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Misc Stock Market

KyloG said:
They can't let all these deposits go...they (Fed) created this mess. Not sure what they thought, hike until something breaks, now they done broke something.

Click to expand...

They will need congressional approval for sums over $250K. I can see a immediate legal challenge if they go over $250K.
 
There are plenty of moving parts here and lots of unknowns, most-specifically who's connected to what, where, and with what reserves?

Apparently the firm attempted to raise capital, failed, and now is looking for a buyer. The FDIC stepped in and locked the doors -- they typically do this on a Friday after the market closes but acted early this time.

One very interesting element of this situation is that the bank, being a bank, is supposed to have reserves against this type of loss, especially startup funding which is extraordinarily risky even in the best of times. As I've repeatedly noted one of the big concerns anyone with a brain ought to have is the wildly-distorted market picture you get from a long-term run of negative interest rates in real terms.

I can run a cash furnace, basically, that looks pretty good so long as I can keep financing it at ever-lower interest rates because I can roll over my alleged "debt" (whether I do it formally by redeeming the former debt or informally by issuing more at much lower coupons, thereby diluting the "blended" total rate) on a continual basis.

In theory these sorts of loans are supposed to be backed by assets when held by a bank. The question of course is always what are the assets worth if you need to sell them? The price of a used truck, for example, is very different if there are no new ones because there are no chips yet the roofers all need one to haul their stuff to jobs .vs. the converse -- the economy is in a deep recession, there are fifty new trucks on the local dealer's lot, people are putting blue tarps up instead of reroofing their house when it leaks and nobody is building new houses.

Reality is that if you hold paper at a below market rate it is always discounted to its market value. Why? Because if you have to sell it that's all you'll get; the buyer would be stupid to buy your 2% 10 year Treasury when he can have a new one at 3.94%. Therefore while it is absolutely true that if you hold it for the entire 10 years you'll get your entire $10,000 (for example) back you will also get the old coupon rate until then instead of the new one. While you can certainly make the claim that for Treasuries you can hold them to maturity that claim only holds up if they're not the backing for something else; if they are (e.g. deposits) and someone demands their money you must sell. Therefore any logical accounting practice is that on any rise in rates you may only count them as "hold to maturity" and thus "money good" if they are not part of your collateral base for something that can be called -- such as a demand deposit.

To do otherwise -- and I don't care what the Federal Reserve, Congress or FASB claims -- is fraud.

Let's remember that Colonial claimed in an earnings report that they were fine during the crash -- and about a month later the FDIC came in, closed them, and when BB&T bought the remains they published a valuation which essentially claimed the assets had lost roughly a third of their value over a month's time.

The odds of that being real across an entire portfolio are basically zero, never mind that if you're so-poorly underwriting things that it is true you're basically running a scam outfit in the first place. Either way there's no plausible legitimate explanation.

Now we're doing it again, and at the core of the problem was a known false premise -- rates would never rise and thus the cash furnace game was permanent.

No, it isn't. It never was. It never could be.

Everyone knew it too and that means representing otherwise was fraud.

So is allowing an institution to mark assets to a model when there is no guarantee that the asset will be worth the modeled price when it matures. There is only one such asset that meets this criteria and that is a Treasury obligation of some description which does not back anything that can be called, such as a demand deposit, because if Treasury fails so does the monetary system and government -- and thus the rest is irrelevant.

This specific instance is about a bank that has a portfolio of assets with very long duration that allegedly "back" its deposits and which were issued at much lower rates than today. If there is a demand for funds you can't sell them at par because nobody is obligated to buy and the other alternatives are trading at a higher coupon. Its even worse in this case than usual because roughly half, from what I can see, is 5+ years out in duration! So if that paper yields 3% but the new paper of equivalent quality yields 6% you have to discount the face to get someone to take it by the difference times the duration.

Anyone who thinks that the very same regulators that should have stomped on this six months ago didn't let other institutions do the same stupid crap has rocks in their head. Said "regulators" were, just as back in 2008, watching Redtube instead of doing their jobs so yeah, there's more to come.

If you remember we were all told back in February of 2008 that Bear Stearns was "fine"; it then failed. The next lie was that it was contained and not an indication of systemic fraud writ large among the banking and financial system generally -- the deliberate statement that alleged "assets" are in fact money good. That was a lie.

Indeed the Federal Reserve knew, as did Citibank, that Lehman was insolvent weeks before it formally blew up. How do we know this? Because it was documented in the post-mortem; they attempted a tri-party repo with Citibank (the other party being the NY Fed), Citi rejected the collateral as not worth its claimed value and thus both unsuitable and unstable and Lehman had nothing else to put up. The attempt failed and was deliberately concealed from the public as a whole but of course both The Fed and Citi knew it at that moment in time.

