patrick.net

Shaman says

Here’s the real fucked up thing about those bank failures: they didn’t have to happen!
The Fed is tasked with providing instant liquidity to banks in case of a run where depositors want their money. A short term loan from the Fed would have provided SVB with the cash it needed to operate until assets could be shuffled around. But the Fed declined to provide that short term money. As they also declined to do their job with Signature bank in NY.
Why?
There’s another agenda at play here.

Is this how it really works? Any bank can just get a short term loan from the Fed at a moment's notice, no strings attached?

Nobody has a stack of cash sitting at the bank in an envelope with their name on it.
Well unless it's in a safe deposit box.

If you're covered by the FDIC then it's as good as money in the bank.
We need a stable banking system and mother fuckers need to go to jail. I say we open up every fraud case going all the way back to Nixon and prosecute everyone that is still alive like a 98 year old Nazi. Round them all up and throw them in the Jeffery Epstein Prison, not one of them Harvey Weinstein vacation resorts.

Kim has a good take on the bank collapse and how it’s more of a narrative being pushed by government and big corporations who covet customers of the failed banks.

https://youtu.be/DUBKdzG5vcY

Eric Holder says

Any bank can just get a short term loan from the Fed at a moment's notice, no strings attached?

Normal market operations that happen at the Feds discount window require collateral that is "marked to market".
In general, the Federal Reserve seeks to value securities collateral at a fair market value estimate. Securities are valued using prices supplied by the Federal Reserve’s external vendors. Securities for which a price is unavailable from external vendors will receive zero collateral value.
Additionally, depending on the asset class, the value of the asset receives a haircut to minimize risk to the Fed. See the tables here:
https://www.frbdiscountwindow.org/Pages/Collateral/collateral_valuation

As part of emergency operations to deal with this crisis, the Fed opened a new one year loan facility (the Bank Term Funding Program) that values assets like those nasty 10 year Treasuries that did SVB in at par (instead of the market value that has fallen drastically due to the the higher interest rates). Note that agency debt and mortgage-backed securities can also be used as collateral.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312a.htm

Tenpoundbass says

We need a stable banking system and mother fuckers need to go to jail.

We need an HONEST banking system and you can't have capitalism without bankruptcy.

Patrick says

pudil says

But by all means, convert your cash to silver and pay to store it in a safety deposit box. No one is stopping you, we all have that option if you don’t believe in the traditional banking model that has been around for hundreds of years.

pudil You are 100% guaranteed to lose all of the money you have in paper dollars eventually:



Silver fluctuates in purchasing power, but does not ever go to zero, as paper money does.

Everyone understands that holding cash is losing money overtime because the interest rate is less then inflation.

Holding silver has the same issue, just in a different way. You need to pay storage costs. Every year you will need to sell some of your silver to cover those costs. Eventually you will have no silver.

Yet the silver remains valuable, as it has for thousands of years.

You don't necessarily need to pay for storage, and in fact having someone else store it for you is an additional risk. They might just keep it, or "lose" it.

Patrick says

Yet the silver remains valuable, as it has for thousands of years.

You don't necessarily need to pay for storage, and in fact having someone else store it for you is an additional risk. They might just keep it, or "lose" it.

If you are just talking about holding uninsured silver in your house or something that could be stolen, lost in a fire, flood, etc then I don’t think your should be complaining about risk to losing your FDIC insured deposit in a bank.

The point is, any form of value that is not invested will lose money and go to zero over time.

pudil says

The point is, any form of value that is not invested will lose money and go to zero over time.

NOT TRUE!
Here is a pick of one of my retirement funds:


I can buy room and board with gold now and I can buy it with gold when I retire and dig up my fund.

If I can remember where I buried it and nobody digs it up first.

pudil says

The point is, any form of value that is not invested will lose money and go to zero over time.

You are right.

Reality says

being hired to lead a French army to destroy the books of Venetian and Genoese banks,

Whoa. Napoleon's first targets were Italy, then the Dutch who had many large banks. Makes sense.

