Capitalism on the way up, socialism on the way down
Bill Ackman: I expect there will be bank runs beginning Monday at non-SIB banks
11–20 of 52 posts
Re: Bill Ackman: I expect there will be bank runs beginning Monday at non-SIB banks
#12Let's say you're a company with well over the 250k limit on a bank account. How would you even withdraw that? Get it deposited on some other account (why trust the other bank more?), get the money in cash?
Wire it to a larger bank?
Re: Bill Ackman: I expect there will be bank runs beginning Monday at non-SIB banks
#13Even though I dislike this guy, he is not wrong. First Republic is most certainly going into receivership tomorrow.
That's the rumor and I imagine they got to pull the same tricks as SVB as regards to buying risky MBS without alerting the FED. But is there any evidence to support this?
https://www.cnbc.com/quotes/FRC?tab=financials
They didn't buy MBS, but they have very similar assets/liabilities. They have $17B more "assets" than liabilities, but $166B are in loans and only $4B in cash, meanwhile they have $176B in deposits that are about to be withdrawn heavily. They are going to need to liquidate those loans and you want to guess how much of a % haircut they're going to take on a liquidation of that scale, for similar assets to the MBS SVB purchased last year?
Re: Bill Ackman: I expect there will be bank runs beginning Monday at non-SIB banks
#14He is shorting?
Re: Bill Ackman: I expect there will be bank runs beginning Monday at non-SIB banks
#15Even though I dislike this guy, he is not wrong. First Republic is most certainly going into receivership tomorrow.
That's the rumor and I imagine they got to pull the same tricks as SVB as regards to buying risky MBS without alerting the FED. But is there any evidence to support this?
Long-duration fixed income assets go down in value when interest rates rise. This is true whether they're long-dated treasuries or agency MBS. Banks that finance with short term liabilities and own long-term assets are risky because of this: when rates rise the value of their assets declines while the value of their liabilities remains mostly the same.
This is a very different phenomenon than what happened in 2008. In 2008, banks owned a different kind of MBS that was poorly-underwritten, poorly documented, and truanched in a way that made their value extremely sensitive to various model assumptions. This made them extremely illiquid, meaning that if you tried to sell them in volume you would have to sell at a large discount relative to the value of the expected discounted cashflow of the security. (This is not true of 2023 MBS. These MBS are a totally different species. In 2023 rates rose, the value decreased, but we can be extremely certain of the value and they are extremely easy to sell at little discount to this value).
Contagion happened in 2008 because when there was a run on bank A, bank A had to sell its illiquid MBS at a large discount. This reduced/made uncertain the value of bank B's similar MBS, which triggers a run at bank B. In that sense, the bank A run causes the bank B run. There's no spillover mechanism in this 2023 scenario: SVB's selling its treasury or MBS portfolio doesn't meaningfully impair some unrelated bank's assets. To the extent that some unrelated bank is in trouble, it's because they face correlated macro shocks, not because there's a causal spillover.
Re: Bill Ackman: I expect there will be bank runs beginning Monday at non-SIB banks
#16Earlier quoted context omitted.
That's the rumor and I imagine they got to pull the same tricks as SVB as regards to buying risky MBS without alerting the FED. But is there any evidence to support this?
https://www.cnbc.com/quotes/FRC?tab=financials They didn't buy MBS, but they have very similar assets/liabilities. They have $17B more "assets" than liabilities, but $166B are in loans and only $4B in cash, meanwhile they have $176B in deposits that are about to be withdrawn heavily. They are going to need to liquidate those loans and you want to guess how much of a % haircut they're going to take on a liquidation of…
unplug the phones and pull the internet... seems simple enough.
Re: Bill Ackman: I expect there will be bank runs beginning Monday at non-SIB banks
#17Even though I dislike this guy, he is not wrong. First Republic is most certainly going into receivership tomorrow.
That's the rumor and I imagine they got to pull the same tricks as SVB as regards to buying risky MBS without alerting the FED. But is there any evidence to support this?
Of the information available right now, most of it says that First Republic is in a completely different position. At least based on their disclosure on Friday (https://ir.firstrepublic.com/static-files/295faa27-f208-4936...), their risk of a run due to un-insured deposits and sector exposure is much lower:
> Consumer deposits have an average account size of less than $200,000 and business deposits have an average account size of less than $500,000
… and far less of their assets are likely to share SVB's duration exposure:
> The investment portfolio is less than 15% of total bank assets.
Re: Bill Ackman: I expect there will be bank runs beginning Monday at non-SIB banks
#18Earlier quoted context omitted.
That's the rumor and I imagine they got to pull the same tricks as SVB as regards to buying risky MBS without alerting the FED. But is there any evidence to support this?
MBS are much safer today than pre GSE (government sponsored entities). SVB failed to hedge their assets. The MBS will still be worth their face value at maturity.
Yes, thank you. I feel like people are throwing around "MBS" because it's vaguely menacing and reminds people of 2008. 2023 MBS are a completely different animal; any comparison to 2008 is a total red herring from people angling for free money from the taxpayers.
Re: Bill Ackman: I expect there will be bank runs beginning Monday at non-SIB banks
#19Let's say you're a company with well over the 250k limit on a bank account. How would you even withdraw that? Get it deposited on some other account (why trust the other bank more?), get the money in cash?
Sell your deposit to somebody else at a discount if you’re desperate for cash.
Re: Bill Ackman: I expect there will be bank runs beginning Monday at non-SIB banks
#20Starting to think this was a manufactured bank run and whoever is manufacturing it wants it to spread. The first social media induced bank run. Kind of like what wallstbets did to pump worthless stocks like AMC and GME only in reverse.