“This is the first inning. They [banks] are selling the assets that are their highest-quality assets and that are short-duration and floating rate.” Some quick math on the $2 billion sale looks to be a 3% hit to PacWest on their best loans.
Can Fractionalized Banking Survive 21st Century Technology?
What she knows is as the world has gone from paper to digits “bank runs clearly are speeding up. And the impact of that is it's revealing that the traditional banking system-- it's always been fundamentally unstable. But it's even more unstable than folks had realized. And banks in general, as a result of the fact that the liabilities can be withdrawn a lot faster, are going to need to hold more cash.”
Some Bank Depositors Get the Smoke, others the Mirrors.
The FDIC can decide what deposits live and which ones die. For now, the deposit insurer has told SVB’s Cayman depositors they can file unsecured claims in the bankruptcy by July 10. The receiver (FDIC) has up to 180 days to determine whether to allow the claims, according to a notice sent by one of SVB’s customers to its investors.
Bobbie Gentry's escape to Galt's Gulch
Bobbie Gentry “looked like a Greek goddess and she was deeply involved in tasks usually reserved for men. Obviously there are many factors behind success but, in 1967, America was clearly not ready to roll out the red carpet for the female artist who wrote, played and produced her own material.”
Real Estate Still Lurks
Banks can’t raise equity at this point given low valuations and tepid investor demand, so they must reduce their loan books and “find places to pull back on existing loans and future loan commitments.”
The Fed fights COVID Largesse
While we’ve all moved on from COVID, the government’s COVID largesse has a long tail. Kaplan’s been talking to mayors from around the country and they tell him “American Rescue Act (ARPA) money must be spent by states and municipalities between now and the end of 2024 or it’s lost.
Entreprenuership Breaks Out at Taylor Swift Concert
It would take a Swifty to know Swifties and their individual demand curves.
Bank Buyers Wait For FDIC Subsidy
A rose-colored glasses wearing Jamie Dimon said on May 11th as paraphrased by CNBC, “Regional banks are “quite strong” and will have good financial results, but managers are worried because of the bank runs that have taken down three firms, he said.”
Depositors are not listening to Mr. Dimon and neither are regional bank shareholders.
Privatize Gains, Socialize Losses
That last boldfaced item is “$50 loan from the FDIC.” The deposit insurer doesn’t have that kind of money. The FDIC borrowed it from the Fed (which doesn’t have it either but can conjure it up out of thin air) to lend to JP Morgan Chase. JPM then paid off the $30 billion it and the other 10 big banks placed on deposit as First Republic was circling the drain.
The Agony Out There
As Snider points out, “There is so much hubris attached to [CLOs] because they are basically made to be quantified by mathematical models.” So, the Fed can lower rates but that won’t save real estate. Real estate will continue to crash and THAT will bring down rates.
First Republic Count Down
Yes, the taxpayers will be the unwitting holders of First Republic’s bad assets, while one of the FDIC’s favored bidders gets the good stuff at a discount. Jamie Dimon’s J.P. Morgan already has ten percent of the nation’s deposits making that bank ineligible to pick up First Republic but don’t be surprised if Jamie receives a “special government waiver” if he submits the winning bid.
Peak Environmentalism
“No. I think EV is going to be something you're going to go to a museum with my kids and be like, wow, that was an evolutionary dead.”
How Does a Bank Collapse in 48 Hours?
If you watched the Fed Chair Jerome Powell testify before the senate and the house early last week you heard over and over that banks are well capitalized. The non-sequitur inspiring the Shakespearean quote “Methinks you protest too much.”
Retail Investors Positioned For Thrashing
Individual investors are fighting the Fed trading options that expire the same day they begin trading. “This week, volume for contracts that expire on the same day they’re traded hit a record 50% share of all the options transactions on the S&P 500, data from CBOE and Nomura show.”
L.A. Walk Away
CoStar News reports, “The loan defaults are another sign of struggle for office real estate owners in the nation's second-largest city as remote working policies enacted in the pandemic hamper demand. National office real estate demand has been curtailed since 2020, with vacancy at 12.8%, its highest since the Great Recession, according to CoStar data.”
White Collar Canary
Tech and other corporate layoffs are announced everyday, but closer to your local courthouse, law firms are feeling the pinch.
Increased Interest Rates Erode Bank Capital
Many banks bought mortgage-backed securities during the zero-rate days to “juice income,” but now, on a mark-to-market basis those MBS are trading for a fraction of purchase prices, creating losses of 50 to 60 percent of capital. “Regulators are not pleased.”
Movements to Rackets: The Falwells Rise and Fall
The common thread of the four stories, three from the speech plus the Falwells, is as the movement becomes a racket each and every time power turns to money turns to sexual exploits.
The Confidence Man Runs Again
Unlike the many recent books about Trump, Haberman connects Donald’s early years with his presidential term and aftermath. Haberman has reported on Trump her entire career and is the only person who could write “Confidence Man.”
Crypto Meltdown and Pension Assets
However, as MarcoMaven’s Steph Pomboy tweeted Wednesday, “For my money, the most interesting…and foreboding…aspect of the downfall of Blankman-Freed’s FTX is the «revelation» that the Ontario Teachers Pension was a major investor. The coming pension crisis is going to be massive…and the switch to QE by global cbks whiplash-inducing.”