The regulatory burden placed on all banks following the failure of Silicon Valley was insane. It's time for common sense to return (and actually be applied...i'm for good/fair/reasonable regulation)

https://fdic.gov/news/press-releases/2025/statement-acting-chairman-travis-hill

I hope he has some say in stopping the bail outs of depositors with non-insured deposits. If you have to much cash buy a dang 90 day T-Bill.

So, load up on FAZ?

My favorites:

• Adopt a more open-minded approach to innovation and technology adoption, including (1) a more transparent approach to fintech partnerships and to digital assets and tokenization, and (2) engagement to address growing technology costs for community banks.
• Improve the bank merger approval process and replace the 2024 Statement of Policy to ensure that merger transactions that satisfy the Bank Merger Act are approved in a timely way.
• Encourage more de novo activity so there is a healthy pipeline of new entrants in the banking sector.
• Enhance our readiness and preparedness for resolving large financial institutions, incorporating lessons from the far-too-costly failures of 2023, including the need to be much more proactive and nimble and to improve the bidding process.

Bank acquisitions/start-ups have been almost impossible. It reduces the options available to consumers.

Heineken-Ashi said:

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Banks lobbying for further loosening, and they are already not accounting for the huge risks on balance sheets, much less the amount those risks continue to increase.

The Fed Is Putting Your Money At Even Greater Risk - SaferBankingResearch
Banking Regulators Continue To Water Down Protections For The Public - SaferBankingResearch

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The risk (IMO) is heavier with the bigger banks and the larger regionals that are more aggressive in nature. The bigger issue in banking is that community banking is regulated so tightly that "main street banking" is being stifled while "wall street banking" continues to grow.

I believe that the regulators would greatly prefer to have a limited # of banks like you see in europe and canada where they would have increasing control. I know a group that has raised sufficient capital and has a decent management team that has been trying to start a new bank for 4 years. They've been stymied at almost every turn by the regulators with very little instruction/support. At over $1MM in spend on lawyers and fees and still not there.

New community banks would support just that...the community where the bank is located. That's what is needed for the majority of Americans. Big banks serve a great purpose as well...we need both.

The risk is spread out and no size of bank is immune, though certain segments as a whole might have greater exposure. And it's not just one thing. It's unrealized losses on treasuries, it's CRE, it's consumer credit, consumer debt, it's loans to shadow banks, it's CMBS, it's liquidity and the draining of the reverse repo facility (which means no ammo in the tank should a COVID style save the day be needed), it's trading assets that are not part of AFS and HTM securities. There isn't just one risk like in 2008. The big banks have large exposure to these risks, yes, but a smaller bank with exposure to even one of these can be just as catastrophic.

Here's a blurb about the shadow lending. As a reminder, this is loans from banks to private groups who are not subject to the same regulations as banks. Banks are using these groups to increase leverage, likely to make up for their large unrealized losses.

This is a big reason why I think we need more banks. (with appropriate levels of capital and regulation).

I spent the last ten years providing banking services to "shadow lenders". I'm very familiar with them. A huge portion of the loans they do (particularly on real estate) are loans that have historically been handled by community banks.

cgh1999 said:

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This is a big reason why I think we need more banks. (with appropriate levels of capital and regulation).

I spent the last ten years providing banking services to "shadow lenders". I'm very familiar with them. A huge portion of the loans they do (particularly on real estate) are loans that have historically been handled by community banks.

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Yes, and not all are bad. But the whole point is that it's loans the banks CANT do on real estate currently, but can using shadow bankers who can take on more risk with less regulatory scrutiny. It's setting up for something bad, because banks don't just pull back on their leverage on their own and count their winnings. We all know what comes next.

Heineken-Ashi said:

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cgh1999 said:

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This is a big reason why I think we need more banks. (with appropriate levels of capital and regulation).

I spent the last ten years providing banking services to "shadow lenders". I'm very familiar with them. A huge portion of the loans they do (particularly on real estate) are loans that have historically been handled by community banks.

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Yes, and not all are bad. But the whole point is that it's loans the banks CANT do on real estate currently, but can using shadow bankers who can take on more risk with less regulatory scrutiny. It's setting up for something bad, because banks don't just pull back on their leverage on their own and count their winnings. We all know what comes next.

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In most cases, the leverage profiles are much better for the banks at this point.

On average, the advance rate on most of these leverage facilities is 75%-80% on note and 60%-65% LTV based on appraisals. Private lenders are typically lending around 70%-80% on improved real estate and 50%-60% LTV on land.

In a hypothetical scenario of a $1MM piece of property, you're looking at $800k loan from the private lender. at an 80% advance, you'll see a loan of $560k which drops the banks exposure to 56%. Additional advantages are another layer of capital between the real estate and the bank.

Banks are being much more selective in RE lending, but the addition of another layer of capital makes it less risky for the bank. Further, the rates/terms for private credit may actually deter more risky loans. And the private credit lender may have an REO strategy to rehabilitate the property.

I'm more familiar with the RE space vs other forms of private lending, but i'd assume similar structural advantages.

cgh1999 said:

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Heineken-Ashi said:

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The bigger issue in banking is that community banking is regulated so tightly that "main street banking" is being stifled while "wall street banking" continues to grow.

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That's why they spend millions lobbying, buying ifluence. Very swampy.