No banks are safe (bail ins, FDIC limits, systemic risks)

Welcome to the Precious Metals Bug Forums

Welcome to the PMBug forums - a watering hole for folks interested in gold, silver, precious metals, sound money, investing, market and economic news, central bank monetary policies, politics and more. You can visit the forum page to see the list of forum nodes (categories/rooms) for topics.

Why not register an account and join the discussions? When you register an account and log in, you may enjoy additional benefits including no Google ads, market data/charts, access to trade/barter with the community and much more. Registering an account is free - you have nothing to lose!

This is the Economist article:
... Where is the money going?

The answer starts with money-market funds, low-risk investment vehicles that buy short-term government and corporate debt. These saw inflows of $121bn last week as svb failed. However money does not actually enter such vehicles, for they are unable to take deposits. Instead, cash that leaves a bank for a money-market fund is credited to the fund’s bank account, from which it is used to purchase the commercial paper or short-term debt in which the fund invests. When the fund uses money in this way, it flows to the bank account of whichever institution sells the asset. Inflows to money-market funds should thus shuffle deposits around the banking system, rather than force them out of it.

And that is what used to happen. Yet there is one obscure way in which money-market funds may suck deposits from the banking system: the Federal Reserve’s reverse-repo facility, which was introduced in 2013. The scheme was a seemingly innocuous change to the financial system’s plumbing that may, a decade later, be having a profoundly destabilising impact on banks.

In a usual repo transaction a bank borrows from competitors or the central bank and deposits collateral in exchange. A reverse repo does the opposite. A shadow bank, such as a money-market fund, instructs its custodian bank to deposit reserves at the Fed in return for securities. The scheme was meant to aid the Fed’s exit from ultra-low rates by putting a floor on the cost of borrowing in the interbank market. After all, why would a bank or shadow bank ever lend to its peers at a lower rate than is available from the Fed?
...
Click to expand...

More:

www.economist.com

America’s banks are missing hundreds of billions of dollars

How the Federal Reserve drained the financial system of deposits
www.economist.com www.economist.com
 
The Federal Reserve will be forced to make an "emergency rate cut" by June, according to Edward Dowd, former BlackRock portfolio manager and Founding Partner of Phinance Technologies. He predicted that a "controlled implosion" of the banking sector would follow over the next 24 months, leaving the United States with only six major banks.
...
"They [the authorities] are going to continue to play what I call "whack-a-mole," he said. "They plug their finger in the dike, everybody breathes a sigh of relief, and then there's another problem… I'm hoping that's the case because to be honest, I don't want to see a fast panic. That's not good for any of us."

The result of this, forecast Dowd, is that only six banks would be left standing, making it easier for the government to introduce Central Bank Digital Currencies (CBDCs), programmable tokens issued and controlled by central banks, and which operate as fiat currency. He claimed this would all occur by 2025 at the latest.

He also predicted that, based on the year-over-year growth rate of the M2 money supply, a "hard recession" will soon manifest, prompted by "continued economic deterioration," "more bank failures," and a possible global "sovereign debt crisis."

To find out why Dowd thinks the upcoming recession he forecasts may be comparable to the Great Depression, watch the video above.

Central Bank Digital Currencies

"If you wanted to introduce central bank digital currency, wouldn't it be better to have only six banks in the U.S., all systemically important, basically run by the government?" Dowd suggested.
...
Click to expand...

www.kitco.com

Fed's 'Emergency rate cut' by June to precede 'controlled implosion' of banking sector, only 6 banks left as CBDCs rolled out by 2025 - Edward Dowd

www.kitco.com

I hope he is wrong.
 
futurama-good-news-everyone.gif


Bold emphasis is mine:
Banking-sector jitters are on the minds of depositors, investors and policy makers, but how do the current problems compare with bank troubles through history? Over the past eight centuries, researchers say, there are few direct parallels for the particular twists and turns of recent weeks.

But when past bank troubles were most similar to current events, the financial pain ended up being widespread most of the time, according to researchers at the Yale School of Management and Boston College’s Carroll School of Management.

Taking the very, very long view, Andrew Metrick at Yale and Paul Schmelzing at Boston College have spent several years compiling the ways governments and markets have responded when banks looked shaky and anxiety ran high during the past eight centuries.

Out of 880 crises affecting 138 countries, they found 57 events echoing the current moment, where account guarantees and emergency lending were the tools regulators and banks used to calm nerves.

