Posted on 03/20/2023 9:54:17 AM PDT by Red Badger
Some 186 financial institutions in the United States are vulnerable to a collapse if uninsured depositors seek to withdraw their funds, according to a study from analysts with the National Bureau of Economic Research.
The research comes shortly after the collapse of Silicon Valley Bank, where the vast majority of accounts exceeded the $250,000 threshold guaranteed by the Federal Deposit Insurance Corporation (FDIC). Financial authorities scrambled to back all deposits at Silicon Valley Bank such that the remainder of the financial system, in which roughly half of deposits surpass $250,000, would remain safeguarded against bank runs.
Silicon Valley Bank had been forced to cover withdrawals by selling a bond portfolio that had declined substantially in value amid Federal Reserve actions to reduce inflation by promoting a higher economy-wide interest rate environment. The study found that monetary tightening from the Federal Reserve has caused bank asset values to decline by 10%, indicating that the overall financial system’s assets are $2 trillion lower than suggested by their book value.
The analysts noted that prior to the Federal Reserve hiking the target federal funds rate by a collective 4.5% over the past year, the banking system would have been solvent if half of the uninsured depositors attempted to withdraw their balances and if all uninsured depositors attempted to withdraw their balances. The “substantial losses in the value of banks’ long-duration assets” induced by the higher interest rates now implies that “banks are much more fragile” to runs by uninsured depositors, the customers with more than $250,000 in their combined accounts with a given financial institution.
Some 1,619 of the 4,800 banks examined by the researchers would not be able to withstand all uninsured account holders attempting to withdraw their funds, while 186 banks would not be unable to withstand half of uninsured depositors demanding their funds. Both scenarios presupposed that the banks would not be forced to sell their long-term assets at fire sale prices to cover withdrawals. The scenario of all uninsured depositors seeking to pull their funds is “likely too extreme, although not impossible once the news of a run spreads.”
Some 78% of assets at Silicon Valley Bank were funded by uninsured deposits, placing the bank in the first percentile with respect to uninsured leverage even as the company was not an outlier with respect to the overall ratio between equity and assets.
Silicon Valley Bank offered services to nearly half of the venture-backed technology and healthcare firms in the United States; businesses typically deposit far more than $250,000 to cover operations as well as several months’ worth of expenses under a potential crisis. Lawmakers such as Rep. Maxine Waters (D-CA) and Sen. Elizabeth Warren (D-MA) recently suggested that Congress reconsider the $250,000 deposit insurance threshold.
President Joe Biden vowed after the collapse of Silicon Valley Bank and Signature Bank, where the vast majority of deposits were likewise uninsured, that “the American people and American businesses can have confidence that their bank deposits will be there when they need them.” Treasury Secretary Janet Yellen said authorities would only protect uninsured deposits at banks whose failure would “create systemic risk and significant financial and economic consequences.” Sen. James Lankford (R-OK) had pressed Yellen about whether uninsured deposits at community banks “regardless of their size” would be “fully insured.”
We have a men’s group from church that meets periodically for lunch. One member is a local banker. When asked about the failure he said that all banks are upside down right now due to outstanding loans at low interest rates and the Fed raising rates from zero to 5%.
Just remember, all their officers went to the same Poison Ivy League schools..............
Different set of rules...................
I’m in Florida.....Haven’t heard anything so far.......................
You can set the capitalization rate anywhere, but when you see such dramatic changes in interest rates over twelve months balance sheets are going to be trashed unless disciplines were followed on the front end. In the late 70’s and early 80’s I saw most Oregon state chartered banks go out of business. Few would have memory of that time.
The Fed had to have known this was going to happen.
I’m not even a financial type person and I could have predicted it.
Maybe it was intentional..................
The Fed ‘suckered them in’ like a drug dealer giving away ‘free samples’ of his stash just to get you hooked.
The banks got hooked on ‘free money’................
And how many public pension funds?
Reasons I wonder...
The Fed ‘suckered them in’ like a drug dealer giving away ‘free samples’ of his stash just to get you hooked.
The banks got hooked on ‘free money’................
First Republic Bank (FRC) is leading the bankrupt bank parade today as it set a new 52 week low. FRC is now down about 95% from 3/22/2022.
52 Week Range
$11.52
03/20/2023
$174.21
03/22/2022
/jk
It might be a good idea to take a few hundred dollars from your bank account today.
No reason to wait in line as the bank contagion seems to be spreading.
This banking crisis is far from over. It’s really just starting.
The snowball is headed down the hill..........................
I use a Credit Union. Different set of rules.......................
Everyone should keep publishing this stuff until the banks do fail. Then, we can break out into a complete and total civil war making sure we kill all of the offspring first just to hurt people emotionally as much as possible before the adults get really busy killing each other.
From my readings in history and the Bible, I can come up with ways to leave people alive, but wishing they had never started all of this corruption and evil. Would start with the Antifa/BLM types and after making videos of them begging people to stop fighting because of what my forces would do to them, would then move on to anyone else who felt the need to fight. Peoples’ minds CAN be changed to become compliant.
As I have posted before, I have a solution for this. Really.
THIS
THIS TOO
one would have to have money in the bank to withdraw it....lol.....we don’t have that much of a problem, but we do have some in there....mostly to pay monthly bills....but I think I will go withdraw $500.
“””Everyone should keep publishing this stuff until the banks do fail. Then, we can break out into a complete and total civil war making sure we kill all of the offspring first just to hurt people emotionally as much as possible before the adults get really busy killing each other.
From my readings in history and the Bible, I can come up with ways to leave people alive, but wishing they had never started all of this corruption and evil. Would start with the Antifa/BLM types and after making videos of them begging people to stop fighting because of what my forces would do to them, would then move on to anyone else who felt the need to fight. Peoples’ minds CAN be changed to become compliant.
As I have posted before, I have a solution for this. Really.”””
If I read your comment correctly, you seem to be implying that we should remain quiet as the banks are shown to have engaged in business practices of their own making.
And let me add it is not only the banks who are corrupt. Our government agencies are equally corrupt. The FED, Treasury, and FDIC have known for a long time that the banks whom they regulate were doing some stupid stuff that included taking in $1 million DEMAND DEPOSITS and using the DEMAND DEPOSITS to buy 30 year bonds.
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