Posted on 08/30/2024 7:14:14 AM PDT by delta7
A new study by Florida Atlantic University believes that 94 separate US banks are facing a significant risk of bank runs. The at risk banks have all reported a 50% or higher ratio of uninsured deposits to total deposits. Basically, they simply do not have the hard currency to shell out in the event of a panic.
Banks currently limit cash withdrawals under the pretense of money laundering and security. They will ask all sorts of questions if you even TRY to withdraw your money. They realize we are on the verge of a crisis in banking on a global scale.
The University’s Liquidity Risk from Exposures to Uninsured Deposits index found that BNY Mellon and John Deere Financial have a 100% ratio of uninsured deposits, followed by State Street Bank (92.6%), Northern Trust (73.9%), Citibank (72.5%), HSBC Bank (69.8%), JP Morgan Chase (51.7%), and U.S. Bank (50.4%).
The Federal Deposit Insurance Corporation (FDIC) has the power to shutdown a bank before a bank run occurs. The FDIC is controlled by Congress and acts as a safety measure to protect insured deposits in the event of bank runs. Deposits over $250,000 are not insured nor are mutual funds, annuities, life insurance, bonds, or stocks. Uninsured depositors have experienced a mere 6% in losses over the past 16 years.
Let’s take a look at the Silicon Valley Bank (SVB) failure of March 2023. The FDIC agreed to make all account holders whole including those with uninsured deposits. SVB has an uninsured deposit ratio of 97% at the time and failing to cover all losses would have created a panic in the banking world. The FDIC invoked the “Systemic Risk Exception” for SVB and Signature Bank that enabled them to protect uninsured depositors when deemed necessary. Two-thirds of the FDIC board voted in favor of the measure and the Fed, Treasury Secretary, and president signed it off.
The FDIC relies on the Deposit Insurance Fund (DIF), which is backed by Washington. Now, what happens when multiple large banks fail? It was easy for the government to write off a few banks to brush the severity of the situation under the rug. If everyone tried to withdraw their accounts at the same time, the government would not have the hard currency to back it. This is one of the major reasons that we will see a conversion from hard currency to digital.
I have stressed that studies in ancient times as well as modern show that during a crisis you head toward DEFLATION as money becomes scarce, the VELOCITY of money collapses, and people HOARD wealth – they do not spend it. The US will experience a period of stagflation as GDP will decline as inflation soars. Banks will begin to fail in Europe before it becomes a global contagion.
I suspect most long-term loans are performing quite well. Someone who is carrying a 30-year mortgage at a rate of 3% has every incentive to pay it off meticulously.
A bank with $10 billion in reserves is not going to be able to pay out $10 billion in cash withdrawals even if all its reserves are invested safely. That's because the $10 billion in U.S. Treasury bills they have accumulated over time would only be worth $8 billion if they had to sell them off today -- due to the steep decline in their value as interest rates have risen. (Think of how much a long-term T-bill paying out 1.5% has lost in value when they are currently paying out 4%.)
THIS is why the U.S. government bails these banks out. The government isn't concerned about a run on the bank by its depositors to take all their cash out. It's concerned about banks being forced to sell off their U.S. Treasury bills at a steep discount just to meet even 80% of their deposit exposure.
SVB was not your “local” bank. Using that to compare with your local community retail bank is, for lack of a better term, ignorant. Or, intentionally inflammatory.
The banking system has been fueled on too many years of low cost money. The next recession is going to take its toll. But we are not seeing the idiotic lending that we saw from 2000-2007.
And no, it is not likely that we will see “bank runs” any time soon.
I’m saying, by 100% that the bank could not use your money to make loans from because it is sitting in the vault at all times ready for you to withdraw at any given moment.
When it is 99%, it means the banks allow themselves to make loans based on the 1% they did not secure because they do not expect in the course of the day 100% of people coming to take their money out at once.
Over the course of the day, a certain number of people will deposit money and a certain number will withdraw money. The banks use that principle to decide how much money, as a percentage, to keep in the bank and how much they can do other things with your money, such invest it or make loans from it. The banks have it down pat as to how much they can risk not having the money secured and still remain solvent.
It works, until something happens when the population panicks and everybody goes to the bank to withdraw their money and find the bank didn’t keep all the money because they took some money and invested it and took other money and loaned it. Then you have a bank collapse.