That’s 6.5% of the sample size, they noted in a Monday study released by the National Bureau of Economic Research. It’s a “relatively rare occurrence to see such a particular policy mix deployed,” the study said.

Just over half of all the 880 crises turned out to be systemic and far-reaching, they noted. But of the 57 similar historical episodes — which include America’s financial turmoil in 2008-2009 — nearly 80% turned out to be widespread and systemic, they noted.
...
Click to expand...

www.marketwatch.com

Researchers analyzed 800 years of banking crises. They concluded, ‘We are already in the midst of a systemic event’

The new study looks at the ways governments and markets have responded when banks looked shaky, and anxiety ran high.
www.marketwatch.com www.marketwatch.com
 
From the link in post # 246:

"This move to cashless [transactions] is a first step before digital currencies," he said. "I'd love to see everybody start to use cash. Whenever you go out, have the cash, forget the credit card."

Not really a first step. We've been using cashless transactions for years.

As to everybody using cash, not going to happen. In fact, as time goes on, you'll see cash used less and less.
 
pmbug said:
I hope he is wrong.
Click to expand...
As the old saying goes, you can hope in one hand and umm, do something else in the other?
...and which do you think will get filled first?

Odds are, it'll be the one filled with something else.


From your other link: It’s a “relatively rare occurrence to see such a particular policy mix deployed,” the study said.

It's also a rare occurrence to near the end of life for a reserve currency.
Or put another way, extraordinary times call for extraordinary measures.
Edited to add: yet we are told the economy is doing great. Best ever, they say. Lol


Not saying it absolutely has to be the end for that, but lots of signs are increasingly suggesting that it is.
....and a hard recession will only serve to speed along the rate at which it happens. It's slow, for now.



As for cashlessness and encouraging people to use cash? It's a good idea, but imho, it's too late for that.
For one thing, there simply isn't enough physical cash for the majority to do that, as there is only about $3 trillion in cash in existence.
...and most of it circulates off shore.
....and even if the wanted to print enough to do so, it'd take years to print enough for the majority to conduct business in cash, as they can "only" print about $250 billion in cash per year.
Edited again to further add:...and don't have "years" in order to try to fix it.


No, the answer would have been for them to have never stopped using it as their primary way of conducting business.
...but most are too short sighted to have done so. By the time the majority reacts to what is and has been readily apparent to anyone having been truly paying attention, it'll be far too late.
 
So the FDIC is thinking they need the banks to pay up $23 Billion dollars in order to save the SVB and Signature deposits. So does anyone else see the circular Firing Squad logic here? Lol Pay up in order to save you.

 
No, what I'm seeing is the folly of a Command-And-Control economy.'

Seeing it for about the tenth time in my lifetime. The USSR, China under Mao...East Germany; North Korea, Cuba...Uganda...India, which while ostensibly democratic, was Central-Planning Socialist for its first 30 years of independence.

More out there.

Now it's our turn. The Meek didn't Inherit the Earth - the Stupid did.
 

Congress Sweats the Small Stuff as Four Wall Street Mega Banks Have a Combined $3.3 Trillion in Uninsured Deposits​

Editor's Update: The FDIC has confirmed that none of the $622.607 billion in deposits in foreign offices/branches of Citibank are FDIC insured. See the

View original
Editor’s Update: The FDIC has confirmed that none of the $622.607 billion in deposits in foreign offices/branches of Citibank are FDIC insured. See the stunning information in the ninth paragraph below.

By Pam Martens and Russ Martens: March 30, 2023 ~

On Tuesday, Martin Gruenberg, the Chair of the Federal Deposit Insurance Corporation (FDIC), the federal agency that serves as both a bank regulator and the overseer of the federal insurance program for U.S. bank deposits, testified before the Senate Banking Committee. The dangers of U.S. banks holding large amounts of uninsured deposits came up repeatedly in his testimony. For example, Gruenberg’s written testimony included these details about the ongoing banking crisis:

“…on Friday, March 10, a number of institutions with large amounts of uninsured deposits reported that depositors had begun to withdraw their funds.”

