Posted on 03/13/2023 6:26:53 AM PDT by Red Badger
March 12 (UPI) -- Regulators shut down New York's Signature Bank on Sunday, the second bank to be shuttered in a matter of days, with President Joe Biden attempting to assuage fears over the stability of the financial system by vowing to continue efforts to strengthen oversight and regulation.
Signature Bank -- a state-charted, federal-insured crypto industry lender based in New York City -- was closed by state bank regulators Sunday in an effort "to protect depositors," New York Department of Financial Services Superintendent Adrienne Harris said in a statement.
According to state records, Signature Bank has $110.3 billion in total assets and some $88.6 billion in total deposits as of Dec. 31.
The bank's closure comes after California's Silicon Valley Bank, a tech startup lender, became the first major bank to fail in more than two years by being forced to close its doors by state regulators on Friday, and after Silvergate Bank, another major California-based crypto bank, said that it would "wind down operations" and begin the process of voluntary liquidation on Wednesday.
While Silvergate said its plan includes full repayment for all depositors, the dissolution of Silicon Valley Bank raised concerns over the weekend about who would bear the financial loss, with the federal government on Sunday stating all depositors will have access to their money from Monday.
"No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer," the U.S. Treasury in a joint statement with the Federal Reserve and the Federal Deposit Insurance Corporation.
All depositors of Signature Bank will also "be made whole," they vowed. "As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer."
"Shareholders and certain unsecured debtholders will be protected," the agencies said, adding that senior management at Signature Bank has been removed.
As required by law, any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks.
In an attempt to calm worries concerning the entire financial system, the federal agencies were adamant that it "remains resilient and on a solid foundation" due to reforms put in place following the 2008 financial crisis.
The Fed on Sunday also announced the creation of an emergency lending program to ensure banks have funding available to "meet the needs of all their depositors."
Biden, who directed Silicon Valley Bank and Signature Bank be closed, said their shuttering ensures that taxpayer dollars will not be put at risk. He also vowed to hold to account "those responsible for this mess."
"The American people and American businesses can have confidence that their bank deposits will be there when they need them," he said in a statement.
The president said he will deliver remarks Monday on "how we will maintain a resilient banking system to protect our historic economic recovery."
I looked to see if I could buy options on some of the banks that were down since the FDIC has announced their backstop and liquidity plan.
They were too expensive, it was cheaper just to buy the stock.
So I bought 100 shares of FRC at $30 down 65% from Friday’s closed.
And 200 shares of WAL at $13.05 down 75% from Friday’s close.
I sure hope the lending facility kicks in and saves these banks before the regulators force them to close.
Crypto. Crypto.
Avoid like the plague .(a real plague….not Covid)
Some Bank stocks are halted.............
I thought they must be because my brokerage wasn’t showing quotes, but it must have been a short hold, because my trades with through.
I may have caught a couple of falling knives. I think it’s a race against time between ensuring the banks have enough liquidity to meet depositor demands and seeing rationality return to the market.
Approx. 4600 FDIC insured banks left. Wonder how many will survive after this shake-out? I’d guess about 4K one year from now. Gov. takeovers and asset sales. Mergers (encouraged by Fed or otherwise) .
I bet (as opposed to invested) $5600. I’m down $640.
Both FRC and WAL have been halted.
Hard to see what’s going on.
Be Greedy when others are fearful?
Or a fool and his money are soon parted?
IDK, I’m hoping that the Bank Term Funding Program (BTFP) the Federal Reserve Board just announced will stop the closure of most of these.
It’s not like they don’t have assets in excess of deposits. It’s just that they are illiquid.
Two to three decades ago there were over 13,000 FDIC banks.
After regulators first allowed branching and then allowed interstate banking, there was really no reason to have so many banks. There are considerable economies of scale, such that a handful of banks could serve the entire market - Something between 2, as in the Boeing and Airbus plane makers, and the 5 or so domestic airlines.
Buy low, sell high.......................🤦♂️👍
Just about every business that is paying attention is looking for ways to disperse their money to reduce their risk. Now multiply that by hundreds of thousands (or more) businesses.
While this is logical and indeed responsible behavior on the part of the individual business, the sudden movement of capital will create a lot of stress on the Banking system in the short term. It could get very ugly indeed.
That’s one of the reasons, I suggested earlier that they should temporarily increase the FDIC insurance to $500,000.
That would stop some of the movement.
At one point this morning, I was down $2000 on my $5600 bet.
And was very much feeling like a fool and his money.
But now I’ve regained all of that loss and I’m up $200 over my initial investment. FRC told CNBC they weren’t seeing that many depositors withdrawing.
I think it’s going to be a good trade.
And now I’m up $3,000 for the day.
If WAL goes back to it’s 50 day moving average of $68, and FRC goes back to it’s 50 day moving average of $126.
Then my $5600 bet will be worth 200*$68 + 100*$126 = 13,600 + 12,600 = $26,200. I got a lot of upside potential.
Of course regulators could shut them down this afternoon. But I don’t think it will happen.
Never let a crisis go to waste!......Rahm Emmanuel..................
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