A bunch of readers…..
…..asked me to comment on the Silicon Valley Bank (SVB) situation.
As on most other matters…..
Mainstream talk around SVB…..
…..and OBSCURES the real issue.
The bank is accused of having made “risky bets.”
Even gazillionaire hedgefunders…..
…..such as Bill Ackman…..
…..are, in unthinking panic…..
…..carrying that nonsense.
So, what are these risky bets?
U.S. Treasury Bonds!
You see, the bank took deposits…..
…..used them to buy Treasuries…..
…..and, now that those Treasuries…..
…..have FALLEN in value…..
…..(due to rising yields)…..
…..the bank’s assets (Treasuries, and loans outstanding)…..
…..have fallen below its liabilities (deposits, plus, any outstanding bonds issued by the bank itself)…..
…..leading to NEGATIVE EQUITY…..
…..also known as, “we’re fucked.”
(It APPEARS the bottom didn’t fall out, until the bank booked an “impairment” to its equity, acknowledging the degraded value of its Treasuries by “marking them to market”, rather than keeping them on the books at original value—remember this sentence.)
Folks, I have NEWS for Bill Ackman…..
Due to something…..
…..called “double entry accounting“…..
…..which has been around for centuries…..
EVERY bank in the USA…..
…..MUST take EVERY dollar of deposits…..
…..and put it SOMEWHERE…..
…..and that SOMEWHERE…..
…..always means, either…..
…..loaning that dollar right back out…..
…..or putting it on deposit…..
…..with another bank, or with the Federal Reserve…..
…..or BUYING an asset…..
…..first and foremost, Treasuries.
Of our banking system…..
(In fact, Treasuries were the required, defining asset of National Banks even BEFORE the Federal Reserve Act of 1913.)
And, as such…..
Not just SVB…..
But EVERY bank…..
Is at risk from these “risky (LOL) investments.”
Lesser banks are at greater risk…..
Because the “systemically important” ones…..
Such as, Bank of America…..
Have much, much more on deposit with the Fed, or with other banks…..
While, typically, smaller banks…..
…..have only a token amount, with the Fed.
But, in principle…..
All banks are “at risk.”
So, you see…..
There’s NOTHING unusual about SVB…..
It catered to a sector…..
…..that’s not doing so great…..
…..and needed to draw down its deposits.
Yeah, now you get it…..
“The weakest domino!”
The “risky bets” have become…..
…..not some crappy, circa 2005 mortgage bonds…..
…..but the BEDROCK itself!
(Now, what if EVERY bank marked its Treasuries to market? Last one out, turn off the lights! Obviously, they won’t… but, what does that do, to confidence in the banking sector?)
WHY has this happened?
Because of the Federal Reserve’s campaign…..
…..to raise interest rates, economy-wide…..
…..but first and foremost…..
…..(as Treasuries, esp. the 10-year, determine all other rates)…..
…..in the Treasuries complex.
…..(for those who skipped Finance 101)…..
Bond yields run inverse to bond prices.
The “yield” is essentially the price…..
…..that the bond issuer pays…..
…..to “rent” money from the investor.
It is the “rent” on money.
In pushing this rent, higher…..
The Fed has reduced the price…..
…..that investors (or any buyers)…..
…..to the issuers (or any sellers)…..
…..for the bond.
In other words…..
Bonds have FALLEN in price.
So, we see now…..
…..that, in principle…..
ALL banks, are at risk…..
…..of NEGATIVE EQUITY…..
…..from rising rates…..
…..coupled with an economic “slowdown.”
SBV was NOT unique…..
And did NOTHING particularly wrong.
Again, it’s just the weakest domino.
Where does that leave us?
It leaves us, as follows:
IRRESPECTIVE of how far “they” go…..
…..to bail out SBV’s depositors…..
…..(and right now, it looks like, they MIGHT go all the way)…..
“The Fed” will HAVE to reverse course…..
…..on its interest rate hikes…..
MORE OR LESS, IMMEDIATELY…..
“They” will have to fully backstop…..
…..the entire banking system…..
That is, ALL deposits…..
Up to ANY value.
Even, deposit accounts…..
…..worth hundreds of millions of dollars a piece.
With that kind of a backstop…..
The assets countervailing those deposit liabilities for the banks…..
Could be anything!
They could be, loans…..
…..to REALLY lousy, crappy borrowers.
(What would that do to inflation?)
To the maximum extent…..
…..that a given bank’s charter (or whatever) allows it…..
It could be complex option bets on oil prices!
…..it could be ANYTHING.
And that means…..
As far as investing goes…..
It would be “RISK OFF!”
Leave Putin and the Saudis, smiling.
On the other hand…..
If the Fed simply reverses course…..
…..on its interest rate hikes…..
That’s ALSO “risk off.”
Any way you slice it…..
Inflation is NOT going away.
