patrick.net

"“Almost half of the 4,800 banks in the US are nearly insolvent, as they have burned through their capital buffers, The Telegraph reported earlier this week, citing a group of banking experts. According to Professor Amit Seru, a banking expert at Stanford University, around half of US lenders are underwater. . . .Around 2,315 banks across the US are currently sitting on assets worth less than their liabilities, according to a Hoover Institution report by Professor Seru and a group of banking experts, as cited by the media. The market value of the loan portfolios of these lenders is reportedly $2 trillion lower than the stated book value.” From RT"

https://www.rt.com/business/575878-half-us-banks-insolvent/

NuttBoxer says

The market value of the loan portfolios of these lenders is reportedly $2 trillion lower than the stated book value.”

That $2T+ will show up in inflation sooner or later.

Yes, the Fed will just buy the crap loans with money they just printed, sticking all of us with the inflation bill every day.

The Fed should not exist.

Blue says

That $2T+ will show up in inflation sooner or later.

Sooner.

Yep, bankruptcy and a return to fiscal responsibility, or hyperinflation. There are no other options.

I hope that second outcome makes everyone here think long and hard about their assets that are worthless without the dollar.

Just because interest rates were extremely low during the last cycle, doesn't mean they can't go lower than that.

In Europe and Japan, you had negative interest rates. Yes, their populations put up with that nonsense.

There can be a huge amount of debt created if we allow negative interest rates.

Misc says

There can be a huge amount of debt created if we allow negative interest rates.

Negative interest rates can happen during deflation when no one wants to borrow because they will be paying back with more valuable dollars. Not likely to happen during inflationary times.

HeadSet says

Misc says

There can be a huge amount of debt created if we allow negative interest rates.

Negative interest rates can happen during deflation when no one wants to borrow because they will be paying back with more valuable dollars. Not likely to happen during inflationary times.

I'd say it's a function of a large amount of money circulating pared with risk aversion. When EU and US were heavily engaged in QE, negative rates happened ion the EU for some t-bills cause the banks were literally saying, please take our money and invest!

Misc says

Just because interest rates were extremely low during the last cycle, doesn't mean they can't go lower than that.

Then why have they gone higher? The Fed would have preferred they stayed low, makes inflation easier. Ahh, but free market says a correction must come, so it does. The control you speak of isn't possible.

mell says

negative rates happened ion the EU for some t-bills cause the banks were literally saying, please take our money and invest!

That was actually done by the ECB as a ploy to lower the value of the Euro.

Regional banks stocks were damaged the most by the Fed Funds rate rising from 0.25% to 5.5% and to the highest level in 22 years. Many had long term US Treasuries as assets which dropped in value. Perhaps they will rally in 2024 or 2025 just like beaten down healthcare and energy stocks.



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@ad Is that an image of market cap of all stocks? If so, holy shit - that means that something close to a third of the whole market is just a few big tech stocks.

Where did you get that image from?

Patrick says

Where did you get that image from?

That map is of the S&P500 market cap. It does give one pause when you see the entire energy sector is slightly smaller than Microsoft...
https://finviz.com/map.ashx

https://www.cnbc.com/2024/02/29/shares-of-nycb-fall-more-than-10percent-after-bank-discloses-internal-controls-issue-ceo-change.html

Shares of NYCB fall more than 20% after bank discloses ‘internal controls’ issue, CEO change

The US hasn't had a functional economy beginning in 1987 when the PPT (Plunge Protection Committee) was first formed to deal with the 500 point drop in the DJIA. With the 2009 housing meltdown, the Fed assumed unlimited authority to buy up any assets in any quantity to "maintain price stability."

EJ from iTulip gave up on predicting the economy because he was convinced that it was essentially non-functional and purely run on inputs from the government and the Fed.

Hell, just look at gold. The conclusion to the Triffin Dilemma is right behind the Fed curtain. Once the curtain rises . . .

Patrick says

ad Is that an image of market cap of all stocks? If so, holy shit - that means that something close to a third of the whole market is just a few big tech stocks.

Where did you get that image from?

The heat map is from the FinViz website. It is the S&P 500. True Patrick, as I think the top 10 stocks of the S&P 500 make up about 39% of its market cap.

,

stereotomy says

EJ from iTulip gave up on predicting the economy because he was convinced that it was essentially non-functional and purely run on inputs from the government and the Fed.

Hell, just look at gold. The conclusion to the Triffin Dilemma is right behind the Fed curtain. Once the curtain rises . .

True as its a central planned or rigged economy. The Fed can come in and buy up US Treasuries when the federal government goes on a spending spree to ward off a recession.

At least in 2000 during the dot.com bust, a lot of bad companies (and bad debt) like Garden.com and Pets.com dissolved. They were plenty of other "jobbers" that eventually gone to the wayside including even Yahoo and AOL.

Winning companies or "non-ringers" made out of the dot com bust like Amazon and Microstrategy: https://en.wikipedia.org/wiki/Dot-com_party#Resurgence

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zzyzzx says

https://www.cnbc.com/2024/02/29/shares-of-nycb-fall-more-than-10percent-after-bank-discloses-internal-controls-issue-ceo-change.html

Shares of NYCB fall more than 20% after bank discloses ‘internal controls’ issue, CEO change

Deja vu all over again ...the next Silicon Valley Bank now is New York Community Bank

how more insolvent or distressed regional banks are out there ?

Maybe when the Fed Funds rate gets lowered from 5.5% to 4.5% when the 6 month simple moving average for PCE is below 3% then the regional banks with long term Treasuries as assets will not be in as much distressed conditions.

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Philadelphia Bank just failed.

https://fortune.com/2024/04/26/philadelphia-bank-implodes-failure/

Regulators have closed Republic First Bank, a regional lender operating in Pennsylvania, New Jersey and New York.

The Federal Deposit Insurance Corp. said Friday it had seized the Philadelphia-based bank, which did business as Republic Bank and had roughly $6 billion in assets and $4 billion in deposits as of Jan. 31.

Fulton Bank, which is based in Lancaster, Pennsylvania, agreed to assume substantially all of the failed bank’s deposits and buy essentially all of its assets, the agency said.

Republic Bank’s 32 branches will reopen as branches of Fulton Bank as early as Saturday. Republic First Bank depositors can access their funds via checks or ATMs as early as Friday night, the FDIC said.

The bank’s failure is expected to cost the deposit insurance fund $667 million.

Local credit union where I live has been taken over. Was already under restrictions about how much debt they could have due to failed audit(?) or similar by Feds a few years back. Before I chose a new local(semi-local) bank, took a look at their financials. This one hired some VP who didn't know lending regulations from his ass, so stayed away.

NuttBoxer says

Local credit union where I live has been taken over. Was already under restrictions about how much debt they could have due to failed audit(?) or similar by Feds a few years back. Before I chose a new local(semi-local) bank, took a look at their financials. This one hired some VP who didn't know lending regulations from his ass, so stayed away.

What do.you mean by 'taken over'?

Did another credit union buy it?