And this:

Congress Sweats the Small Stuff as Four Wall Street Mega Banks Have a Combined $3.3 Trillion in Uninsured Deposits

Editor's Update: The FDIC has confirmed that none of the $622.607 billion in deposits in foreign offices/branches of Citibank are FDIC insured. See the
wallstreetonparade.com
 
Goldhedge said:
The FDIC has confirmed that none of the $622.607 billion in deposits in foreign offices/branches of Citibank are FDIC insured.
Click to expand...
When push finally meets shove, it'll suck to be them.
 
They already have a plan.

CTRL+PRNT.

Far be it from me to defend these lowlifes, but the chart of bank failures is meaningless unless one adjusts for inflation, with constant dollars.

When a dollar today is worth less than five cents in 1970...it's really kind of irrelevant to be shocked at the numbers. At the slovenly banking practices, yes. At how the Green New Deal, and all these Green startups with government money, were roped into keeping huge amounts in those banks, yes.

But not the dollar amounts.
 
Moody's Investor Service has downgraded the U.S. banking sector by one notch as the sector faces higher interest rates, funding risks and less credit strength, on the heels of earnings updates from financial firms in recent days.

Citing deterioration of the operating environment and pressure on profit margins, Moody's late Friday cut its macro profile of the U.S. banking system to "Strong+" from "Very Strong-".

"There are negative credit implications for the U.S. banking sector that extend beyond immediate funding challenges to downward pressure on banks' earnings, combined in some cases with weaker capitalization and risks related to commercial real estate (CRE)," Moody's said.

Moody's downgraded 11 banks including Comerica Inc. (CMA), U.S. Bancorp (USB), First Republic Bank (FRC), Western Alliance Bancorp/ (WAL), and Zions Bancorp. (ZION).
...
Click to expand...

Moody's downgrades U.S. banks to 'strong+' from 'very strong-" as credit strength ebbs

www.morningstar.com www.morningstar.com

Crisis averted?
 
Jim Bianco says we're seeing a "bank walk" in all banks (actually worse in larger banks than smaller ones) as people withdraw accounts to chase yield in money market funds:

mishtalk.com

A Tidal Wave of Money Leaving Banks Will Kill Bank Profits and Lending

Jim Bianco has a 21-Tweet Thread on what’s going on with bank deposits. I chimed in on a couple of the Tweets. Here are some of the most important ideas.The “bank walk” becomes a …
mishtalk.com mishtalk.com
 
pmbug said:
Jim Bianco says we're seeing a "bank walk" in all banks (actually worse in larger banks than smaller ones) as people withdraw accounts to chase yield in money market funds:

mishtalk.com

A Tidal Wave of Money Leaving Banks Will Kill Bank Profits and Lending

Jim Bianco has a 21-Tweet Thread on what’s going on with bank deposits. I chimed in on a couple of the Tweets. Here are some of the most important ideas.The “bank walk” becomes a …
mishtalk.com mishtalk.com
Click to expand...
I know several people with more than 250k in their accounts that have moved the majority to money market accounts for safety and yield.

I am also seeing a lot more signs at restaurants saying something like there will be a 3% surcharge on your bill for using credit and debit cards. It may push a few to use cash more.
 
April 24 (Reuters) - First Republic Bank (FRC.N) shares sank more than 20% after the closing bell on Monday as it said deposits plunged by more than $100 billion in the first quarter and it was exploring options such as restructuring its balance sheet.

The deposit slump overshadowed profits that beat expectations for the beleaguered company, shored up through deposits from U.S. banking giants last month after two regional lenders collapsed.

www.reuters.com

First Republic Bank deposits tumble more than $100 billion as it explores options

First Republic Bank shares sank more than 20% after the closing bell on Monday as it said deposits plunged by more than $100 billion in the first quarter and it was exploring options such as restructuring its balance sheet.
www.reuters.com www.reuters.com
 
Yeah, this banking crisis is not over yet. Does this put more pressure on the Fed to pause rate hikes? I guess we find out in a little over a week.
 
...
The solution that emerged early Monday morning deals with the immediate threat of a disorderly failure of First Republic and, therefore, does not fuel the already uncomfortable risk of possible additional disruptions to other regional and community banks.

Yet the potential collateral damage and the unintended consequences are far from immaterial.

Four stand out in particular.