No One’s In Charge
Or, One Last Word On The Federal Reserve
No, the Federal Reserve…..
…..doesn’t “really” control interest rates.
Sure, like Brandon’s CIA and State Department…..
…..(with respect to the Ukraine)…..
They push the buttons…..
But everything they do…..
…..is to “maintain credibility“…..
…..with an eye…..
…..to what everyone else (at home and abroad) thinks…..
….or will, or may think.
(In short, no one in the U.S., at the national level, is really in charge of anything. Because everyone is FOLLOWING, NOT LEADING. This is one reason why Trump was so unique.)
This is why, like Brandon’s people…..
The Fed has walked into a giant trap.
For the Fed’s “credibility“…..
There is only one possible outcome.
They will, in the end…..
Money Money Money
If the Dreizin Report is valuable to you…..
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I make NO money on ads.
Yes, my blogging platform…..
Does show a few lame ads…..
And, my proceeds WOULD come…..
…..to about $100 a quarter…..
…..(that’s three months, LOL)…..
But I’ve refused to accept that money…..
Because they use PayPal…..
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About The Gayest Air Force Ever…..
Yes, I was referring to the U.S. Air Force.
I was NOT disparaging.
Under my Anglican faith…..
God is gay…..
…..(at least, for metaphysical purposes)…..
And we are ALL made in his image.
I am PROUD of the unabashed gayness…..
…..of my nation’s military.
As for the B-52 flight…..
…..of March 11th…..
It was a VERY provocative move.
I can’t be sure…..
But I can’t say I remember this happening, EVER.
(Almost certainly, it did NOT happen before 2022.)
It’s more common for Uncle Sam…..
To fly jet fighters in that area…..
NOT STRATEGIC BOMBERS.
Truly… The Gayest Army Ever Assembled
Speaking of “the gayest army ever assembled“…..
…..from my last, “headline only” post…..
A few readers…..
…..where I was coming from.
Folks, I’m NOT saying…..
…..that ALL Ukro-warriors are gay.
(And if they were, I would EMBRACE them, and offer them UNCONDITIONAL ACCEPTANCE.)
The real proportion is probably under 50 percent.
The fact remains…..
If you take the Ukrainian alphabet…..
…..and remove all letters…..
…..that overlap with the Russian alphabet…..
…..what you’re left with…..
…..IN THEIR PRECISE ALPHABETICAL ORDER…..
……are the letters ґ є і ї …..
…..which, again in that order, spell ґєії…..
…..which literally means, “gays.”
Look, I didn’t make this up.
Also, I don’t believe in coincidences.
It is what it is.
It can’t be changed…..
…..with “Biblical linguistics” counseling, or whatever.
We just have to accept it.
Now, for those of you…..
….who want to complain…..
…..about Dreizin being so obsessed…..
…..with homeless sexuality.
Well, you geniuses…..
Speaking ONLY for myself…..
Strictly as a private citizen…..
…..who lives in the USA…..
I’m just TAKING A CUE…..
From my own government!
DREIZIN REPORT EXCLUSIVE FOOTAGE
Folks, I was able to secure…..
…..of Putin’s representative…..
…..desperately begging for assistance…..
…..from PMC Wagner…..
…..early last spring.
Watch it here…..
Only on the Dreizin Report:
I will repeat this in every post…..
…..(except “headline only“, quickie posts)…..
…..until it’s no longer relevant…..
…..and/or we’re no longer here.
Assuming we make it to 2024…..
…..and have an election…..
The wonderful governor of Florida…..
If elected President of the USA…..
Won’t do much of shit…..
…..other than get us into a war…..
…..with our supplier of everything.
That is, China.
Because that’s the track we’re on.
Trump tried to take the rivalry in an exclusively economic direction…..
But he was removed.
And now… THE CAKE IS BAKED.
Yes, I’m waiting for another pann-de-mmick…..
But the only strictly “political” issue now that matters…..
…..is how hard the U.S. will fight…..
…..and risk everything…..
…..(including, me and my family)…..
….to hold on to its Hegemony.
And… the “public” has no say in that.
Will NEVER have a say.
I can’t remember the last time the “public” had a say…..
…..on anything that really mattered.
Because we don’t fucking matter.
Anyone who plans to keep voting…..
…..(above the local/state level)…..
…..and legitimize U.S. Federal politics…..
…..and the destruction of their own country…..
…..and perhaps the world…..
…..is a “battered wife“…..
…..or just a FUCKING IDIOT.
(However, even if you’re an idiot, you should still give me money, for all the work I put into this blog. Or, at least, follow me on Twitter, and be sure to “like” everything, even the old stuff.)
Please support my work, here.
