Are The USA Banks / Banking System Solvent?

[enjoythemusic]

To add some levity....

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[Krash]

Originally Posted by GB-man

CS shares up 20%. That’s a pretty good return.


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[EEpro]

Originally Posted by Krash

CS shares up 20%. That’s a pretty good return.


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It was so obviously going to get bailed out. I bought 1000 for fun while sitting at a stop light after work. Will sell the open and buy some steaks for the fam

[enjoythemusic]

Originally Posted by Krash

CS shares up 20%. That’s a pretty good return.

Congrats! Yes, as we all know the MMT system allows for (literally) unlimited currency made available for bank bailouts. Plus USA banks are now essentially nationalized with expressed guarantees, etc.

Plan accordingly for your benefit, and don't let this week's banking crisis of confidence go to waste.

[Krash]

Originally Posted by enjoythemusic

Congrats! The MMT system allows for (literally) unlimited currency made available for bank bailouts. Plus USA banks are now essentially nationalized with expressed guarantees, etc.

Plan accordingly for your benefit, and don't let this week's banking crisis of confidence go to waste.

I predict 20% upside for XLF. It's an exchange-traded fund with a basket of big national banks. 25% upside for BAC and JPM too (which are also in XLF). The risk is way overblown for them.

In terms of local or regional banks, I'm not sure about those yet. I don't know enough about them, and there could still be one or two that end up in the ditch.

[EEpro]

Originally Posted by Krash

I predict 20% upside for XLF. It's an exchange-traded fund with a basket of big national banks. 25% upside for BAC and JPM too (which are also in XLF). The risk is way overblown for them.

In terms of local or regional banks, I'm not sure about those yet. I don't know enough about them, and there could still be one or two that end up in the ditch.

I'm watching XLF and KBE. They have further to fall but I agree with you guys. This is a paradigm shift where banks are basically nationalized. Zero risk with a long enough holding period.

[enjoythemusic]

True that Brad, plus there's no need to pay for SIPC (insurance), so there are cost savings for depositors too. If any big depositors are still paying for SIPC, they should rethink the unneeded parasitic loss due to paying for SIPC now that all USA FDIC banks are nationalized.

[Mifune]

WOW... First Republic Bank up from the 19's to mid 30's intra day

[Krash]

Originally Posted by Mifune

WOW... First Republic Bank up from the 19's to mid 30's intra day

I remember back in 2008, I told my neighbors that now is a good time to invest in bank stocks.

They all laughed at me.

Of course, I didn't listen to them. Why would I?

I invested a modest amount of money ($20,000) in XLF and by 2014 / 2015, it more than tripled in value.

[Chewbacca]

I think I’m poor now.

[enjoythemusic]

Nice jump in FRC after cash bailout announced.

Could be a good time to legalize mjane so dispensary cash can be deposited into Federal banks.

[INC]

Originally Posted by Chewbacca

I think I’m poor now.

Well, I understand your feeling. I would also feel so bad if I lost so much that I only found $8,003,344,999 cash in each of my real estates :tweet:

[Blansky]

Originally Posted by Chewbacca

I think I’m poor now.

Chewie, being just a multi billionaire doesn’t make you poor.

You just may have to budget for a few days till things turn around.

[Chewbacca]

The love and support I get here keeps me going. Thank you all.

[SDGT3]

Big banks giving FRC a $30B infusion... what's their angle on this?

[huncho]

banks are the perfect business. make money when things are good, get bailed out when things are bad

[Krash]

Originally Posted by SDGT3

Big banks giving FRC a $30B infusion... what's their angle on this?

They’re not “giving” them cash. All their doing is moving a small portion of their cash assets from another bank (which is typically the local federal reserve) into FRC. Banks don’t keep their money under a mattress. This bolsters FRCs balance sheet.

It’s also not a government bailout. I’m not sure how people made that leap.


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[Kowaco]

Originally Posted by SDGT3

Big banks giving FRC a $30B infusion... what's their angle on this?

Maybe they feel like if FRC goes they may be next. Like Buffet said When the tide goes out, you see who’s swimming naked and they’re probably trying to get their trunks back on.


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[enjoythemusic]

Agreed Krash, the bankers are changing chairs on the Titanic ATM.

[Krash]

Also, I just read more details. A group of banks are moving some of their cash assets into FRC, and have agreed to keep it there for a minimum of 120 days. My guess is that it will be there a lot longer than that, but eventually, that money is going to move somewhere else (I'd imagine)...

[Blansky]

Originally Posted by huncho

banks are the perfect business. make money when things are good, get bailed out when things are bad

Yup. And the bonuses are nice too.

