I walked into Regions to make a deposit. it was mainly cash. They thanked me because they were running out of it. Tru story. That was a month ago.
Since then, we have been holding our cash!
OT- Did it just get serious that fast? FED, FDIC, Treasury, and all of Congress just met
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I walked into Regions to make a deposit. it was mainly cash. They thanked me because they were running out of it. Tru story. That was a month ago.
Since then, we have been holding our cash!
This seemed to be exactly the issue with SVB. When they started to get out of the bonds, they had to show the loss they took. Bad management for sure but not in the same manner of 2008 crisis.
And it really only seems to have gotten them because they needed the liquidity. Banks that don’t have depositors pulling out en masse could in theory level out those losses over time. And you’re right, being over-leveraged in any particular asset class is certainly bad management, but bonds were about the only fiscally responsible place to park any excess cash in those times. Hard to put those bank execs in anywhere near the same category as Lehman, etc.
Or maybe that branch was poorly managing their cash levels or Loomis was late on their weekly delivery.
I am in the minority, I suspect, and will be again the next time it happens. And again after that one too. Venture Capitalists are smiling, though. They're in the majority on this and they suddenly get more than $250,000 of their deposits guaranteed. Mom and pops they ain't.
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"Former Rep. Barney Frank (D-MA) endorsed changes to his own Dodd-Frank law in 2018 that freed mid-sized banks from undergoing stress tests. He sits on Signature Bank's board, which just collapsed." https://www.washingtonpost.com/news...new-banking-law-few-knew-he-works-for-a-bank/
One thing I hope that comes out of this is the banks start giving decent interest on savings accounts. The measley 0.5-1% we were getting when the Fed had interest rates close to zero wasn't all that awful, but when you can easily move that over to Treasury Direct and beat the mess out of your bank, it's not a good thing for the banks.
I moved 6K from my Candance bank account to my Region account in cash. The lady taking the cash seemed extra happy for the cash. I thought it was strange. This was last week.
It's a mistake to assume the reaction of a single teller managing her cash drawer is a sign of an entire bank being short on cash.
I did not assume anything I just thought it was strange that she got excited about cash.
It’s an interesting study in psychology. We project way more than we would expect. Those with only personal banking accounts don’t think about business accounts that are used to make payroll for regular people. Our default assumption is wealthy individuals with > $250k of personal money. The reality is that wealthy individuals, other than times that they pull in cash for immediate liquidity needs, are invested elsewhere.
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Very true… deposit rates aren’t good enough for the majority of people to keep excess liquidity in bank accounts. And honestly the ease of moving money in your Schwab account to invest has made it to where even your upper middle class is not keeping a lot of liquidity in banks. That’s part of the reason several banks are having liquidity issues right now.
Well there is good news. The Silicon Valley bank owners took bonuses on Friday, after asking for help from the Feds and just before the FDIC took over the bank. Thank God. I can sleep safely now knowing bankers and venture capitalists are being made whole. I just hope the government never stops doing this. Libertarianism is for suckers and egg heads with college degrees. It's not an ideology for bankers.
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Nothing that is beneficial or responsible. Probably going to force CBDC upon the average customer so it looks like they got their money back but actually didn't
Right. And Fidelity is always popping up ads about how they can be my "bank" by providing checking features, etc., albeit all uninsured. The lines are blurred. Let the market take a dump on folks and it might push more people back into insured deposits, or stuffing cash in mattresses great depression style...
That bank had a lot of really smart finance guys who, perhaps when they realized how broke the bank was, set off a panic. Smart, rich people know how to arrange economic outcomes in their favor. JP Morgan: "As shown in the first chart, SIVB was in a league of its own: a high level of loans plus securities as a percentage of deposits, and very low reliance on stickier retail deposits as a share of total deposits. Bottom line: SIVB carved out a distinct and riskier niche than other banks, setting itself up for large potential capital shortfalls in case of rising interest rates, deposit outflows and forced asset sales. …" https://am.jpmorgan.com/content/dam...he-market/silicon-valley-bank-failure-amv.pdf
It would impose discipline on banks. If you bailout depositors, you encourage other banks to take more risks because depositors will be less likely to be concerned and less likely to move deposits because of a concern about stability.
I don't know what the best approach is but am fine with a bailout, but I don't think the bailout should make depositors 100% whole. Give them 95 cents on the dollar, so there's at least some lesson learned but not one that would cause further bank failures.