There was a huge banking scandal involving John Law financing the "Mountains of Emeralds" in Lousiana and later Lavoisier was playing games with the French Banking System. Don't be bullshitted that they killed Lavoisier for his scientific opinions, it was for his role in a banking scandal and he was the top guy.

Amazing explanation, Thanks Reality.

Also thanks for the Templars, then Medicis (who married into French Royalty, Catherine d'Medici was a murdering bitch), and the Fuggers and the Hansa. Also the Jesuits were deeply involved in banking. The whole "There was no interest banking in Europe until the 1500s" is bullshit.

pudil says

Still waiting for any example of anyone ever losing money in an FDIC insured account.

I'm gonna buy SVB for a dollar, change the name to The Super Stable Bank You Can Count On, and I expect your life savings in my vault by the weekend. Because you clearly believe that re-naming something makes it different. FSLIC, FDIC, completely different!

pudil says

But by all means, convert your cash to silver and pay to store it in a safety deposit box. No one is stopping you, we all have that option if you don’t believe in the traditional banking model that has been around for hundreds of years.

I'm gonna repeat myself, but it's because you keep going into the weeds and getting lost. Bad money always chases out good. Why the fuck would I pay for anything using real money(silver coin), when I can give worthless debt notes for goods and services with real value. Read what happened to especially Rhode Island after the Revolution. You assertion wasn't even true 200 years ago.

Also, if you buy coin, then keep it in a bank, where they can declare a holiday whenever they want, you really don't know what you're doing, or why.

Eric Holder says

Whatever is allowed by law. Obviously, it's not legal for FDIC to not pay out deposits below $250,001.

Read a little more on the SnL crisis. And remember morality != legality. Or talk to the people who didn't get their money back.

Eric Holder says

It's pretty much the same except some private property is allowed and farm workers do have passports. Just like FDIC is almost the same shit as prior to S&L, but nobody with deposits under $250K can be legally forced to take a haircut.

Exactly! And they were, legally forced, to take pennies on the dollar. I remember this happened at other times as well, small midwest banks that didn't even pay the pennies. Will try to find it.

mell says

That's true, but you have the problem of safe storage etc.

Versus the safe storage of fiat paper in places like SVB?

mell says

invest the rest in fiat denominated assets - which most are - that appreciate with inflation

Examples? Judging by the past 15 years not housing, stocks, bonds, cars, 401k's, IRA's.

pudil says

Holding silver has the same issue, just in a different way. You need to pay storage costs. Every year you will need to sell some of your silver to cover those costs. Eventually you will have no silver.

I've never paid storage costs. And again, that would largely defeat the purpose...

Onvacation says

pudil says

The point is, any form of value that is not invested will lose money and go to zero over time.

You are right.

Not if it's real money.

NuttBoxer says

mell says

That's true, but you have the problem of safe storage etc.

Versus the safe storage of fiat paper in places like SVB?

mell says

invest the rest in fiat denominated assets - which most are - that appreciate with inflation

Examples? Judging by the past 15 years not housing, stocks, bonds, cars, 401k's, IRA's.

NuttBoxer says

mell says

That's true, but you have the problem of safe storage etc.

Versus the safe storage of fiat paper in places like SVB?

Yes, if it's below the insurance limit you will get it all back.

NuttBoxer says

mell says

invest the rest in fiat denominated assets - which most are - that appreciate with inflation

Examples? Judging by the past 15 years not housing, stocks, bonds, cars, 401k's, IRA's.

All of these have at least roughly tracked inflation, so yes. If you do your DD you can even get ahead by buying the right stuff. I'm not against precious metals, but it depends on whether the person is able to properly store it for no to little extra cost and not lose it or have it stolen/robbed/destroyed. And when it comes to fiat money I consider a bank a better choice than putting it under the mattress or in a safe.

mell says

Yes, if it's below the insurance limit you will get it all back.

Not a distinction holders of real money have to worry about.

mell says

All of these have at least roughly tracked inflation, so yes.

So in 2008 inflation was -50%? I don't remember seeing that...

