So ... What does everyone think is going to happen next week?
Will everyone with more than $250,000 in a single account (think rich people and companies) start pulling their money out and spread it around to other banks to keep their accounts under 250K?
When they do that, where will the banks that they currently have their accounts get the money ... they will be selling assets (bonds and securities) to generate the “cash” for their customers. And when they sell these bonds securities (basically mortgage back securities at 3.5% or less), they will be taking losses.
Now multiply this by hundreds of banks around the country ... how many more banks by the end of next week will be in a liquidity crisis? More bank failures in the coming weeks?
Now, will the Fed reverse their monetary policy and begin another QE? If so, then inflation will start jumping up again and the dollar will drop like a rock.
It is looking like a damned-if-you-do, damned-if-you-don’t situation.
This is exactly what is going to happen if the FED and Govt. doesn’t step in. And frankly, if you run a payroll over $250K you need to be able to park it at few banks overnight to get distributed.
How many of these business customers did that on Thursday at SVB, expecting paychecks to get deposited to their employee on Friday.