Many people were shorting Lehman at the time, which looked extraordinarily dangerous unless you knew they were bankrupt, in which case it was the trade of the century as you knew you couldn't lose. Was it ever run to ground as to exactly who knew, who told who and that nobody shorting the stock knew -- that is, had material inside information and was trading on it, which is illegal by the way? No.

Is this incident localized? I have no idea.

But what I'm quite-certain of is that a lot of financial institutions have loans out at crazy leverage due to the zero reserve requirements Ben Bernanke had made available to him via the TARP bill that was eventually passed (which I reported on at the time) which, in point of fact, simply accelerated a timeline that had already been there. In other words Congress had already planned to give the banks the ability to do this sort of thing before the 2008 blow-up despite it being ridiculously unsound and fraudulent. Neither party has done a thing to reverse that in the 15 years since and you'll note that not one word has been spoken about it in recent years during the Fed Chair's semi-annual testimony either. Every single one of the 535 fraudsters in Washington DC and every President since Bush has been intimately and personally responsible for same.

So is there a ticking bomb -- or three -- out there in the financial system today? Yes.

There has been for the last 15 years and nobody has been willing to cut the burning fuse.

The fuse is now in the box and nobody knows how long it is or how big the explosive is inside.

It might be a very long fuse and a firecracker. Whoopie de-doo-dah.

But given the incentives while the length of the fuse is not necessarily tied to incentives that the explosive is extremely large and might surround a hollow sphere with a pit in the center is in fact rather likely.

Folks We've seen tis (several) times Since the S&L crises, 2K tech blow-up, 2008, yet, here We, are AGAIN..
History repeats & often Rymes..
2008 is calling..
(also the Late 1970's & 1980's)
Remember interest Rates back then?

Credits.. https://market-ticker.org/akcs-www?post=248293


It's (almost) A SHORT the phone book moment..
 
SENC said:
There are plenty of moving parts here and lots of unknowns, most-specifically who's connected to what, where, and with what reserves?

Apparently the firm attempted to raise capital, failed, and now is looking for a buyer. The FDIC stepped in and locked the doors -- they typically do this on a Friday after the market closes but acted early this time.

One very interesting element of this situation is that the bank, being a bank, is supposed to have reserves against this type of loss, especially startup funding which is extraordinarily risky even in the best of times. As I've repeatedly noted one of the big concerns anyone with a brain ought to have is the wildly-distorted market picture you get from a long-term run of negative interest rates in real terms.

I can run a cash furnace, basically, that looks pretty good so long as I can keep financing it at ever-lower interest rates because I can roll over my alleged "debt" (whether I do it formally by redeeming the former debt or informally by issuing more at much lower coupons, thereby diluting the "blended" total rate) on a continual basis.

In theory these sorts of loans are supposed to be backed by assets when held by a bank. The question of course is always what are the assets worth if you need to sell them? The price of a used truck, for example, is very different if there are no new ones because there are no chips yet the roofers all need one to haul their stuff to jobs .vs. the converse -- the economy is in a deep recession, there are fifty new trucks on the local dealer's lot, people are putting blue tarps up instead of reroofing their house when it leaks and nobody is building new houses.

Reality is that if you hold paper at a below market rate it is always discounted to its market value. Why? Because if you have to sell it that's all you'll get; the buyer would be stupid to buy your 2% 10 year Treasury when he can have a new one at 3.94%. Therefore while it is absolutely true that if you hold it for the entire 10 years you'll get your entire $10,000 (for example) back you will also get the old coupon rate until then instead of the new one. While you can certainly make the claim that for Treasuries you can hold them to maturity that claim only holds up if they're not the backing for something else; if they are (e.g. deposits) and someone demands their money you must sell. Therefore any logical accounting practice is that on any rise in rates you may only count them as "hold to maturity" and thus "money good" if they are not part of your collateral base for something that can be called -- such as a demand deposit.

To do otherwise -- and I don't care what the Federal Reserve, Congress or FASB claims -- is fraud.

Let's remember that Colonial claimed in an earnings report that they were fine during the crash -- and about a month later the FDIC came in, closed them, and when BB&T bought the remains they published a valuation which essentially claimed the assets had lost roughly a third of their value over a month's time.

The odds of that being real across an entire portfolio are basically zero, never mind that if you're so-poorly underwriting things that it is true you're basically running a scam outfit in the first place. Either way there's no plausible legitimate explanation.

Now we're doing it again, and at the core of the problem was a known false premise -- rates would never rise and thus the cash furnace game was permanent.

No, it isn't. It never was. It never could be.

Everyone knew it too and that means representing otherwise was fraud.

So is allowing an institution to mark assets to a model when there is no guarantee that the asset will be worth the modeled price when it matures. There is only one such asset that meets this criteria and that is a Treasury obligation of some description which does not back anything that can be called, such as a demand deposit, because if Treasury fails so does the monetary system and government -- and thus the rest is irrelevant.

