125 Comments

1. In the unlikely event you both missed this key detail as I did until just now: the Fed will buy assets at par, not fair value, via the BTFP.
   Oh, and Becker was on the SF Fed until last week. Good thing you don’t have any emojis for us to choose from!

   https://www.theblaze.com/op-ed/horowitz-with-the-impending-bank-bailout-and-stagflation-trap-its-time-to-clip-the-wings-of-the-federal-reserve#toggle-gdpr

   1. Yes. Very critical decision along with the uninsured deposits.

      1. https://twitter.com/popjump/status/1635092761132269569

         With the backstop in place this means the Fed can raise interest rates by 50bps without harming HTM assets, since they can be traded in *at par* if banks need liquidity. This enables the Fed to go higher for longer…

         https://twitter.com/paulomacro/status/1635107645907681281

         Big regional top 10ish will be fine. Problem is the public is only beginning to get hip to the fact that you can buy a money market fund easily for 4%, no load. Why park balances at 0? And so balances will continue to shift from bank deposits to MMFs until banks raise rates

         But since upside down banks can’t afford to jack deposit rates and now with “BTFD” Fed facilities they can borrow against HTM without having to sell and take a mark, they can meet depositor outflows but deposits will gradually drift over time to earn a yield.

         the ex-10 regionals have less HTM and more CRE, ie less collateral with which to tap the BTFD window. And yes I am using that BTFD acronym incorrectly on purpose.

2. SVB “bank run” narrative and meta-commentary

   https://twitter.com/thetomzone/status/1635027440790810625

   this thread is a wild ride, it’s like if European royalty all had a group chat in 1914 and they all started panicking so much about the security risks to Archduke Ferdinand that he had a heart attack and died

3. Another big bank down today. “Who’s your banker?”

   Does anyone know how long it takes to get your cash insurance payment if your bank (insured by FDIC or NCUA if credit union) goes belly up?

   Also, do they require you to present a current bank statement or do they take the bank’s ledgers as of the death date and start cutting checks from the government for your amount on deposit? Yet another reason to make sure you archive your bank statements.

   1. I asked a Morgan Stanley advisor today about how FDIC works. He gave me this and a 30 page document with more specifics. This image might be helpful to somebody so posting here. At least it gives you links to peruse should you want more information.

      1. Nice quick reference. Thanks for posting this.

      2. This looks similar for NCUA:
         https://ncua.gov/files/publications/guides-manuals/NCUAHowYourAcctInsured.pdf

4. This is a quote from the damage control communication email sent out by First Republic Bank to clients out West here as a result of it’s hit due to the antics at SVB. (Usual gang to the “rescue”.) Not sure what the new Bank Term Funding Program is about..??

   “The additional borrowing capacity from the Federal Reserve, continued access to funding through the Federal Home Loan Bank, and ability to access additional financing through JPMorgan Chase & Co. increases, diversifies, and further strengthens First Republic’s existing liquidity profile. The total available, unused liquidity to fund operations is now more than $70 billion. This excludes additional liquidity First Republic is eligible to receive under the new Bank Term Funding Program announced by the Federal Reserve today.
   Jim Herbert, Founder and Executive Chairman and Mike Roffler, CEO and President of First Republic Bank said, “First Republic’s capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks.”

   1. Overall in the US the banks hold $600+Bn in unrealised losses.
      Those will get transferred to the Fed’s balance sheet with the $600+Bn getting transferred into “money” in circulation, allegedly for one year. Then the liability will get rolled over.
      The big questions is : what will interest rates look like in a year’s time and after retail real estate and commercial real estate loan problems surface?
      The Fed did something very similar in 2008, when their balance sheet was much smaller.

      1. @richard lough did you watch Titus’ latest Best Evidence video too? It’s interesting when you consider the Fed is raising interest rates but isn’t entering the repo market (yet) this time around…that And the issue is 10x bigger than it was in 2008. ?

         1. One of the biggest reasons for a potential “train wreck”. Probably shouldn’t use that metaphor with all the literal train wrecks in the US lately….

      2. R-Thanks for clarifying the new scheme…BTFP.

5. https://www.theblaze.com/op-ed/horowitz-south-dakota-and-other-red-states-are-about-to-ban-bitcoin-as-legal-money-cbdc

   Bills that contain this redefinition of money already passed the Kentucky Senate, the Montana Senate, the Indiana Senate, and the North Dakota House. They have breezed through the committees in every state they have been introduced. If this is not stopped, it will be the death of our freedom. Every Republican governor and legislator needs to be informed about these UCC changes and to oppose them until this provision is changed. Moreover, they need to go on offense and pass legislation explicitly promoting decentralization and prohibiting the implementation of a central bank digital currency. Time is of the essence. 

   1. South Dakota governor vetoed

      1. Did you see the photo of the governor holding this huge veto stamp? It looked like a branding iron and left a huge red “veto” on the the paper. I had a good chuckle.

         1. Yes, I saw that, also. Very theatrical!

      2. Rumor on the street is they have enough votes to override the veto.

         1. Ugly.

            1. I think word / awareness is spreading. I have heard of some SD legis. reps who have changed their mind(s), i.e. “who didn’t read the bill”….also Mark Crispin Miller wrote a good substack yesterday on CBDC’s, and got 200+ comments.

6. https://www.msn.com/en-us/money/news/silicon-valley-bank-s-collapse-sends-shivers-through-china-startups/ar-AA18tlDO

   Chinese startups have long relied on SVB, which has forged ties with local government officials in Shanghai, for venture capital funds after traditional US banks turned them away. The Chinese government exerts strict controls over its currency and imposes restrictions on foreign investments — making SVB one of the few lenders willing to work with China-based startups seeking capital from offshore investors.

   https://www.svbsecurities.com/team/joseph-gentile/

   Joseph Gentile is the Chief Administrative Officer at SVB Securities. Prior to joining the firm in 2007, Mr. Gentile served as the CFO for Lehman Brothers’ Global Investment Bank where he directed the accounting and financial needs within the Fixed Income division.

   1. Thank you, Rich! That may explain why SVB was taken down. That’s my best guess now.

   2. He had ties to Enron too- coinky doinky

7. Catherine,
   what’s your take on the current events around Silicon Valley Bank in California?
   Thanks Christian

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