Comments and any associated weblinks or other references must be directly relevant, tangential, and responsive to specific facts or views within my own published material (not just to other comments), specifically the material above the given comments section that you are adding to. What this means, for example, is if I wrote about dogs and cats in the Ukraine, and only dogs and cats in the Ukraine, please don’t start babbling about life in Lugansk, or the horrible loss of life in general. THIS IS NOT A “DISCUSSION BOARD.” IT IS NOT A DEBATE PLATFORM TO DISCUSS IRRELEVANT HISTORICAL QUESTIONS, OR TO INJECT YOUR OWN PET SUBJECTS / INTERESTS, PHILOSOPHICAL MUSINGS, OR RANDOM RAMBLINGS THAT DON’T DIRECTLY, SUBSTANTIALLY BEAR ON WHAT I WROTE. Please, no disjointed / overcaffeinated rambling, which implies, among other things, no mentioning eight different topics in one comment, like a schizoid aiming to connect all the dots (if your mind is racing, take your Ritalin and calm the fuck down before you comment on this site); no “pet issues” or inquiries that have no direct bearing on what I wrote; no unclear/unexplained, irrelevant, or barely-relevant weblinks; no trying to write your own mini-blog news update digest in my comments; no batteries of questions like what about Donetsk and what about Kiev and what about the Big Offensive and how does this all end and where does blah blah blah (I will NOT respond to you, I will BLOCK you); no asking me what I think of some commentator whom I’ve never heard of; no Nazis; no Nazis pretending to be Jewish like “I’m a bar mitzvah boy, but I’m so ashamed of my people who are not the real Jews of Jesus’ time“; no “crypto” Jew-hating (when I have to read it three times before I’m sure it’s about Jews, then I permanently block your wise ass); no dogmatic Marxists; no using anti-Ukraine jargon or other “Nadsat” bullshit-speak that you picked up from The Saker, which no one outside of you and your freaky virtual friends can understand (e.g., Ukrops, 404, the vimiratis); no calling for the destruction or dissolution of the USA or its government; no calling for the destruction of Washington, DC; no calling for violence against current or former elected or appointed officials of the U.S. Government; no nonconstructive or hateful ranting about Jews (or Swej, Joos, Jooz, Jooze, Juice, Juize, Jewz, Jewze, J-Dogs, J-Dogz, J-Dawgz, J’s, Chews, Choos, Chooz, Chooze, Zionists, Zio-Nazis, Anglo-American Zionists, Amerizionists, Zionist Occupation Government, ZOG, IsraHell, Bibi SatanYahoo, “those of whom we cannot speak”, “your friends whom we can’t talk about”, “a certain small ethnic group”, the chosen, the tribe, the chosen tribe, the thirteenth tribe, tribe of Judah, the Khazarians, Khazarian mafia, Rothschilds, Khazarian Rothschilds, JewTube, JooTube, JewMerica, JooMerica, etc., etc.); no being nasty to other commenters; no trolling the “sysop”; no passive-aggressive needling of the “sysop” (I don’t acknowledge, I just BLOCK and you’re gone, “one strike” and your ass is out, GO GET SOME THERAPY); no dissing or ragging on the Insane Clown Posse, no Chupacabras, no “country music”, no karens or avocado toast, no complaining that your other comment wasn’t published (because you’d didn’t read this Comments Policy), and no claiming “the korona doesn’t exist because vyruses don’t exist.” Please share your ***CONCISE*** (2 smartphone screens of small font text is NOT concise, I don’t have time to read your dumb fucking manifesto, gawd dayyuuum!!!), relevant, coherent, organized thoughts, and come back for my next post. Also, by commenting, you expressly accept and agree to my “one bullet, one Nazi” policy, and please be advised, this includes Nazis everywhere, even in the Ukraine. Furthermore, if you are a LibJew/DemJew, you are BANNED from commenting on this site UNLESS you acknowledge the extensive presence and influence of Nazis and other fascists in the Ukraine, who don’t give a fuck that they have an allegedly “Jewish president”, because they’re still (in many cases) getting paid by the state, and they’ll “take their country back from the Jews” once they take care of the Russians (can’t slit all throats at once.) If you can’t acknowledge it, then get the fuck out with your “Never Again” bullshit. Also, no scrubs. If you don’t know what a “scrub” is, please consult the TLC video on YouTube. Although scrubs exist in ALL ethnic groups and populations, a very good example of scrubs, is all the poor young black men who get shot dead, and then the moms are like, “He had such aspirations, he was going to be a rapper.” Yeah, they were all going to be famous rappers, all the thousands of them! Sure!
in the video play time 17:29-18:42 you can see convoy of US IFV’s, and mainly Abrams tanks in Slovakia. I remember You said, that US won’t give tanks to VSU. So these pieces are going there secretly. Or these tanks are Polish but intentionally sent trough Slovakia?
I never, ever said they won’t give tanks to the Ukraine. They’ve been giving tanks to the Ukraine since late 2014. Their Soviet-model tanks have finally run out, so now they are giving other tanks.
I did say the USA was not in a hurry to give its own tanks.
