by Brian Shilhavy
Editor, Health Impact News
While the Fed’s move yesterday (Sunday, March 12th) to bailout depositors from the Big Tech banks that crashed in recent days may have prevented a stock market crash today, it did not stop the bank runs, and more than 30 banks halted trading at one point today.
The Fed/TSY/FDIC stepped in and saved the world again last night… but nobody told regional banks, whose shares are down dramatically today…
Admittedly off the lows of the day, but all with multiple trading halts today. FRC, WAL, and MYFW are the highest default risk banks in the Russell 3000 Banks Subsector, according to Bloomberg…
But it’s not just the small banks who are seeing default risk increase, all of the global majors are seeing CDS spreads rise…
Most banking is done online now, so long lines at banks to withdraw funds are not something most are going to see these days. What is happening instead is that customers are withdrawing their funds from the riskier, mostly smaller banks, and putting them into larger banks that they believe are “too big to fail” because they believe the Fed will step in to prevent that.
The unexpected demise of Signature Bank over the weekend, along with the failure of Silicon Valley Bank on Friday, ignited a shoot-first-ask-questions-later reaction among regional-bank investors as customers moved deposits to the largest U.S. banks for perceived safekeeping, observers said Monday.
Stocks of regional banks such as First Republic Bank FRC, -58.93%, Western Alliance Bancorp WAL, -44.16%, PacWest Bancorp PACW, -27.53% and Zions Bancorp ZION, -20.82% dropped Monday even after U.S. bank regulators set up a new emergency-loan program as a backstop for deposits.
Over the weekend, crypto-friendly Signature Bank SBNY, -22.87% was closed by regulators, even though only a minority of its deposits were tied to digital currency. The company was hit hard despite the fact that it derives most of its business from traditional commercial banking services to companies outside the world of startups and digital currencies.
“Investors are scared by a flight of deposits to the too-big-to-fail banks,” Janney Montgomery Scott bank analyst Christopher Marinac told MarketWatch. “It’s a perception problem that’s become a perception crisis.”
Even though the Federal Reserve announced a new backstop program and President Joe Biden declared U.S. banks safe, investors remain skeptical about the fixes in place for the banking system — or they simply haven’t taken the time to absorb the moves by regulators to calm investors, Marinac said.
“There’s a disbelief out there that the there are no more failures coming,” he said. (Full article.)
While this is quickly turning into a partisan issue with each side blaming the other, open up your wallet and look at the color of your federal reserve notes (known as U.S. dollars). They are GREEN, not blue, and not red.
You “reap what you sow” is a fact of life, not only in agriculture (you can’t plant corn and expect to harvest watermelons), but also in the financial world, and after years of corruption in the business world and financial markets, the time to reap the consequences seems to be upon us.
America has prospered for too long off the backs of cheap labor outside the U.S. while investments and start up firms have become just as risky and worthless as gambling in Las Vegas, throwing money around as entertainment without producing anything of real value.
This is a MORAL issue, not a political issue. The time to pay off our debts that we have immorally been ignoring for decades, no matter which political office has been in power, is now upon us it would seem.
ReallyGraceful has a nice summary in a video she published today.
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Published on March 13, 2023