Just spoke with my Mom the other day, here 401k hasn't kept up with inflation, or even gone up at all, yet she's poured around $10k into it.

Care to revise your male-cow-excrement statement?

NuttBoxer says

mell says

Yes, if it's below the insurance limit you will get it all back.

Not a distinction holders of real money have to worry about.

mell says

All of these have at least roughly tracked inflation, so yes.

So in 2008 inflation was -50%? I don't remember seeing that...

Just spoke with my Mom the other day, here 401k hasn't kept up with inflation, or even gone up at all, yet she's poured around $10k into it.

Care to revise your male-cow-excrement statement?

That's not true, if you held your 401k and put it all into any run of the mill index fund, say vanguard, you'd have averaged 5%-7% per year. If you sold all in 2008 you will not look pretty, but that's exactly why you can rotate out of the stock market and into t bills/CDs as you get older, if you are worried about needing all your money right after a severe recession.

So for everyone harping on $250k, that's only for some banks. Others insurance stops at $100k. See Nextbank in Phoenix, or the infamous Franklin SnL for examples.

https://money.cnn.com/2002/02/08/news/nextbank/

And remember, that FDIC money has to be printed, which means they take a percentage of everyone, everyone's deposits to pay it out. But the depositors only get what they had, not calculated for the inflation that just took a bite out of their wealth. Keep bragging about FDIC all you want, until you have to take wheelbarrow's full of dollars to buy a gallon of milk.

And one more thing. How many of you will leave your money in and wait for the FDIC insurance to pay you back? Any takers? Obviously many won't, otherwise bank runs wouldn't still happen. But let's play this insurance bullshit out. Those of you with blind trust in the system, look up the highest risk bank in your area, and move your money. It's all insured right, nothing to lose...

mell says

That's not true, if you held your 401k and put it all into any run of the mill index fund, say vanguard, you'd have averaged 5%-7% per year.

My mom's account also has matching, so it's really lost closer to $20k... But you're still gonna cling to your inflation adjusted philosophy, that has not worked for her in real life? Pretty socialistic of you comrade.

mell says

If you sold all in 2008

Did you keep up with inflation or not in '08?

NuttBoxer says

mell says

That's not true, if you held your 401k and put it all into any run of the mill index fund, say vanguard, you'd have averaged 5%-7% per year.

My mom's account also has matching, so it's really lost closer to $20k... But you're still gonna cling to your inflation adjusted philosophy, that has not worked for her in real life? Pretty socialistic of you comrade.

mell says

If you sold all in 2008

Did you keep up with inflation or not in '08?

Not saying it's a glorious way to financial independence, but for many better than spending it all or risking it with more speculative investments without proper DD. Even if you store all your wealth in precious metals you need discipline and a good handle on how to store and guard it. There are pros and cons to every method, but in the end it doesn't matter whch denomination, if you own shares in a productive company, land and/or property which appreciates and/or generates rental income, you will get paid for your share/service in any denomination. I think fiat should be backed by something, gold, assets, services etc. but it's not like the greenback is worthless, in fact, if you don't mind moving to another country you can live as upper class in your golden years from a middle class USD denominated pension/401k. And if you can spot macroeconomic trends such as the 2008 bust you could have sold at least 50% in 2006-2007 and parked it, then bought it back 2008-2010 gradually and held it for another cycle of 7-8 years before taking profits again, and you would have outperformed pretty much everyone. It's how Burry got very wealthy.

I remember a guy I worked for had a wealthy brother in law. BIL decided to hedge by buying silver bars. He kept them on pallets in his garage of all places. He didn't inspect them on a regular basis. One day, he took a gander, and almost a complete pallet was gone.

His daugher was a heroin addict with thug friends and boyfriend. She had just been grabbing a bar whenever she needed to buy drugs for herself and comrades, and whittled down a fortune by giving away the bars.

Goes to show you how the fickle finger of fate works with physical assets.

All the executives of SVB sold stock and plundered SVB like a third world dictator on the way out. That means that somebody crashed SVB on purpose, and executive class were in on it. They were probably as usual given assurances they would not be prosecuted, and they could keep their graft. Even the Cramer pump scheme on TV was probably geared as prep to their telepathic bail outs.

