Diablo Dude

I'm aware.
Some regional banks have mismatched their assets with their liabilities.
I dont believe this will be systemic to the Big Commercial Banks. The Regionals have less liquidity and real estate risk.

But anyone that has a bunch of bonds in their portfolio purchased in a low rate environment that they are holding to maturity will have issues if their depositor base is mobile.
First Republic and PacWest come to mind.

Diablo Dude

No surprise there.
The Fed is the lender of last resort.
It's etched in stone.

usctrojanGT3

Let's hope it's not systematic but we will see less lending, tighter capital requirements, and lower bank profitability. I guess we now know what the Fed broke with their big, fast interest rate hikes.

Diablo Dude

Yes, they "exposed" the bank management team's that thought that they could simply hold low yielding treasuries to maturity and not have to deal with market to market (capital ratios).
Why the management team at the bank never got around to raising capital in the marketplace is beyond me. They didnt raise until AFTER they sold out of their bond portfolio.
Seemed ***-backwards to me. I guess the threat of a Moody's downgrade forced their hand.

And the regulators appeared to be asleep at the wheel as well. Kind of feels like 1994 all over again when Orange County went BK after the Fed raised rates 6 times.
They raised one more time after The OC filed BK and then went on an easing cycle.
Interesting times!

ipse dixit

It would be truly ironic if by raising interest rates to "save" the economy, Powell actually wrecks it.

Diablo Dude

A rising interest rate cycle ALWAYS results in something "breaking".
Nothing unusual here.

Manifold

I think the economy was due for a reckoning regardless of what Powell does with interest rates. You can't juice up the economy like that and not expect to eventually have to pay the piper. All sorts of valuations have gone crazy, and the problems didn't begin with the pandemic.

Diablo Dude

I think that you fail to realize that everything starts and ends with the Fed and its monetary policy.

M2 money supply increased a whopping and unprecedented 40% from $15.5 Trillion dollars to $21.7 Trillion dollars between February of 2020 to March of 2022.
That came from the FED. No one else. To claim that interest rates dont matter is terribly naive.

M2 (M2SL) | FRED | St. Louis Fed (stlouisfed.org)

ipse dixit

No, no.

Everything starts and ends with ADMs.

The only reason Powell is raising rates is to decrease money supply so there's less free cash and hence less money to pay for GT cars and thus lower ADMs.

Get with it, dude.

Diablo Dude

Damn!
My bad.

Boltsfan

Um, no. The Fed was part of it through quantitative easing, but fiscal stimulus was a huge part, so to say "no one else" is flat out wrong.

Boltsfan

My guess is that the Fed raises 25 bps at the next meeting. They are in a conundrum - they have the earlier inflationary data that is hotter than expected but then SVB, etc. happens. If the March CPI comes in hot or even warm, then I think they will feel compelled to raise 25 bps.

We haven't even seen the full effects of the interest rate hikes, which we will later this year, and things are already breaking. Put on your seatbelts.

Boltsfan

If the SVB assets aren't sufficient, then it comes from the Deposit Insurance Fund, which assesses financial institutions, who, in turn, will charge more to their customers. So, it depends on whether there is a shortfall and if so, then customers of banks will probably pay more in fees.

fijibubba

The SVB share holders meanwhile are left eating yellow snow. Still a ton of fallout no matter if depositors are made whole or not. Unfortunately someone is always left holding the bag and now will be unlikely able to pay their ADM. That stings, especially when most had no opportunity to liquidate...

ScratchTheItch

Is there a "values" thread anywhere tracking sale data? Asking prices are easy to see but would love some data on real-world transactions for used models. Making some space in my garage and a 992 GT3 may be on a short list of possible additions depending on price trends. Right now I'm basically just eyeballing BAT results.