Why are these bond purchases called risky bets? Some might be, but doesn’t FED policy explain that when the FED is fighting inflation and contracting the money supply, it uses Open Market Operations whereby Treasury Bonds are sold to its member banks in order to reduce their cash reserves? Doesn’t sound like these banks have much of a choice but to take on more of these garbage bonds. The FED is trying to fix its first mistake (inflation) by committing another blunder (collapsing bank assets). But that’s okay. There’s an endless supply of taxpayer bailout money…
Was IFF deactivated (transponders) for this ‘Training Run’? If so and they flew over the sea first and into the Gulf of Finland ( and not over the Baltic States first and then altering course NW out to sea) then this is very worrying.
On the other hand if they flew over the Baltic states land mass first would they not be under the control of civilian ATC having first filed a flight plan?. Then presumably this would have been less provocative and all very easy for the Russians to monitor any deviance from flight plan.
I see just now on our news here in Ireland that the Russians are claiming the Transponders of the Drone which went down into the sea off Crimea had its Transponders off and this triggered the Russian response.
God have mercy. If the March 11th flight’s transponder was off, how was I able to show pictures of its flight path? Pictures that I screen-shot from a public website. One of the pictures is right up there with my headline.
I see a lot of people asking about the missile that hit a bunker in Kiev, killing several NATO officers.
As far as I can tell, the story is total BS. It comes from 1(!) source as far as I know – that being Intel Drop. The site has yet to demonstrate its credibility. Indeed, this story, at least by my lights, *discredits* this site.
Mr. Dreizem, thanks for outstanding way you describe the dramatic moment in history that we live in.
For everybody a question:
How long can this banking without risk and quantitative easings go? Forever?
Is there any limit to printing money?
Until the Revolution. The Revolution will not be televised.
Can I just say… now I’m not a military person but I absolutely agree with you 100%. The picture is looking very BAD for the Ukrainians and very GOOD for the Russians. Now…I can’t say with ABSOLUTE certainty but IT IS very LIKELY that the Russians WILL move forward and the Ukrainians will move backwards, so to speak, most PROBABLY during the night OR the day time. NOW! Can I also say, I’m not an economist BUT there is A GROWING FEELING that somebody somewhere is PLANNING an alternative to the dollar and that other peoples from other areas are looking at this with confused interest while absent mindedly drying their hands in an air fryer.
The bank went long treasuries and figured on a bailout if it didn’t work out. Did not work so well. They did at least get wiped out. Would have been nice to wipeout Cuban and Ackman but…I doubt most banks went this far but some did. Those may get wiped out too. The Fed is not big on wipeouts. Right now they are just taking the govt bonds off the books which is zero loss to them. If they start taking the junk, we have a full bailout and they are eating the losses for their client base.
That’s a bit of worrying information.
My lovely Russian wife has to go to Moscow at the end of the month and cheapest way is
through Estonia to St Petersburg.
We are both pensioners and she cannot receive her hard worked for pension
from Russia to the UK.
I will show her the Ukraine/Russian alphabet -it will amuse her.
I enjoy your blog very much thank you.
How can bank runs happen today. The average account has less than 10k between savings and checking. An ATM will only give you 3 to 500 cash per day. You cant walk in a bank and ask for all your money in cash, they will offer a bank check but no cash. I dont get a bank holding treasuries as losing money because these are long term assets. You will get more back when you cash it in at maturity. Is this all due to bank repos and if so why isn’t it effecting all banks why just SIVB. This sounds like JPM again not giving a common over night loan to Lehman. Wtf is going on JPM involved with Bernie Madoff and Jeffery Epstien and it’s still aloud to be a bank? I seriously dont understand why Al Capone never opened a bank, he still be alive lol.
Nonsense, I just withdrew $2000 from an ATM, two hours ago. (The limit used to be $1000, but when my bank laid off all its tellers in 2018 or so, and then shut most of its branches in 2020, they upped it to $2000.)
I’ve withdrawn as much as $15,000 (in cash), from live tellers, when I’ve needed to pay contractors/workers of a certain immigration status, for big jobs. (Fortunately, a 1099 is not presently required from landlords.)
As for a bank check, like any check, that’s still a type of withdrawal. As soon as it’s deposited and cleared, the money goes to whatever bank the payee deposits it at.
Bank runs are a possibility at all times. Even in the best of times, in a nation of this size, 2 or 3 or even 4 small banks fail every month.
Apparently, SVB arrangements for sweep into money market funds were registered in SVB name. Some customers who thought they were protected from risk of SVB as counterparty couldn’t access their funds.
Very good piece today. Thanks. I saw the bunker story, but unless a more reputable source, such as Rybar, backs it up, I assume it is just a rumour.
Boy! That was quick ! Rate cuts on hold already this morning 😎
Mr Dreizin, on the SIVB story you are right about treasuries. BUT maturity/duration is the main factor here. You can buy short term treasuries and be fine or go long (10y) and be .. svb. It is as simple as that, svb got too greedy with this. Large banks, like HSBC, know how to avoid this and now they will emerge victorious yet again, scooping all these niche players.
