Danielle DiMartino Booth—a trenchant critic of the Fed with an insider’s experience and knowledge—offers an explanation of what’s going on with the banking system and the Fed.
As an addendum to the SVB meltdown, Kim Strassel goes for woke regarding the lack of oversight (SF out to lunch) and the gushing of free money out of DC (climate worship-biotech etc), all leading to a kinda “California” type disaster:
Jim Rickards did an interview in which he gets into that stuff, too. Astonishing amounts of money, and the recipients were *required* to bank only at SVB. They were building SVB up to be the big Woke Bank of the West. Money laundering central for the Dems.
Start at 52:00, but it heats up at about 58:00. If you like it start from the beginning. But the last twenty minutes or so are where he's really smoking:
"In this new interview, @JuliaLaRoche and I don't pull any punches. We look at SVB through a lens of incompetence, climate scams, crypto connections, Democratic Party donations, insider trading and more. We cover what went wrong and a lot else besides."
Among other things, Rickards points out that Yellen is a labor economist who doesn't know jack about banking and money. That's why Luongo was saying yesterday, She's not very smart. She's a creature of others.
Agreed. The more she speaks, slowly with such clear enunciation, the more she demonstrates an astonishing lack of understanding of the basic fundamentals of economics. Or she's lying (shocking, I know...)
Thank you, Mark (and posters) for writing about this.
I am belatedly trying to educate myself, forcing myself to read/listen to reputable sources, in an attempt to understand what has and is happening. This is not an area where I excel hence the forcing. Must admit I get to a point where my brain starts shutting down like I am listening to Karine Jean-Pierre, the difference being I don't feel like a stooge for trying and I may eventually learn something of relevance.
I don’t have the expertise or experience of someone like DDMB, but something doesn’t smell right here. It just so happens that this backstopping of bank deposits only applies to the big banks. Looking like this is a move toward banking consolidation — i.e., this new policy actually incentivizes bank runs among smaller institutions.
Janet Yellen’s congressional testimony yesterday was an eye-opener:
Thank you...VERY helpful analysis. Like the questioner here, I failed to appreciate that the at-par collateralization was completely captured, bank-to-bank, by the Fed's Bank Term Loan Program. So, in my rudimentary understanding, the stepped-up collateral value can only be used vis-a-vis the Fed, on the Fed's negotiated terms, rather than the market (which I feared would be inflationary/further QE). Seems kind of brilliant, actually, considering all bad-to-worst options available.
And we have minimal clarity, because so few are asking anything close to a good first question, but because they can’t do arithmetic, they don’t understand the answer which therefore prevents a probing 2nd question.
1) Banks bellying up to the Discount Window for loans larger than 2006-09 tells me this is definitely a massive NPL problem that came due vs a HTM mismatch.
2) TBTFs “injecting” $30 Billion into FRC was the end of “socializing the losses” a la JPM circa 1907 bank stopping, a very good thing. I’m willing to bet that the TBTFs that hit the Discount Window were arm twisted to deposit at FRC instead of making them the scapegoat for a bad restricted stock loan portfolio at ALL the banks.
Going to get interesting.
Oh, that Ackman’s still squealing about not all SIVB deposits are guaranteed tells me the use of “eligible” by the Fed was not “transitory” and not everyone was made whole.
Nope. That's not the droids they were looking for....Nonperforming is the unasked question in all of this, because it exposes big tech, harshly, and The Street as their hand maiden.
A bank run can be due to actual failures "recognized", can be simply psychological and/or both. One bank's failures (SVB only had 2.7% depositors qualified for FDIC Ins. protection. A Formula that's ripe for what's happened as in the recognition of bad/poor risk management). That awareness -of held-bonds value below par value- resulted in becoming a real prospect of investor's loss ('realization') causing cascading reactions (aka classic bank-run). The general populace seeing the 2nd largest bank ever to 'fail' reacts and that results then in a lot of banks, [tho' much better positioned and with better risk management profiles] getting hit with said bank runs in a reaction in fear of banks failing (psychological).
Amongst those banks hit in the secondary runs, some are 'worse off' , etc., but what Melinda notes is the "getting fun" part: the US is prime for a big series of economical events. Won't be fun for savers, but the war on savers has been ongoing due to the 'debt economy' structure our leadership's monetary policies have pursued. THAT is the 'big series' that I think is coming due for massive upheaval. The fed have been partners for over a decade. to me, Powell is looking like he's not continuing that partnership. (Maybe actually doing the right thing? One can hope...)
What I would suggest as well, and Melinda may better be able to describe the technicals than I'll try to here, is that these 'Par-value loans' are being Guaranteed by the Fed.
Much discussion about being inflationary, etc., abounds but my point is the contagion is not contained; I submit the psychology-bank-run is what's being addressed (trying to reassure depositors "everything's just fine") to preserve the marginal banks. But the larger realities of a debt-economy being clobbered by inflation is simply not contained.