Thank you. Truist’s “ right” to deny any cash withdrawals ( due to “ hardship on the bank) as stated is a wake up call to all.
I have heard all banks since the Dodd Frank act in 2010, ALL banks have instituted rules to prevent bank runs. My own Credit Union account disclosures states they can “ require “ any and all distributions from a Savings account by submitting a written letter 120 days in advance.
It pays to read a bank’s account disclosures, it’s coming.
Hard to think of any legitimate reason.
——————
Not if the caretakers want cash payments for their work. Many caretakers give discounted rates with cash. A bank has no business in questioning a person’s withdrawal, regardless of an authoritarian government’s “ rule” on withdrawals.
I’ve been following and learning of this issue over the last year.
I don’t recall the exact percentages on where the banking risks are at, but will try to pull them up from bookmarks. But I do believe at the time of deep states choosing they will pull the trigger and this orchestrated crash will go into effect.
For now, anyone ever hear of a “bail-in”?
After the crash in ‘08-09 new legislation was written regarding bail outs. Instead of tax payers bailing out “too big to fail” banks, under (Ibelieve it was the Frank-Dodd legislation) the depositors will now bail out the too big to fail banking institutions.
The fdic now insures depositors up to 250k. So let’s say an individual has 500k in a single deposit savings account. In the event of bank runs, and the fdic kicks in, the depositors (may get his/her insured funds) and the remaining 250k will be basically given in the form of bank shares of a failed bank.
Bail-In: Definition and Role in a Financial Crisis
https://www.investopedia.com/terms/b/bailin.asp
Why Bank Bail-Ins Are the New Bailouts
Food for thought, it’s not only our banks that have a fraction of cash reserves on hand, but the fdic is only presently funded less than 2% of what they are insured to cover.
The amount of cash that could potentially go out the door in a flood of withdrawals is dwarfed by the enormous volume of money changing hands to and from bank accounts on a daily basis. Just think about the size of a bank account that is required to handle payroll transactions for a typical mid-sized U.S. company, let alone a Fortune 500 company.
I understand, but that’s because the banks got greedy and took undue risks and it might come back to bite them. It’s inevitable, because familiarity breeds contempt.
The current banking concerns related to banks not taking ENOUGH risk -- i.e., by investing their reserves heavily in long-term T-bills at extremely low interest rates.
I have read the Dodd Frank act of 2010 allows “ bail ins”, and the $250,000 FDIC insurance has “ up to three years” to cover the failed banks losses OR until “ orderly liquidation “ can occur.
Can anyone confirm? Reading through the Dodd Frank act is an impossibility.
It means that the banks too unnecessary risks for profit. Banks are supposed to be conservative institutions, financially, where they don’t take much money out incase they have a bank run or something.
Instead of whatever historical ratio was considered a safe ratio between having money in the bank or loaned out or invested, the banks decided to have less money in the bank that the historical average. This puts them at risk for if too many people try to take money out.
I’m sure there is other reasons, but I’m only concerened with the one, because it directly affects if you can get your money back or not.
It means that the banks too unnecessary risks for profit. Banks are supposed to be conservative institutions, financially, where they don’t take much money out incase they have a bank run or something.
Instead of whatever historical ratio was considered a safe ratio between having money in the bank or loaned out or invested, the banks decided to have less money in the bank that the historical average. This puts them at risk for if too many people try to take money out.
I’m sure there is other reasons, but I’m only concerened with the one, because it directly affects if you can get your money back or not.
Banks are not supposed to take risks, like high interest investments because their jobs is to take your money and be in position to give your money on demand. It doesn’t mean they can’t take risks, but they are not supposed to take risks that means that you can’t get your money.
Bail ins….explained but not clear to me.
…. “Are Bank Bail-Ins Legal In the United States?
Bank bail-ins are legal under the Dodd-Frank Wall Street Reform and Consumer Act.
5
Banks have the authority to use debt capital as equity to avoid failure. This includes capital from unsecured creditors, common and preferred shareholders, bondholders, and DEPOSITORS whose account balances exceed the FDIC-insured limit of $250,000.”
I wonder how they define a “Large Cash Withdrawals.”
$500.00?
$1,000.00?
$5,000.00?
$10,000.00?
$50,000.00?
$100,000.00? etc
I could not find any mention of an amount in their policy.