Even a bank as crooked as Wells Fargo has people still dealing with it. Unbelievable.

After 2008 I was fed up and left Bank of America and took my overdraft across the street to a credit union.

[Kowaco]

These are exciting times, in an odd way I’d like to see some banks start fail. It seems like the last few years have been one catastrophe after another and this would just be one more. The anticipation of doom is worse than the actual event. Something is wrong I just don’t know what it is.


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[enjoythemusic]

Sad, but true... Guess all those unfortunate to be struggling can only LOL at this situation. Sad, very sad... So let's add a bit of levity.

https://babylonbee.com/news/man-stru...-bail-out-bank

bailout.jpg

[enjoythemusic]

Today's High Score

$297,000,000,000... 297 billion bailout

plus 7,000,000,000,000... 7 trillion in guaranteed deposits.

What does only one trillion look like? It is Dollars stacked 60,000 miles up into space.

7 x 60,000 = _______.

Note: The moon is 238,855 miles from Earth.

[Blansky]

Originally Posted by enjoythemusic

Today's High Score

$297,000,000,000... 297 billion bailout

plus 7,000,000,000,000... 7 trillion in guaranteed deposits.

What does only one trillion look like? 60,000 miles up into space.

Don’t look Chewie.

It’s gonna take your staff of thousands, 25 hour work days for a few months to get you back to trillionaire status.

[enjoythemusic]

Originally Posted by Blansky

Don’t look Chewie.

It’s gonna take your staff of thousands, 25 hour work days for a few months to get you back to trillionaire status.

The moment Chewbacca watches the video and suddenly realizes the staff he really needs to be a trillionaire....

margin-call.jpg

[Mifune]

Today the Fed released its balance sheet numbers in an era when stated policy was to shrink liabilities... it's not pretty and infact is more than 5x normal month over due most importantly due to the NEW safety net.

In fact, they have basically have erased nearly all of the unwinding we've just gone thru over these last few months.



Oopsidoodle, that didn't work
>300 Billion

[envuks]

Originally Posted by enjoythemusic

The Fed should announce accepting US Debt / Treasuries as the same as 'Cash Reserves' being held by the Fed. So banks give Fed all this underwater USA Debt. Interest for reserves is ~4.75% and so like Magic all USA Debt held by Fed 'as reserves' gets 4.75%.

Ok, you may now be thinking how can the banks get the 1% or 2% or whatever face 'value' on the original Treasury Debt Note AND the Fed's 4.75%. See, here is where the Fed ''''''avoids moral hazard''''' by only 'allowing' the ~4.75% in total.

I think there is a small correction here that I’d highlight which is that the fed isn’t assuming ownership of the debt / lower valued structured debt under the new program. The banks will still hold the structured debt as an asset at market value on balance sheet. They can just borrow from the fed at par value of the debt on balance sheet (rather than market value).

This approach seems to carry new risk, which could be systemic if rates continue to climb over the long term. Or climb substantially higher.

The scenario where I could see banks getting into trouble would be borrowing on this new program only to buy higher yielding treasuries. thus increasing interest margin by borrowing to buy more.

Then if the debt goes further south, ie rates continue to climb, banks face the same situation that SVB hit only on a larger scale.

It seems the responsibility to use the new borrowing program wisely, for cash flow as intended, will fall upon banks. Those placing priority on sort-term earnings, like publicly traded banks, may be tempted to borrow to increase interest margin (and earnings). Which is essentially gambling that rates will not continue to rise.

We’ll see how this plays out over the long term….


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[SDGT3]

Originally Posted by Krash

They’re not “giving” them cash. All their doing is moving a small portion of their cash assets from another bank (which is typically the local federal reserve) into FRC. Banks don’t keep their money under a mattress. This bolsters FRCs balance sheet.

It’s also not a government bailout. I’m not sure how people made that leap.


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I wrote giving but didn't mean it literally. I thought perhaps they take some ownership stake in FRC and not let them sink. I never thought the big banks were charitable, but also didn't think it was a govt. bailout... at least not yet.

Originally Posted by Kowaco

Maybe they feel like if FRC goes they may be next. Like Buffet said When the tide goes out, you see who’s swimming naked and they’re probably trying to get their trunks back on.


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My line of thinking was similar but I belive the majors have enough liquidity and will be fine. Perhaps they are worried about a crisis in confidence and it's better to assist a small bank and not let this snowball into a bigger than it has to be.

[enjoythemusic]

I truly do appreciate your informative posts Envuks.