This specific instance is about a bank that has a portfolio of assets with very long duration that allegedly "back" its deposits and which were issued at much lower rates than today. If there is a demand for funds you can't sell them at par because nobody is obligated to buy and the other alternatives are trading at a higher coupon. Its even worse in this case than usual because roughly half, from what I can see, is 5+ years out in duration! So if that paper yields 3% but the new paper of equivalent quality yields 6% you have to discount the face to get someone to take it by the difference times the duration.

Anyone who thinks that the very same regulators that should have stomped on this six months ago didn't let other institutions do the same stupid crap has rocks in their head. Said "regulators" were, just as back in 2008, watching Redtube instead of doing their jobs so yeah, there's more to come.

If you remember we were all told back in February of 2008 that Bear Stearns was "fine"; it then failed. The next lie was that it was contained and not an indication of systemic fraud writ large among the banking and financial system generally -- the deliberate statement that alleged "assets" are in fact money good. That was a lie.

Indeed the Federal Reserve knew, as did Citibank, that Lehman was insolvent weeks before it formally blew up. How do we know this? Because it was documented in the post-mortem; they attempted a tri-party repo with Citibank (the other party being the NY Fed), Citi rejected the collateral as not worth its claimed value and thus both unsuitable and unstable and Lehman had nothing else to put up. The attempt failed and was deliberately concealed from the public as a whole but of course both The Fed and Citi knew it at that moment in time.

Many people were shorting Lehman at the time, which looked extraordinarily dangerous unless you knew they were bankrupt, in which case it was the trade of the century as you knew you couldn't lose. Was it ever run to ground as to exactly who knew, who told who and that nobody shorting the stock knew -- that is, had material inside information and was trading on it, which is illegal by the way? No.

Is this incident localized? I have no idea.

But what I'm quite-certain of is that a lot of financial institutions have loans out at crazy leverage due to the zero reserve requirements Ben Bernanke had made available to him via the TARP bill that was eventually passed (which I reported on at the time) which, in point of fact, simply accelerated a timeline that had already been there. In other words Congress had already planned to give the banks the ability to do this sort of thing before the 2008 blow-up despite it being ridiculously unsound and fraudulent. Neither party has done a thing to reverse that in the 15 years since and you'll note that not one word has been spoken about it in recent years during the Fed Chair's semi-annual testimony either. Every single one of the 535 fraudsters in Washington DC and every President since Bush has been intimately and personally responsible for same.

So is there a ticking bomb -- or three -- out there in the financial system today? Yes.

There has been for the last 15 years and nobody has been willing to cut the burning fuse.

The fuse is now in the box and nobody knows how long it is or how big the explosive is inside.

It might be a very long fuse and a firecracker. Whoopie de-doo-dah.

But given the incentives while the length of the fuse is not necessarily tied to incentives that the explosive is extremely large and might surround a hollow sphere with a pit in the center is in fact rather likely.

Folks We've seen tis (several) times Since the S&L crises, 2K tech blow-up, 2008, yet, here We, are AGAIN..
History repeats & often Rymes..
2008 is calling..
(also the Late 1970's & 1980's)
Remember interest Rates back then?

Credits.. https://market-ticker.org/akcs-www?post=248293


It's (almost) A SHORT the phone book moment..
Click to expand...
People who know the business cycle and crashes should know that with what happened as a result of covid and cash injections to the public, the massive amount of effort to hold the dam back from breaking is only going to make the end result worse. They held the covid recession back by throwing a ton at it and have held the crash off with other means since, but there was just too much money flying around especially with all these crypto startups and investment that people weren't reducing spending fast enough. Now for those who don't have deep pockets it's quickly showing and those deeper pockets are now panicking especially those who were with SVB. There's going to be a crash again and the longer we wait and the more money thrown at it to stop it will make it worse when it happens.
 
KyloG said:
They can't let all these deposits go...they (Fed) created this mess. Not sure what they thought, hike until something breaks, now they done broke something.

Click to expand...

Yeah I'm not the business guy and trying to really wrap my mind around all of it. On the one hand, I'm sick of Gov't bailouts, at some point it has to stop but on the other hand, as you alluded to, the horrific fed policies is what created it, so they have some culpability in this. You almost wonder if this is what they wanted ?‍♂️
 
severestorm said:
“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.” Sounds illegal.
Click to expand...
Money printer go brrr
 
metwannabe said:
Money printer go brrr
Click to expand...
Yep. They'll just print up however many trillions it takes, no matter how many banks fail. They'll call it a backstop or a facility or some other fancy word for bailout. But it's the same story every time. The market will take off and they'll all make money, like usual, while everybody else gets scared out of their minds reading all the doom and gloom stuff.
 
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