Hello. Thanks for your comment, but…..
We do NOT know the actual maturity structure of SVB’s bond portfolio, esp. as relates to other banks of comparable size.
It is all speculation and “talking points” going around, pundits and tweeters just repeating each other, a bunch of parrots, I can even see it in the comments here.
MOREOVER, yields have risen hugely for all durations, 2 year out through 30 year. It’s not as if one end of the yield curve is stuck.
Even if SVB was invested more in 2-years than other banks (we don’t know that it was), fact is, YIELDS FOR THE 2 AND 10 YEAR HAVE GONE UP ALMOST IDENTICALLY. There is almost no difference. The “should have played it safe with the 10 year” argument, is nonsense. There’s no material difference!!! You lose more or less the same, holding one, as holding the other!
That’s how you know, it’s a lot of parrots talking, people who have NOT looked at the most basic facts.
They keep talking about duration mismatch.
The mismatch is, most deposits can be pulled any time, and it may not be a good time for the bank, duh, that’s it. That’s banking for you. It’s not new! It’s not a bond portfolio “duration” problem, per se.
I’ll venture to guess, those who set the alleged duration and “poor risk management” talk in motion… such as the hedgefunder Bill Ackman….. did so in a DELIBERATE attempt to OBFUSCATE the REAL issue…..
…..which is, that the “subprime crisis” has, in a way, migrated into what’s supposed to be THE MOST STABLE FINANCIAL ASSET ON EARTH.
Yes, they are scared! They want to sweep this under the rug as an example of bad management at one bank (or two or three banks), and be done with it, please move on, back to business, nothing to see here.
Lastly, I’m not sure why you bring up HSBC. That bank is no longer a major player in the U.S., if it ever was.
FYI, there is information on SVB bond portfolio maturity structure as of year-end 2022. I don’t think it changes the main points of the original post: SVB didn’t substantially make risky bets; SVB were merely the weakest domino; all banks are at risk.
FFIEC Form 031 (pp. 21-29 of report for securities and loans)
SEC Form 10-K (Notes to Financial Statements > “Investment Securities” and “Loans and Allowance…”)
Hi Dreizin, I have been following Tom Luongo who provides divisions within white house which sometimes seemed reasonable unless this was deliberately done by US administration. I would like to know your opinion- same subject. He mentioned three prominent factions within US admin: State dept, MIC and Fed where Fed supports domestic big corporates while State dept supports Davos.
He said it was Fed behind the crash of SVB to destroy stable coin and original goal of Fed seems to be destroy LIBOR, euro-dollars and ensure SFOR become global-rate for dollars. Here are the sources:
How does he know all this? Has he ever worked for the Federal Reserve? Does he have some special insight? I’m guessing his last pre-blogging job, was selling propane at Agway. He sounds like a world-class bullshitter, inventing epic dramas for the gullible. Me, I only remark on what I can directly, plainly see, or at least confirm, by or for myself, and with an understanding aided by my high IQ and my experience, however modest, in the military and in the Washington PR/manipulation game, as well as my fluent Russian (incl. deep knowledge of Russian history and culture), expertise in the Ukraine/Donbass conflict since 2014, and general knowledge of finance. I don’t give you this “Two Steps From Hell”, epic interdimensional conspiracy bullshit. Where is your critical thinking, man? How do you figure that Luongo “knows” all of this??? Use your brain! It’s BULLSHIT!!!!!!
Well, what gives Luongo so much gravitas is the fact that he can speak really, really fast, and spew Austrian Economics like there’s no tomorrow while smoking a cigar. Being bald with a beard and glasses also helps. Not to mention the sound of a goat baaa-ing in the background.
Exactly. If these nerds were so smart howcome they ain’t trillionaires yet? There’s no conspiracy here, just rank incompetence.
Maybe i just dont believe anything anymore but it seems to me the panic was ‘created’ as even the execs and other biggies like Thiel knew weeks prior and withdrew their money, could this be another manufactured crisis so all the small and medium regional banks fail by panic inducing everyone to transfer millions/billions into the globalist banks JPM, Citi, BofA etc, and once all the funds are concentrated these banks can do their ‘buy ins’ essentially confiscating everything and/or collectively institute the cbdc.
Thanks for your comment, but the conspiracy is in your head only. There are always a few astute minds who smell trouble before others do, but if all the “biggies knew weeks prior”, this whole thing would’ve happened weeks ago… in which case, you’d have left me exactly the same comment, and I’d have written you the exact same response, some weeks ago.
I recently bought some 4-week T-Bills on my 401K account. Unless you are a bank and buy ’em by the millions, it doesn’t amount to much. A little pocket change for 4-weeks of waiting. I do see that, if I were to sell them now, I would lose money. But that would be stupid because they mature on the 28th and then I get face value.