  • First, the US now has a more concentrated banking system, with what was once viewed not so long ago as “too big to fail”/”too big to manage” banks becoming larger.
  • Second, there is even greater doubt about the nature of the de facto deposit insurance system in place.
  • Third, the compositional risk within the banking system of less credit extending into the economy will continue, potentially aggravating the headwinds to high and inclusive growth.
  • Finally, the total cost of First Republic’s resolution remains to be assessed, including how the burden be shared among the public and private sectors and, with that, the extent of the “bailout” for the 11 banks that had large deposits with First Republic.
...
Click to expand...

El-Erian Warns Of "Collateral Damage & Unintended Consequences" Of JPM's Sponsored Buyout Of FRC | ZeroHedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero
www.zerohedge.com www.zerohedge.com

I thought we were still on a fractional reserve banking schema, but I was reminded this morning that the Fed actually moved to a zero reserve banking model a few years ago:

As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.
...
Click to expand...

www.federalreserve.gov

Reserve Requirements

The Federal Reserve Board of Governors in Washington DC.
www.federalreserve.gov

Smart. :paperbag:
 
PacWest and Western Alliance look to be racing for the #4 spot.

PacWest and Western Alliance each saw their shares drop more than 25% early Tuesday, a sign that fears about the health of regional banks are still running high after First Republic was seized and sold to JPMorgan.

PacWest and Western Alliance—which were temporarily halted for volatility as they plunged— have been among the hardest-hit banks in the turmoil. Both banks reported double-digit quarterly declines in deposits at the end of March, but said flows have since stabilized.
...
Click to expand...

www.wsj.com

PacWest, Western Alliance Stocks Plunge More Than 25%

PacWest and Western Alliance each saw their shares drop more than 25% early Tuesday, a sign that fears about the health of regional banks are still running high after [First Republic was seized and sold to JPMorgan](https://www.wsj.com/articles/first-republic-bank-is-seized-sold-to-jpmorgan-in-secon
www.wsj.com www.wsj.com
 
Anyone besides me, and some pundits, think this is a deliberate blowing-up of the banking world?

We SEE what they want. FedNow is on the shelf, waiting for launch.

And it's not going to be voluntary; and there are all kinds of tracking tools in the pipeline, I'm told. Learn your spending habits and develop a profile on each person who buys anything online or with a credit card.

All that's left is to set up Social Credit Scores.

And with the Xiden misAdministration's plan, LAUNCHED NOW, to give LOWER interest mortgages to people with POORER credit scores...we SEE they have a REAL interest in Social Engineering using your own money,

I think the banks are being scuttled. What's left will be, not bailed out by the FDIC, but absorbed into the Fed. Which will become the State People's Bank.

CBDC coming in three, two, one...
 
Western Alliance Bancorp. led a rebound in regional bank stocks Wednesday, after an analyst said the recent selloff on the heels of the distressed sale of First Republic Bank to JPMorgan Chase & Co was “irrational” given hard numbers from the bank on its relative stability.
...
Click to expand...

 
Yeah, I expect PacWest and Western Alliance are both going to fail in the near future.
 
Hedge fund manager and macro economic expert Hugh Hendry just issued a major warning on the US banking system and the American economy as a whole.

In a new interview on Bloomberg Markets, Hendry says mass panic and capital flight away from the US banking sector is entirely justified.

Hendry says a further decline in the M2 money supply, which in part tracks money in liquid checking accounts, could convince the US government to step in and prevent citizens from taking their capital out of the banking system.

“Sometimes it’s kind of relevant to panic. I would recommend you panic… You’ve seen the biggest waterfall decline in M2 right now. M2 is deposits, not loans. That’s the deposits fleeing the system and going into money market funds.

That could reach a crescendo where the Treasury and the Fed may have to come in and actually restrict your right as a US citizen to pull money out of the US banking sector.”
Click to expand...

dailyhodl.com

US Government May Freeze American Bank Withdrawals As Currency Panic and Capital Flight Mounts: Macro Guru Hugh Hendry - The Daily Hodl

Hedge fund manager and macro economic expert Hugh Hendry just issued a major warning on the US banking system and the American economy as a whole.
dailyhodl.com dailyhodl.com



It's hard to imagine it happening, but that doesn't mean it can't.
 
pmbug said:
It's hard to imagine it happening, but that doesn't mean it can't.
Click to expand...
It's happened before.
....but prior to ninety years and two Months ago, people woulda had a hard time imagining it happening then, too. That's when the gov assumed the role of being the sovereign.
 
You must log in or register to reply here.
Back
Top Bottom