Sounds fine but neither of us gets to decide. The decision by the govt to bailout banks to avoid systemic risk was decided decades ago. Some banks will always get bailed out when in trouble and there's nothing we can do about it except what I'm doing, complaining. Of course, banks in podunk Iowa can expect to fail and not receive a dime. That's how financial capitalism in America works. It's been policy since at least 1991. The Fed steps in to avoid a crisis creating a moral hazard that leads to the next crisis that the Fed will intervene in to avoid a crisis. Lather, rinse repeat. Let's just hope we win in Dayton and that baseball has a good year.
A "special assessment on banks" meaning a taxpayer bailout with extra steps.
And I am sure those guys never accept a free lunch, or free cocaine, or free hookers**************************
I don't think a lot on this board realize how heavily regulated and controlled Banks are by federal and state governments. I guarantee you the regulatory agency of SVB knew the condition they were in and have been prepared for it. I'm kind of surprised they weren't bought before their failure, but then again selling a $40 billion bank isn't quite as easy as selling a $250 million one.
And to a point about this encouraging other banks to take riskier management practices, it's not that easy and nearly impossible without the regulatory body knowing and intervening. I work in bank administration, and I can't wipe my *** with company toilet paper without it being FDIC approved. There's not a point during the year where I'm not involved in an audit, exam, risk assessment or similar engagement. If you think the banking system is free capitalism void of government intervention, you couldn't be further from the truth.
And to a point about this encouraging other banks to take riskier management practices, it's not that easy and nearly impossible without the regulatory body knowing and intervening. I work in bank administration, and I can't wipe my *** with company toilet paper without it being FDIC approved. There's not a point during the year where I'm not involved in an audit, exam, risk assessment or similar engagement. If you think the banking system is free capitalism void of government intervention, you couldn't be further from the truth.
So....get Congress to pass a bill authorizing a bailout, and paying for it by taxes/fees on the type of bank being bailed out. Why is that not an option, and the only option a free bailout? Stop and think for a second and you'll quickly realize why.
I don't think you realize the regs you are thinking of were wiped away for banks of this size by Trump and Congress (mostly Rs, with a few Ds) in 2018.
How is a depositor supposed to judge if their deposits are with a sound institution? Does your average Joe need to understand how to look at a bank’s balance sheet and determine if they are in trouble of being insolvent? You’re talking about punishing innocent customers that believed they had their money with a sound institution. And honestly, if you look at SVB, all their metrics that would normally tell you a bank is sound were ok. They didn’t have a ton of non performing loans. And allowance on their loans is in line with other banks. You talk about stopping risky behavior but what risky behavior did SVB engage in that you think should be stopped?
Who is so misinformed to think this: "If you think the banking system is free capitalism void of government intervention, you couldn't be further from the truth.
Most of our economy is regulated, some of it over regulated to the point that regulations are ineffective and inefficient Do you work for a big bank or a community bank? FYI, I'm well off because I inherited quite a bit of bank stock but not stock in a Chase or JP Morgan or even Silicon Valley size bank.
You need to read and understand how these “bailouts” (and that’s a generous use of the word in this instance) are paid for. Any losses to the insurance fund is paid for by banks, via a special assessment. The loss is not shared by tax payers
Do you mind explaining how that statement is misinformed? That's my experience and the experience of my peers. I work for a community bank on the larger end.
Most investors are protected by FDIC. Can you give me a study showing that mom and pop businesses, the ones you pointed out, typically have more than $250K deposited into just one account in a bank? Maybe I'm misinformed about the mom and pop accounts in banks.
"How is a depositor supposed to judge if their deposits are with a sound institution? Does your average Joe need to understand how to look at a bank’s balance sheet and determine if they are in trouble of being insolvent?"
We can't. Well, I kind of can but most people can't. It's called trust and FDIC. Open several accounts, like I have, so that all are insured by the Feds. But, you're right that our economy isn't really set up for low IQ people or incurious and lazy people to make bank, so to speak. . Rich, smart people are good at making economic arrangements come out in their favor and rich people know who to contact when they need assistance. Here's what SIVB did according to JP Morgan: "SIVB was in a league of its own: a high level of loans plus securities as a percentage of deposits, and very low reliance on stickier retail deposits as a share of total deposits."
They are both really ****** Presidents with ****** policies. Both counties are falling over a cliff because of them.
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