Posted on 03/10/2023 10:21:03 AM PST by ConservativeInPA
Regulators closed troubled Silicon Valley Bank after deposit outflows and a failed capital raise plunged the country's 16th largest bank into crisis, roiling the larger lending industry.
It became the largest bank to fail since Seattle's Washington Mutual during the height of the 2008 financial crisis, and the first since 2020. Treasury Secretary Janet Yellen acknowledged the industry turmoil Friday, saying there are "a few" banks the department is closely watching.
"There are recent developments that concern a few banks that I'm monitoring very carefully and when banks experience financial loss it is and should be a matter of concern," Yellen told lawmakers Friday.
(Excerpt) Read more at finance.yahoo.com ...
Texas HOLD’EM ?
There will be other banks failing soon, don't know which ones. But I've read of banks that had tons of money, that lent out billions in 10-year loans between 1 and 2 percent interest. Then the Fed raised rates far beyond that and the banks are stuck losing money as they sell off loans at a huge loss. Would you buy a 1.2 percent loan when you can make 5 percent elsewhere? Not without a huge reduction on the principal costs. As a depositor, wouldn't you withdraw your money earning less than 1 percent in order to invest elsewhere at 5 percent? Some banks are screwed.
A bank executive once told me that his bank could function without any branches at all. But the market research they’ve done over the years consistently shows that customers would much rather do business with a bank that has a local branch even if they never set foot in that branch.
These banks are losing their asses because their reserves are filled with U.S. Treasury bills paying 1.5% interest that they purchased two years ago. Meanwhile, their customers are withdrawing all their money because they can get 5% on a U.S. Treasury bill today.
Reminders of 2008....
2022: SBF
2023: SVB
Photo of group confronting bank guard.
“Look, folks, the way they told it to me is they have to replace all the chains on the pens. When they get done you can come back in.”
Lol, it gave me a good excuse to change the direct deposit on my pension from Wells Fargo to my credit union. I’m not worried, I have faith in the FDIC. I worked there during the last bank crisis. They have access to sufficient capital, and they quickly sell assets from failed banks to replenish the Deposit Insurance Fund.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.