These events raise profound questions about America’s banking system. Post-financial-crisis regulations were supposed to have stuffed banks with capital, pumped up their cash buffers and limited the risks they were able to take. The Fed was meant to have the tools it needed to ensure that solvent institutions remained in business. Critically, it is a lender of last resort, able to swap cash for good collateral at a penalty rate in its “discount window”.
The exercise becomes more alarming still when other assets are adjusted for higher rates, as Erica Jiang of the University of Southern California and co-authors have done. There is, for instance, no real economic difference between a ten-year bond with a 2% coupon and a ten-year loan with a fixed 2% interest rate. If the value of the bond has fallen by 15% so has the value of the loan. Some assets will be floating-rate loans, where the rate rises with market rates.
How many banks have loaded up on securities, or made lots of fixed-rate loans, and are uncomfortably exposed to flighty deposits? Insured deposits are the stickiest because they are protected if things go wrong. So Ms Jiang and co-authors looked at uninsured cash. They found that if half of such deposits were to be withdrawn, the remaining assets and equity of 190 American banks would not be enough to cover the rest of their deposits. These banks currently hold $300bn in insured deposits.
oh its a casino!
I’m not paying to an article and now I’m unfollowing you.
Short the world.
pushes socialist principles but then seeks to gain recognition for covering the downfall of capitalist institutions. These banks crashing are all due to ESG and gross overspending by the govt, leading to reactionary inflation.
In my opinion this is a “must read” article simply because of its comprehensive scope and root cause simplicity….A Bank run with National Debt at $32 Trillion is like a global pandemic with no vaccine in sight.
Let's shine light on mysterious amount of global derivatives exceeding $1.23 Quadrillion and beyond.
Everything comes down to how campaign finance, lobbying, cronyism, nepotism, and insider trading, impact decisions made by state and federal legislators. Always follow the money. Always.
File next to your “missing” money article
Biden, Yellen, Powell, Gensler are complicit, they should be criminally charged for this
Cinderella in the middle of the night encounters the truth...
It’s not rot. It’s the Fed jacking rates by 4,000% in under a year.
Flighty deposits aren’t really a thing when the rates you’re paying are infinitesimal
Let's rephrase that to how many banks have appropriate interest rate hedging policies and how many don't!
Wouldn’t it be nice if something like a stress test could be required? To show bank security. Wild idea I know……
its almost like BANKS ARE A SCAM, since this 'problem' keeps happening over and over creating the 'economic cycle' they teach you at school, its almost like the entire 'liberal economy' is based on a giant scam
Exactly!
Potemkin banking. Good metaphor.
Isn't backstopping their deposits different than keeping them in business?
The U$A financial system is a big Ponzi scheme operated using the private money 💲, majority (95+%) of that are created by private banks. It is a big casino, not a nation. What does the constitution say about who creates money? How long will U$A’s hot air bubbles last?
Swiss banks do not want to merge with Credit Suisse, because they know it has historical stains. This week, the Swiss government also contacted China urgently, because they were afraid of being run on. Such a large-scale run would definitely end. China has not responded yet.
The Federal Reserve has been captured by Wall Street. They serve at their behest, not the public at large.
The rot is in Washington DC, at it goes deep!
he speech that can make Donald Trump POTUS again
the speech that can make Donald Trump POTUS again
serious!! Do not say
Cínicos 💩
Damn the ruling Democratic Party! All it's financial policy fault!
A resposta é .... Vão to. Mar. No. Meio. Do. Seus. Ocos. Fé. Laaas. Dasss Puc. Tás. .
How deep is the rot in America?
This deep:
Believe me, most of the banks in America will not be able to save the dollars that the FED has printed. As long as the interest rates continue to rise, the banks will collapse, the American economy will go bankrupt.
Asking ' How deep is the rot?' of a fungus.
How corrupt is Joe Biden and his dirty Democrats? There is your answer. Infinitely.
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