Jonty30 :"The biggest reason for the instability is because banks have extended themselves too far with making loans with your money."
Delta7 :"..Truist is in trouble.
Please read ALL your account disclosures,
USAA just had some concerning changes in withdrawal “ rules”.
It’s coming."
”A new study by Florida Atlantic University believes that 94 separate US banks are facing a significant risk of bank runs.
The at risk banks have all reported a 50% or higher ratio of uninsured deposits to total deposits.
Basically, they simply do not have the hard currency to shell out in the event of a panic. “
” Banks currently limit cash withdrawals under the pretense of money laundering and security.
They will ask all sorts of questions if you even TRY to withdraw your money.
They realize we are on the verge of a crisis in banking on a global scale. “
”The University’s Liquidity Risk from Exposures to Uninsured Deposits index found that BNY Mellon and John Deere Financial have a 100% ratio of uninsured deposits,
followed by State Street Bank (92.6%), Northern Trust (73.9%), Citibank (72.5%), HSBC Bank (69.8%),
JP Morgan Chase (51.7%), and U.S. Bank (50.4%). “
”The Federal Deposit Insurance Corporation (FDIC) has the power to shutdown a bank before a bank run occurs.
The FDIC is controlled by Congress and acts as a safety measure to protect insured deposits in the event of bank runs.
Deposits over $250,000 are not insured nor are mutual funds, annuities, life insurance, bonds, or stocks.
Uninsured depositors have experienced a mere 6% in losses over the past 16 years..”
”The FDIC relies on the Deposit Insurance Fund (DIF), which is backed by Washington.
Now, what happens when multiple large banks fail?
It was easy for the government to write off a few banks to brush the severity of the situation under the rug.
If everyone tried to withdraw their accounts at the same time, the government would not have the hard currency to back it.
This is one of the major reasons that we will see a conversion from hard currency to digital. “( Emphasis Mine)
”I have stressed that studies in ancient times as well as modern show that during a crisis you head toward DEFLATION as money becomes scarce,
the VELOCITY of money collapses, and people HOARD wealth – they do not spend it.
The US will experience a period of stagflation as GDP will decline as inflation soars.
Banks will begin to fail in Europe before it becomes a global contagion.”
(My Comment) : This is one of the reasons why commercial and neighborhood banks want to create digital currency.
They simply don't have the hard currency assets to cover a possible run on the bank.
The banks don't have the hard currency and the government would be more than happy to shift into digital currency which the government will control
and thereby control the spending habits, commercial enterprises, and digital currency availability to the populace.
In other words, government control of national assets.
Now ask yourself, do you trust Congress and government with your total resources, especially as exemplified by the last three and a half years Federal balanced budgets ?
I still have no idea what you’re talking about. Can you give me an example of an “unnecessary risk” in the banking industry? Up to this point I have see no evidence of systemic bank problems related to what would traditionally be considered high-risk investments.
Agree.
Another issue that has been mentioned briefly is commercial real estate mortgages.
Prior to the fall out of the covid plandemic, the investment into commercial real estate at low percentage rates may have been a good incentive, at least in appearance.
However, due to covid many office workers were sent to work out of their homes, and many never returned. The vacancy rate of commercial office space increased drastically. Also due to the failing economy and increased business failures. This placed strains on the landlords and caused hardship for them to meet their mortgage obligations.
Somewhere around 30% of commercial real estate loans are coming due to be rewritten.
these loans currently sit on bank ledgers as unrealized losses. But when a 100 million dollar loan mortgage comes up for renewal and is only now worth a fraction of that value, it now becomes a bank liability rather than an asset.
How will banking institutions cover these losses? will these banks begin to fall like dominoes? and if they do, bank runs will occur. Will the fdic itself become insolvent?
I believe this will tank the value of the dollar and foreign investors have already been dumping the dollar in anticipation of what they see coming.
I believe this will bring in the cbdc to replace the physical fiat currency we now have.
Here’s a good example of commercial real estate value plummeting....
‘New York Commercial Real Estate Plunges 97.5% at Great Depression Levels’
When these failed lending institutions get placed on the auction block, many of the larger conglomerates will siphon off the most valuable assets for pennies on the dollar, leaving the worthless liabilities on the books for those who “bailed-in” and now have worthless shares of an insolvent bank.
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