I see that notes and bonds work a bit differently than T-bills. Those are still purchased at a discount but have semi-annual interest payments.
There were some good looking 2-year notes on the secondary market but I just searched on the brokerage and none of them are listed currently. There were all kinds available last Wednesday when I searched last. Very peculiar.
I also know that Wells Fargo (in particular) was advertising a promotion rate 11-month CD for 5.05%! But they have reduced that dramatically in the last week or so down to around 3.93%. Last I checked even Capital One had a 5% promotional 12-month CD but that may have changed in the past few days too.
Sounds pretty fishy. Especially the part where people have > $250K deposit accounts just sitting there in a bank. Why wouldn’t they have that in brokered CDs or bonds at least?
This SVB is SO reminiscent of what happ’d in the UK with LIzzard Truss and Quasi Kwarteng. Exactly the same thing that happened to UK pensions happened with SVB. Exactly the same. Great post. The spinmeisters are out in force on MSM! Interesting point from Mark Warner on Martha Raddatz this morning: SVB withstood $42 Billion in withdrawals in ONE DAY. It honored them. Thanks to Peter Thiel. Wamu collapsed under $16Bn over ten days. No bank in US could withstand 42Bn in one day! A little truth from Mark warner there.
As usual, it’s bullshit talk from a bullshitting politician.
WaMu didn’t just “collapse”, it was seized by the government. Sure, SVB sufferred much greater deposit outflows… but it was also seized 4 or 5 times faster. And? And, nothing.
If they hadn’t seized it on Friday, they’d have had to do so over the weekend. So, what Warner said, is meaningless. Some “happy talk” BS from a 25 year-old speechwriter, copy-pasting talking points from the White House or some finance industry lobbying group.
That’s how it works, these politicians have no original thoughts (or, nothing they’d share with YOU, anyway.) Just copy-pasted, memorized hot air. As usual. Same as with any topic they might speak about. Korona, Ukraine, whatever.
Please don’t come here like a partisan zombie, to praise some shitbag politician for spewing talking points on TV.
As for Peter Thiel, of course the Democrats will throw his name out negatively, he was a big Trump supporter. Sure, this one guy blew up the entire financial system. Get your head out of your butt.
It looks like the SVB depositors (even the uninsured ones) are going to get bailed out. Probably because all those tech startups are the bedrock industry that finances our glorious future of, well, rainbows. No unicorns. But there will be Glow-Bull-Hoe-Moe joy juice aplenty because this saves the California wine industry from financial Armageddon!
Washington sent that B-52 to play chicken with the St Petersburg air defense network to try to collect SIGINT on things like the S-400 air defense which the Iranians will probably purchase soon. But those idiots in DC do need an excuse to put US boots on the ground in Ukraine too. There’s no way in hell the Ukrainians can effectively use the advanced systems they’re asking for now without lots of US troops doing it for them. And maybe the Russians really did fire a Khinzhal right into the cloaca of a bunker full of Glow-Bull-Hoe-Moe…
Sorry, the bunker story is fake news.
So how long into CNBC’s first show tomorrow morning are they pushing the Central Bank Digital Currency talking point. “We’ve got to have a digital dollar because it will protect the average depositor, it’s the only responsible thing to do.” That’s how government always sells taking more power, they’re doing it for you own good, safety, protection etc. and it always just ends with us holding the bag, pun not intended, well maybe.
Honest question on the digital currency: If I understand things correctly, this would amount to basically ordinary people being able to deposit money at the Federal Reserve directly, not using a commercial bank as an intermediary. My question/comment is how does that not totally screw over commercial banks? They need those deposits to loan out, at least that’s my understanding of how they make money.
It does, and thats why they need to flip the tables( ;D ) at the systemically insignificant banks, so they can be bought out by the systemically important banks, WHICH LITERALLY OWN THE FED, and then CBDCs no longer hurt the commercial banks left. The CBDC’s will be owned and controlled by those commercial banks and their already wealthy investors( see oligarchs ).
Is this bombing mock run really that different from past bombing mock runs? Genuine question.
Sure, they threaten Kaliningrad all the time.
This may have been the first time they’ve flown a strategic bomber so close to St. Petersburg.
… St Petersbourg … where Vladimir Putin was born and grew up, where 1,500,000 Russians including his brother died and his father and mother came within an inch of joining them, during the siege of the city by Bandera’s chums, helped of course by those charming Finns and some other European hangers on, after which the said Finns promised to stay neutral in 1945 if Uncle Joe spared them but who have now changed their minds, without any electoral mandate… although there are signs of buyers remorse.
You know Dreizin, if I was a conspiracy freak, like your friend, I might begin to suspect that the United Neocons are trying to provoke Russia into attacking NATO.