It also seems the case that certain fair haired depositors will be selectively 'restored' at the head of the line even if the rest aren't?
Guv crooks in the receivership? Whouda thought?

Patrick says

The credit unions have something like the FDIC, but it's a different organization.

Yes, it is NCUA, also gives protection of $250,000.

Only use credit unions, wouldn’t fuck around with banks.

Ppl, here's the thing ... precious metals cannot be used for day-to-day business. At best, it's a hedge against the 'loss of confidence' in central banks managing their respective currency's value on the Forex.

So for me, I'd first bought gold below $500/oz during the Bush era, and bought a bit more, during the time when its value dropped and found support circa ~$1.1K/oz.

All and all, it's never more than 10% of my portfolio at any given time, because it has no income potential, just a way to avoid the day when the Fed, ECB, BOJ, and BOE all lose their OTC value to "mining based" economies like Australia or South Africa. For now, I don't see that latter condition happening because neither Russia, China, nor anyone else on the Road & Belt archipelago of nation-states have given confidence to global investors outside of speculative ventures.

And Australia is too small to sustain their mining economy if the Aussie spot currency price goes up X fold to accommodate a 50% haircut on the USD, EUR, JPY, & GBP. It would take many countries around the world, to make that adjustment occur.

As for equities, most stocks are accounted for by DTCC and thus, don't just disappear overnight so shares in British-American Tobacco, Rio Tinto, Altria, Verizon, Exxon-Mobil will persists, even if your brokerage account goes belly up. And all those aforementioned shares give dividends.

Patrick says

The bank can't get all depositors' money back instantly. It's impossible. And yet banks promise to do the impossible, knowing full well that they cannot.

my favorite banking or finance scene in a movie was the bank run in Its a Wonderful Life

https://www.youtube.com/watch?v=OTJCI1FNBfA

,

ForcedTQ says

Patrick says

The credit unions have something like the FDIC, but it's a different organization.

Yes, it is NCUA, also gives protection of $250,000.

Only use credit unions, wouldn’t fuck around with banks.

Haven't really checked out credit unions yet, but I will say that so-called "regional banks" had similar hype behind them for a while. So I made my way into a 1st Republic Bank many years ago to maybe give it a shot and stick it to the bigger banks. The guy had his desk in the middle of the room without any borders or walls and had me fill out an application with al my details, including SSN. I reluctantly filled out everything, then he said, it will be ready in a few hours and I should come back later. I swung by again after lunch only to find that he had also left for lunch and left my application face up in the middle of his desk in the middle of the room. I grabbed it, ripped it to pieces and stuffed it into my pockets and told another employee what happened and that I will tell everybody to avoid doing business with 1st Republic if they can. Not surprised they are in trouble. For all the annoying shit the bigger banks do, I have stayed with mine, at least they gave me a 3% mortgage ;)

mell says

but for many better than spending it all or risking it with more speculative investments without proper DD.

I'm not saying you can't game the system or pick the bones, just that it's risky, and most people are lemmings, which is why only a few sell towards the top, and buy at the bottom. As long as people are realistic and realize it's no different than a weekend in Vegas, and you don't make real wealth without putting something of value in first. This whole thought of sitting on your ass and gaming a system to get rich is not what I consider responsible.

If your housing is rural, comes with good water sources, and land is farmable, definitely worthwhile purchase. If you go into business for yourself, get a degree or license, yes again good use of your funds. But everything else is a gamble, and if you don't keep that in mind, you lose your shirt every 10 years.

I asked, so I'll tell. My net worth did not take a hit in 2008, and has had steady growth, including during the scamdemic. I always get more money when I change jobs, and I know how to diversify out of paper. I don't over-extend myself, have no debt, and we're actually better off now than we've ever been financially. And I didn't have to depend on any of the things you listed as investments.

Rin says

because it has no income potential

That's because you don't swap during the ratio swings. I've done that a few times now to increase my ounces without having to put in more money.

