even though I review the risk profile of the banks we deal with, I can only do so with their quarterly reporting. I can't sit in on their daily management decisions so I mitigate appropriately by using multiple banks.

Edit to add: My experience in banking also gives me some insight into the fact that some of the regulators have no clue what they're doing and others are very, very good.

Then why are banks like a Comerica also getting crushed. The fear is causing a run on a bunch of regionals unnecessarily and not based on actual risk of the banks book but rather fear of not being in the too big to fail group.

Sims said:

---

I would use failed bank total assets / all bank assets to show the failures as a percent of the system.

In my opinion, we're not experiencing a financial instability / contagion situation. We are experiencing the outcome of an absolutely horrible Fed District 12...which has given us Janet Yellen, Sub Prime, Mary Daly and now the huge concentration risks the regulators allowed to happen.

Between the current failures and the ones that appear to be on the edge...Frist Republic, SVB, PacWest, Western Alliance and Zions Bank...they're all out of Fed District 12. This is a regulatory failure. That district has been asleep at the wheel.

---

That's interesting. Didn't think about that.

It does seem like failures in that district would cause contagion elsewhere simply because of human psychology.

Sims said:

---

I would use failed bank total assets / all bank assets to show the failures as a percent of the system.

In my opinion, we're not experiencing a financial instability / contagion situation. We are experiencing the outcome of an absolutely horrible Fed District 12...which has given us Janet Yellen, Sub Prime, Mary Daly and now the huge concentration risks the regulators allowed to happen.

Between the current failures and the ones that appear to be on the edge...Frist Republic, SVB, PacWest, Western Alliance and Zions Bank...they're all out of Fed District 12. This is a regulatory failure. That district has been asleep at the wheel.

---

Don't underestimate the significance of a few things...

- the flight of Californians to places like Texas
- downsizing of FAANG companies and others that is putting additional strain on locals economies in Cali
- crazy cali covid rules that has adversely affected commercial properties in those same economies

We can still absolutely have runs. No question. I just don't think they are based on systemic instability in the system. Banking is a confidence game and you can lose confidence in a good bank because of a rumor and momentum.

There are some more banks that will fail and they'll likely fail once CRE busts. The liquidity issue that broke SVB was a regulatory lapse and a goofball risk officer. To be fair, SVB tripled in size in like 2 years and thought they were being safe by throwing all the money into treasuries. That seems reasonable at face value anyway.

Bond rates are starting to come down which means the M2M issues the banks were having on the AFS bonds should be lessening.

Personally, I was floored by SVBs portfolio decisions. How in the world you put most of your eggs into treasuries like they did at those rates was mind-blowingly stupid.

We had/were printing ~40% of all money we've ever created. The very next outcome from that is inflation. That is Finance 101.

I also realize that many people and companies have either forgotten about that basic cause and effect or were never taught it.

YouBet said:

---

Personally, I was floored by SVBs portfolio decisions. How in the world you put most of your eggs into treasuries like they did at those rates was mind-blowingly stupid.

We had/were printing ~40% of all money we've ever created. The very next outcome from that is inflation. That is Finance 101.

I also realize that many people and companies have either forgotten about that basic cause and effect or were never taught it.

---

SVB and the regulators (and the accounting firm) should be barred from working in the finance industry and should be sent to prison.

Instead, they will all get fat checks and taxpayers once again foot the bill.

Are tax payers actually taking a hit for SVB?


In '08 as much bailouts happened, the govt made $$ on it all.

Aggie09Derek said:

---

Are tax payers actually taking a hit for SVB?


In '08 as much bailouts happened, the govt made $$ on it all.

---

Not so fast on the making money part. Adjusted for inflation over the time period, the "investment" in the bailouts almost certainly lost money. There are a lot of other related costs not included in the figures folks tout indicating money was "made".

Bailing out failed banks will ultimately costs taxpayers. If sweetheart deals are given to the banks acquiring the failed banks there are still costs associated with that, though most folks fail to count those or even consider them.

There is a cost to inefficiencies created by the government stepping in, there is a cost to the increased regulating and oversight that comes out of these situations.

True

Just wasn't some massive loss in terms of what was spent. Taxpayers weren't screwed over as made out to be on that one. Lot of other govt waste going around…

Aggie09Derek said:

---

Are tax payers actually taking a hit for SVB?


In '08 as much bailouts happened, the govt made $$ on it all.

---

Yes. In effect, JP Morgan was given money by the federal government to cover the costs of taking over SVB. WSJ covered the deal well if someone wants to go find it.

Basically, JPM was given SVB assets and deposits. On top of that, the law limiting any one bank from holding >10% of all deposits was scrubbed to allow JPM to get it.

They now hold 17% of all deposits. I haven't seen any followup if JPM will be forced to divest down to 10% after we get through this "crisis".

Thanks

YouBet said:

---

Phat32 said:

---

It appears many are willing the 4-mega bank scenario into existence by putting FUD into the market and short selling all regionals.

Regional banks are a super important part of our economy. Mega banks are terrible at small business and local lending.

---

Agreed. I personally don't have a need for a regional bank but many, many do.

I use a mega bank (if Fidelity is considered that) simply because a lot of our investments are there, and I was centralizing my finances as much as possible.

---

With one of the big 4. Opening up accounts at a local credit union to begin moving over. I think 1 of the big four fails. Then it could snowball. Some small conservative run banks will have enough and are preparing for that. I've been told some are.

Why in the world do you think one of the big four would fail right now?