PS-2: THANK you for NOT using PayPal — PayPal has now clearly morphed into a deeply repulsive and toxic — social control mechanism
Thank you VERY much for SVB and economy 101 lesson.
Will reread several times to comprehend fully ;-))
More than worth a coffee that I, once again, bought you.
The enemy of ”critical thinking” is the unconscious Id. Freud became pessimistic about civilization after analyzing the carnage of WW-I and constructed his theory of Thanatos.
Anytime the Fed raises interest rates in a significant way, banks have a problem with a loss on their existing mid to long term bond assets. There is nothing new here.
Raising rates typically cause recessions which cause negative deposit flows. In other words, in a recession depositors have less income and they withdraw money. Also, nothing new.
When 3 months Treasuries pay 5% and your local bank pays 1%, depositors withdraw money from a bank in favor of the short term bonds. The fix is simple – raise deposit rates to attract capital. But this hurts bank’s profits. Again, nothing new.
SVB could have hedged their interest rate risk. It is easier to do today than it was in the past. They didn’t. Hopefully, there are banks that did.
SVB had 57% of their assets (over $90B) in bonds and they booked all of them as HTM (held to maturity), thereby, hiding all the unrealized losses of the capital. This was a pretty “bold” move, assuming that they would not need to liquidate any of the portfolio before maturity. Hopefully, other banks are more realistic in their accounting assumptions.
Still, with all of this, there would be no run on SVB ($42 billion withdrawn in a single day on Friday) if a higher percent of their deposits were FDIC insured. No bank can survive such a run. Over 95% of SVB’s deposits were not FDIC insured. Their customers were VC backed technology companies. All VCs were telling their portfolio companies to get money out at once. And inevitable happened.
VC industry has become absurd. It needs to blow up. We IPO 50-75 $1bn plus companies a year. There’s 2000+ pre IPO companies valued over $1bn on VC balance sheets. How realistic is this?
If EVERYONE hedged all that risk, who’d be on the other side of that hedge? LOL man. You didn’t pursue your train of thought to its logical conclusion. There is no market solution.
We’ve had the sharpest rate upswing in generations, maybe ever. After 13 years of near-zero rates. It was bound to blow something up.
“If EVERYONE hedged all that risk, who’d be on the other side of that hedge? LOL man. You didn’t pursue your train of thought to its logical conclusion. There is no market solution.”
Exactly! Hedges only work well when there is some product/commodity to deliver to the exchange should the hedge be called. This was the basis of the old exchanges like the London Metals Exchange and the Chicago Stock Exchange. Of course, people traded more than the actual quantities of products available, but occasional squeezes generally kept the markets in order. With the insane proliferation of “derivatives,” which were invented as financial instruments to make money for the brokers hawking them,(not actually to hedge anything) “hedging” is no longer a very effective way to protect oneself or markets when there is a big hiccup.
Of course, but hedging spreads the risk.
SVB’s situation is fairly unique – their uninsured deposits were way higher than for an average bank and concentrated in a single industry. Majority of their customers are unprofitable and controlled by a few powerful VCs.
The real issue here is with the VCs. They are irresponsible assholes with a lot of influence.
As for Fed raising rates and the corresponding collateral damage, how is this different from other periods in the past when Fed had to raise rates?
“How is this different”, LOLOLOL. The Fed has not raised rates this much, this fast, in at least 40 years. And in proportional terms, certainly, ever. They have, what, tripled or quadrupled in a year-some? No financier or real estater under 35 has ever worked (not even as an intern) with anything but near-zero rates… until the last year. The traditional business cycle was eliminated, we’ve not even had a recession since 2010, whereas normally there’d be one about every seven years. You know all of that, everyone knows it, but you’re a troll who just wants to argue something, anything. Please find somewhere else to get your jollies. You’re blocked, bye bye.
Thank you Mr. Dreizin for calling out the irritating HappyT. I was going to give him a short lesson on hedging and “spreading the risk,” but could not do it in a concise manner. You handled in nicely.
The only thing to do with trolls, is to flush them quickly. Otherwise… they will suck your soul.
Is NY’s Signature Bank case similar to SVB’s?
Not exactly. It was the main bank used by Coinbase to get money in and out of crypto.
That went fast, no need to speculate what “might” happen:
“After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.
We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.
Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.”
IUC they practically nationalize the banks (with the extra they closed today), paying out everyone in full regardless of insured status — out of money that is not direct taxpayer money but a a few hops away. And cover with some extra tax on banks that are still standing and did not yet replace all their staff with diversity hires as SVB.
Probably immediate bank runs prevented before the Monday opening, but the door is now full open to all the moral hazard. “trust in the bank system” sound nice but now gained a different meaning. In the pro-bail arguments yesterday it was said that without action all money is bound to go to the 4 big banks from every other. Now the alternative path looks like inbound full nationalization of the bank system before the complete meltdown. Everyone forgot TANSTAAFL.