When that reality is experienced in, again what I'll credit Melinda of noting as 'getting fun', the taxpayer will be paying those guaranteed loan failures bills. Technically as Ms. Booth explains, this is not a taxpayer-paid program: the Fed is not the Gov't; however, anyone who thinks the Fed gets it's funds from Voodoo Economics forgets the taxpayer, the middle class bulk of this country, will end up paying. Directly or indirectly - I'll just suggest a mix. Inflation taxes everyone, impacts the less-well off, including Non-taxpayers. THAT requires the fed continuing it's war on the very real inflation. Kind of a twin-world of finances going on for Powell but I'll vote for less inflation, let the investor of bad-choices suffer rather than us all.
Yes, we may have terrible times getting through this, maybe worse choices are possible, but none are permanent like inflation is. Hope I made a little sense to you, my -Fan of Dostoyevsky & his Raskolnikov friend! (WrH)
G'day Ms Melinda! *** IF the loans solve the crisis. (I'll go with this is a more honest action than I reference below).
Guarantees-monies come from... well Voodoo Econ doesn't exist. Just as 'Bank Fees, not taxpayers, will pay to make depositors whole' (Per the President) isn't specifying taxpayers, who pays for the bank to pay it's fees? That's my [rather long-winded] attempted point. (Crisis management paired with Inflation making for a most-difficult Fed issue).
As an addendum to the SVB meltdown, Kim Strassel goes for woke regarding the lack of oversight (SF out to lunch) and the gushing of free money out of DC (climate worship-biotech etc), all leading to a kinda “California” type disaster:
https://www.wsj.com/articles/did-esg-help-sink-svb-progressive-climate-bank-bailout-federal-reserve-treasury-biden-insurance-9db64b0b?mod=opinion_featst_pos2
Jim Rickards did an interview in which he gets into that stuff, too. Astonishing amounts of money, and the recipients were *required* to bank only at SVB. They were building SVB up to be the big Woke Bank of the West. Money laundering central for the Dems.
Wow…
https://twitter.com/JamesGRickards/status/1636580427723952128
Start at 52:00, but it heats up at about 58:00. If you like it start from the beginning. But the last twenty minutes or so are where he's really smoking:
"In this new interview, @JuliaLaRoche and I don't pull any punches. We look at SVB through a lens of incompetence, climate scams, crypto connections, Democratic Party donations, insider trading and more. We cover what went wrong and a lot else besides."
Ok will do - once again, overextended (in bonds) and imbalanced (color and gender over professional abilities)! What a steaming mess!
Great Read:
https://nypost.com/2023/03/17/why-woke-frisco-fed-chief-missed-silicon-valley-banks-warning-signs/
…would that be Mary Mary quite contrary?
Among other things, Rickards points out that Yellen is a labor economist who doesn't know jack about banking and money. That's why Luongo was saying yesterday, She's not very smart. She's a creature of others.
Agreed. The more she speaks, slowly with such clear enunciation, the more she demonstrates an astonishing lack of understanding of the basic fundamentals of economics. Or she's lying (shocking, I know...)
Sorry. I never said she's ignorant nor that she lies. I only said that her perspective is not geopolitical in nature.
Giddey up Mr. Powell. Giddey up
Thank you, Mark (and posters) for writing about this.
I am belatedly trying to educate myself, forcing myself to read/listen to reputable sources, in an attempt to understand what has and is happening. This is not an area where I excel hence the forcing. Must admit I get to a point where my brain starts shutting down like I am listening to Karine Jean-Pierre, the difference being I don't feel like a stooge for trying and I may eventually learn something of relevance.
Everything about this is Big.
Big problems, caused by Big Ideas.
Big people (of influence) with Big Egos being involved.
Big moves being made, by Big people, with Big Consequences.
No one can rightly predict what is going to happen, as Egos and Self Protection is involved.
I don’t have the expertise or experience of someone like DDMB, but something doesn’t smell right here. It just so happens that this backstopping of bank deposits only applies to the big banks. Looking like this is a move toward banking consolidation — i.e., this new policy actually incentivizes bank runs among smaller institutions.
Janet Yellen’s congressional testimony yesterday was an eye-opener:
https://youtu.be/Raavjoo-eao
Thank you...VERY helpful analysis. Like the questioner here, I failed to appreciate that the at-par collateralization was completely captured, bank-to-bank, by the Fed's Bank Term Loan Program. So, in my rudimentary understanding, the stepped-up collateral value can only be used vis-a-vis the Fed, on the Fed's negotiated terms, rather than the market (which I feared would be inflationary/further QE). Seems kind of brilliant, actually, considering all bad-to-worst options available.
That’s why “eligible” is so important.
And we have minimal clarity, because so few are asking anything close to a good first question, but because they can’t do arithmetic, they don’t understand the answer which therefore prevents a probing 2nd question.
