The Silicon Valley Bank crisis will force the Fed to slash rates by 100 basis points to prevent contagion, market guru says

Business Insider ^ | Fri, March 10, 2023 | Filip De Mott

[MinorityRepublican]

The Silicon Valley Bank meltdown may incite the Federal Reserve to cut rates by 100 basis points by December to prevent contagion in the financial system, Larry McDonald said.

That would mark a sharp reversal from the central bank's current course of aggressive tightening to rein in inflation.

Rate hikes totaling 450 basis points over the past year have made returns on short-term Treasurys more attractive, draining deposits from banks like SVB, the founder of "The Bear Traps Report" told CNBC on Friday.

"In essence, the Fed is causing this bank run," he said.

Shares of Silicon Valley Bank crashed another 68% on Friday, extending its two-day dive to as much as 87%, with several venture capital firms advising their portfolio companies to pull money from the bank.

Meanwhile, shares of Wall Street banking giants are falling, and regional lenders like First Republic, Signature Bank and PacWest are also plunging.

[aMorePerfectUnion]

Consequences either way

[packagingguy]

A friend of mine told me we cannot fight inflation the way it was done in the Reagan administration because our debt load and interest is too great.

So are we in the terminal phase?

[nickcarraway]

What? Slashing rates now seems incredibly stupid.

[Political Junkie Too]

Rate hikes totaling 450 basis points over the past year have made returns on short-term Treasurys more attractive, draining deposits from banks like SVB...

I didn't think that's what was being reported as the cause of the SVB collapse.

It wasn't people withdrawing their cash to buy bonds elsewhere, it was that SVB itself bought bonds before the Fed rate hikes when their yields were low, and those bonds lost value when the rates went up, killing SVB's balance sheet.

-PJ

[Mr. Jeeves]

Powell is killing the economy with his rate cuts which are doing nothing at all to slow inflation. As Greg Mannarino and others have pointed out, all the Fed has to do to stop inflation is to contract the money supply by raising bank capital reserve requirements.

This strategy, however - despite being sound policy and beneficial to the average American - cuts drastically into bank profits and is treated as the worst kind of sacrilege when it is brought up.

[Mr. Jeeves]

Rate hikes, I meant to say...

[Georgia Girl 2]

I have speculated all along that the FED would have to pivot sooner rather than later. I expected it to start this month.

[Mariner]

no

Rates must go up

[TexasFreeper2009]

nope.

the fed fears NOTHING more than inflation.

[SaveFerris]

(So are we in the terminal phase?)

IMHO, yes.

This interest jump scheme will not end well.

Especially as Fed debt payments shoot up.

Plus a reckless and irresponsible Democrat White House and Democrat Senate. (redundant)

[ProtectOurFreedom]

This was all so avoidable. If the Fed and Congress had not panicked and stupidly and needlessly shut down the economy and poured $5 trillion of paper money into the money supply, inflation would not have taken off, interest rates would have stayed low, and banks would not have failed.

All for what? For people to stay home during COVID? What did that accomplish other than absolutely demolishing the economy and our society and triggering virulent reverse racism?

We are governed by absolute idiots.

[Regulator]

“In essence, the Fed is causing this bank run,”

Oh BS.

Biden caused it with his mad energy “policies”. The inflation that resulted forced Powell to do what he had to.

[Bayard]

Barring Magic beans, or some new infusion of cheap labor and goods for a few years, yes.

[ConservativeMind]

It’s the QE’s, bad COVID handling, massive budgets and spending, and bizarre entry of millions more welfare criminals over our borders, topped off with crazy sanctions against Russia and paying going on $300 billion to Ukraine, while exporting a lot of oil and natural gas to the EU to cover for the Russian loss, while reducing oil and gas access, here in the US.

That’s most of it.

[cgbg]

Banks in general are between a rock and a hard place.

Savers can get paid significant interest rates from some banks and not others—so over time their savings is migrating to the banks that pay the higher rates.

Meanwhile the banks have long term loans/investments in lower interest rate instruments.

They can either pay the higher rate so they can get new capital or then can pay the low rate and lose deposits.

Short version—the banks are magicians with plates in the air. Some of those plates are going to hit the ground and get smashed.

[Varsity Flight]

Protection Racket for the Non-Productive Class isn’t working.

Dept. of

Dept. of

Dept. of

Dept. of

.....

.....

.....

5 1/2 pay raise on the table.... Wonder why?

[4Liberty]

CUT SPENDING

[Bratch]

As long as the Left has a convenient scapegoat (the bad banks did it), they welcome economic disasters. (Never let a crisis go to waste)

The sooner anarchy breaks out, the sooner they can install their authoritarian system.

[Shady]

By design, they “need” to change the monetary system to a social credit system to enslave us all.