The only media that I’ve been able to find about a missile was a rocket on fire flying thru the air.
It could be anything. How about the place hit and destroyed? I’m surprised the MSM media hasn’t touched the subject yet.They were even able to come up with fairy tale about who hit the Nord Stream2. Your critical thinking never wanes from your writing. If anything is there for your subscribers to learn is your critical thinking.
Thanks very much. But, as an adult, you’ve either got it, or you don’t. Can’t “teach” critical thinking, past a certain early age, and even then, for many if not most critical thinkers, it is innate, not taught. The hopeless… are just hopeless. I have a close friend who seems reasonably intelligent, but is always, year in year out, falling for all sorts of propaganda hoaxes and fake news, and all manner of partisan nonsense, and always getting VERY flustered over illegal aliens or trannies or whatever’s the crisis-of-the-month, for his political camp. I’m always calling him out on it, or calming him down, as the case may be, but he never learns, and never will. He’s also holding out hope that the next election could be the best ever, and could change everything, i.e. the Republicans are finally going to get in there and tear everything up like never before, etc. and so forth, LOL. He’s just not going to change. Again, not a “dumb” guy… just no critical thinking at all. I suppose if “democratic” politicians and parties didn’t have millions of followers like him available, we’d all be living under some Putin-style, de facto absolutist monarchy, in which most citizens are cynical and don’t care, as long as they have a decent opportunity to support themselves and their households. Which, frankly, I would not object to.
Who knew that SVB would be providing market discovery of the true value of treasuries issued in the last 10 years? Not Jerome lol
Mr. Dreizin, I’m watching this from the UK – I can’t fault your analysis. I wish that the people here and there, in your country, could do something about it. There does not seem to be any point in voting – all we get is the same – our whole system is ‘supposedly’ designed to deliver the vote of the people but what difference does it make when all of the parties are the same? Democracy by farce. I agree with you that the best policy is not to vote – for scumbags.
There is a reason that the americans send a B52, the russian have used a kinjal missile to strike on a bunker în Lvov 80 meters deep. It was the command center of AFU and a shit load of NATO high officers died. So uncle Sam was pissed. Anyway the B52 stunt was beyond dumb, what did they tried to achive? Don t they know that Poseidon nuclear torpedoes are waiting în the Atlantic to be activated so they can transform New York în a huge radioactive swiming pool? Do they think that the RS28 Sarmat will get lost over the Atlantic and wont find Washington DC?Dumb move man, they will get us all dead.
About the bunker, sounds like a bunch of crap. I’ve heard nothing of it. I think your “source” must be some clickbait crap. Just because you found a website in Russian, doesn’t mean it’s credible. You are lost in fantasy.
This is what they are referring to tho maybe they have another source. I glanced by this on a twitter feed. Idk…..
FYI….Alex from The Duran is bringing it up. Its in the headline “kinzhal bunker strike.” Its on Telegram and I can’t send it or link it. He may confirm its bullshit? I have NOT got to that part yet and can’t listen to it now. Letting you know. Its the Alex only vid from today Telegram “The Duran” channel.
Mercouris is your source on the Ukraine? Jesus.
Thank you for crash course in banking economics, right now the room is still reverberating from SVB crashing. The bomber incident was speculated to be related to outcome of cruise missile hit in Kiev taking out more than a few high military officers in a deep bunker
Hello. I’ve heard of no such “cruise missile hit.” Sounds like the usual, speculative, rumor mill BS. Don’t believe everything you read.
Dear Mr. Dreizin,
Thank you for expounding on the bond markets as they effect us all.
Zero interest rates, over an extended period of time, distorts business in many ways. Corporations, and individuals, with good credit are basically paid to borrow as, at a base rate of 2-3% inflation, the cost of the money they pay back is (at worst) nil. The more likely outcome is that the money has been debased at a rate equal to the difference between the low interest rate they pay, and the rate of inflation. The longer the loan, the less the money costs. Due to the increased money in the market, asset bubbles always result, because it seems human nature cannot resist risking cheap/free money. The smart people take a capital gain in such bubbles, thus make fortunes on free money. Of course, most of us are not so smart. I saw this develop in Japan when I lived there in the 1980s. The reasons were somewhat more complicated as each bust has its own special variations.
As an old commodities trader, I am perhaps more worried about the amount of bets, what in polite company are called derivatives, floating around the globe. I recently heard that these amount to over $200 quadrillion. I do not know if this number is accurate, but it wouldn’t surprise me.
Your thoughts on this situation would be appreciated. Sorry if this post is too long.
Correction: I should have written $250 trillion or 1/4 quadrillion instead of $250 quadrillion. My apologies.
My bad it was Lvov, and the source was given as” The Intel Drop”, and no I’m not that stupid to believe something without corroboration picked up out of a trash can
It’s fake news.
Kinzhal–not cruise missile. Near Lvov.
It’s bullshit. Fake news.