Two things::
1) Banks bellying up to the Discount Window for loans larger than 2006-09 tells me this is definitely a massive NPL problem that came due vs a HTM mismatch.
2) TBTFs “injecting” $30 Billion into FRC was the end of “socializing the losses” a la JPM circa 1907 bank stopping, a very good thing. I’m willing to bet that the TBTFs that hit the Discount Window were arm twisted to deposit at FRC instead of making them the scapegoat for a bad restricted stock loan portfolio at ALL the banks.
Going to get interesting.
Oh, that Ackman’s still squealing about not all SIVB deposits are guaranteed tells me the use of “eligible” by the Fed was not “transitory” and not everyone was made whole.
Tx. This time is different.
ZEROHEDGE: Buyers Emerge For First Republic Bank After Big-Bank Bailout: Report
LUONGO: So, no buyers for SVB b/c the Fed and Wall St. didn't bail it out. They file Chapter 11.
And on the same day $FRC, after a major capital injection by those same guys on Wall St. sees multiple buyers emerge.
Message sent, message received.
Nope. That's not the droids they were looking for....Nonperforming is the unasked question in all of this, because it exposes big tech, harshly, and The Street as their hand maiden.
Luongo's view is that OF COURSE there were banks willing to buy SVB--but they would have demanded to see the books. Zhou/Yellen couldn't allow that.
Everyone DID look at their books over that weekend. They declined to bid because of it, that's why I'm saying its an NPL problem, not mismarked HTM.
Now you understand why I complain about “The Press That Can’t Add”.
The MFM (Press) no longer solicits contacts and background information. They accept missives and PR that supports their ability to “change the world”.
So, no source, because I’ve built my own information network because I needed it.
You want math? I'll give you math:
John G68
@g68_john
·
Socialism is best understood through mathematical formulas.
All genders ÷ the sum of white supremacy
= Speed of climate change
It's science
G'day RNo,
A bank run can be due to actual failures "recognized", can be simply psychological and/or both. One bank's failures (SVB only had 2.7% depositors qualified for FDIC Ins. protection. A Formula that's ripe for what's happened as in the recognition of bad/poor risk management). That awareness -of held-bonds value below par value- resulted in becoming a real prospect of investor's loss ('realization') causing cascading reactions (aka classic bank-run). The general populace seeing the 2nd largest bank ever to 'fail' reacts and that results then in a lot of banks, [tho' much better positioned and with better risk management profiles] getting hit with said bank runs in a reaction in fear of banks failing (psychological).
Amongst those banks hit in the secondary runs, some are 'worse off' , etc., but what Melinda notes is the "getting fun" part: the US is prime for a big series of economical events. Won't be fun for savers, but the war on savers has been ongoing due to the 'debt economy' structure our leadership's monetary policies have pursued. THAT is the 'big series' that I think is coming due for massive upheaval. The fed have been partners for over a decade. to me, Powell is looking like he's not continuing that partnership. (Maybe actually doing the right thing? One can hope...)
What I would suggest as well, and Melinda may better be able to describe the technicals than I'll try to here, is that these 'Par-value loans' are being Guaranteed by the Fed.
Much discussion about being inflationary, etc., abounds but my point is the contagion is not contained; I submit the psychology-bank-run is what's being addressed (trying to reassure depositors "everything's just fine") to preserve the marginal banks. But the larger realities of a debt-economy being clobbered by inflation is simply not contained.
When that reality is experienced in, again what I'll credit Melinda of noting as 'getting fun', the taxpayer will be paying those guaranteed loan failures bills. Technically as Ms. Booth explains, this is not a taxpayer-paid program: the Fed is not the Gov't; however, anyone who thinks the Fed gets it's funds from Voodoo Economics forgets the taxpayer, the middle class bulk of this country, will end up paying. Directly or indirectly - I'll just suggest a mix. Inflation taxes everyone, impacts the less-well off, including Non-taxpayers. THAT requires the fed continuing it's war on the very real inflation. Kind of a twin-world of finances going on for Powell but I'll vote for less inflation, let the investor of bad-choices suffer rather than us all.
Yes, we may have terrible times getting through this, maybe worse choices are possible, but none are permanent like inflation is. Hope I made a little sense to you, my -Fan of Dostoyevsky & his Raskolnikov friend! (WrH)
Nope, no taxpayer hit on this, at the current level of info. I'm with DDB on this.
G'day Ms Melinda! *** IF the loans solve the crisis. (I'll go with this is a more honest action than I reference below).
Guarantees-monies come from... well Voodoo Econ doesn't exist. Just as 'Bank Fees, not taxpayers, will pay to make depositors whole' (Per the President) isn't specifying taxpayers, who pays for the bank to pay it's fees? That's my [rather long-winded] attempted point. (Crisis management paired with Inflation making for a most-difficult Fed issue).
not at all. bout to get fun, at long last.