njhowie
Thinks s/he gets paid by the post
- Joined
- Mar 11, 2012
- Messages
- 3,953
Train wreck weighing on the banking sector.
Now that would be scary. Or worse, what if she and Powell (and maybe Dimon) all got together to tell us how healthy and well functioning the financial system is.I'm expecting Yellen to come out now and tell us again how well capitalized and healthy the banking sector is these days.
I'm expecting Yellen to come out now and tell us again how well capitalized and healthy the banking sector is these days.
Wow, the ride in some bank stocks and preferreds are nothing short of amazing. I guess this is when you either pick up some much cheaper than yesterday shares or hold off believing this is the canary in the coal mine and sit back and watch.
For instance First Republic Bank FRC closed yesterday at 96.01, quickly dropped today to $46 and now stands at $90. Crazy. I hope somebody is making money with this craziness.
https://www.cnbc.com/2023/03/10/sil...ulators-fdic-to-protect-insured-deposits.html
Silicon Valley Bank is shut down by regulators, FDIC to protect insured deposits
And this is why it is important to stay within the $250k per depositor FDIC limits
Just an FYI, there are very few banks that all deposits are not covered... even over $250K... it might take you awhile to get it back but you usually do...
To be fair, this is nothing like the subprime fiasco. SIVB's trouble stems from the loss of value of its long bonds. Yeah, how can you go wrong holding US Treasuries? It's solid, like the rock of Gibraltar. Right!
The problem with institutional investors is that they cannot deny reality like individual investors and say "You don't lose until you sell". Nope, they have to sell to meet obligations.
And for individual investors, the unrealized loss does not go away. It sits there on your portfolio, even if you try not to look at it.
SVB is not a canary in the banking coal mine
.. First, few other banks have as high a proportion of business deposits as SVB, so their funding costs won’t rise as quickly. At Fifth Third, a typical regional bank, deposit costs only hit 1.05 per cent in the fourth quarter. At gigantic Bank of America, the figure was 0.96 per cent
Second, few other banks have as much of their assets locked up in fixed-rate securities as SVB, rather than in floating-rate loans. Securities are 56 per cent of SVB’s assets. At Fifth Third, the figure is 25 per cent; at Bank of America, it is 28 per cent.
I'm expecting Yellen to come out now and tell us again how well capitalized and healthy the banking sector is these days.
Gee, I hope we don't start having bank runs on many other banks too! I don't expect it, but always looking for worst case scenario.It’s really a simple bank run issue.
According to its 3Q results (here) most of the customer deposits were in demand deposits, while most of the assets were in “hold to maturity” fixed income. A much smaller share was in loans and “available for sale” securities. They were unprepared for a run. This is not a capitalization issue, it’s a mismatch between assets and liabilities.