As to the rest, it's a gamble on a system going down. As long as you're ok if that 10% is all you come out with.

cisTits says

And, I think all retail banks should be forced into becoming depositor owned credit unions.

yeah and hire some affirmative action folk to run it too...See how long before all the money is gone.

komputodo says

yeah and hire some affirmative action folk to run it too...See how long before all the money is gone.

Hey, looks like the Bank Runs might be back on.

Our Treasury Secretary says not all deposits over $250k will get covered. Only those held at Systemically important banks.

That'll install confidence in our banking system.

https://www.msn.com/en-us/money/markets/treasury-secretary-yellen-says-not-all-uninsured-deposits-will-be-protected-in-future-bank-failures/ar-AA18IgoZ?ocid=hpmsn&cvid=f9b0751802fc422bbf34bb37ded6521d&ei=60

Misc says

Our Treasury Secretary says not all deposits over $250k will get covered. Only those held at Systemically important banks.

Systemically important" = Major Dem Donors.

Of course. The 'crisis' will be used to preferentially restore the Dem political bribers and divest the perceived enemies of the foreign occupied foreign city state of Washington DC, City of London, Switzerland etc.

https://www.unqualified-reservations.org/2008/09/maturity-transformation-considered/

You may know maturity transformation as “fractional-reserve banking,” which is one common case of the practice. A financial institution practices MT whenever it “borrows short and lends long,” i.e., promises to deliver money in the short term based on the fact that it is owed money in the long term. For example, in a classic fractional-reserve bank which takes checking deposits and uses them to fund mortgages, the bank’s promises have a term of zero (your money is available whenever you want it), and its mortgages are repaid across, say, 30 years.

https://graymirror.substack.com/p/the-golden-age-of-informal-securities

In a free-market financial system, interest rates would be set by supply and demand. In this hypothetical system, which has existed in the past but does not exist anywhere today, every borrower has an equal and opposite lender. If you want to borrow money for 30 years, find someone who wants to lend money for 30 years.

This design is stable because, borrowing genuine and exogenous cataclysms (asteroid strike, pandemic, etc), neither the demand for, nor the supply of, loanable funds, has any reason to change rapidly. Anything that cannot change rapidly is stable. Duh.

That would be capitalism. This is not how our financial system works. Our financial system is powered by continuously increasing systemic debt which is never repaid:

Paywall, but way down the page so you can read most of it for free.

Mish Shedlock is proposing a system where people could agree to not get interest payments, but otherwise their banking would be free (no fees) and safe (money not gambled with by the bank): https://mishtalk.com/economics/the-perfect-solution-to-the-banking-crisis-is-to-make-a-truly-safe-bank

Mish used to comment on patrick.net: https://patrick.net/user/mish

Specifically, we need a bank that puts 100% of its assets in overnight treasuries and makes zero loans. The bank would not need any loan officers or many operational personnel for obvious reasons. There would be no need for FDIC guarantees because there would be zero risk of a run and zero risk of losses. We can still keep the FDIC term in place, but realistically it would not be needed. In essence, we would create a 100% reserve bank.

Such a bank might pay one percentage point less than the Fed 's overnight rate for safekeeping. If the overnight rate fell below 1 percent, the bank would charge a fee for safekeeping. The bank could also do term deposits at a slight discount to corresponding treasury yields. Depositors would be required to hold assets to term.

To prevent runs on existing banks right, we would let every bank participate in this offering. Customers would have a chance to place their deposits into safekeeping accounts at existing banks.

Bank Lending

To make loans, I propose banks would have to attract investment money instead of lending money into existence. They would do so by offering higher than market interest rates on term deposits, but those deposits would not be guaranteed.

As an added benefit, this setup would end fractional reserve lending. We would have a full reserve system, unfortunately one that is not backed by gold, but it would be a huge step in the right direction.

The immediate economic reaction would likely be contractionary, but that seems to be what the Fed wants now anyway to rein in inflation.

I would agree to that, but the banks won't like it because it limits their profits. They don't care about risk because they know that taxpayers are on the hook for their losses.