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America’s banks are missing hundreds of billions of dollars
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Re: America’s banks are missing hundreds of billions of dollars
#22I’d managed to miss the memo that money market funds have such high rates now. I’ll have to consider doing the same, honestly…
Yeah, I had like $4k left in a brokerage account. Then one month I noticed ~$100+ dropped in there and I was like WTF? That's 10x what I see in my savings account for the same amount of money just sitting there! So my money market is now my savings account. The risk is that you could lose your principal...but I guess not anymore!?! Thanks SVB, FRC, et al.
https://www.reuters.com/business/finance/yellen-tells-senato...
Only if "the failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences." So maybe don't bet on it too hard.
Re: America’s banks are missing hundreds of billions of dollars
#23Earlier quoted context omitted.
AFAIU, Fidelity's cash deposits are FDIC insured but the default "core" position -- where uninvested money goes to sit -- is SPAXX, which is not FDIC insured. That position is mostly U.S. Government Repurchase Agreements, with some treasuries and agency securities mixed in. No idea what risks might be associated with everyone now treating these mutual funds as de facto bank accounts...
Money in Fidelity money market funds is protected by the SIPC, up to $500k. Specifically, for their cash management accounts: “Cash balances in the Fidelity® Cash Management Account are swept into an FDIC-Insured interest bearing account at one or more program banks and, under certain circumstances, a money market mutual fund (the "Money Market Overflow"). Deposits swept into the program bank(s) are eligible for FDIC…
The question is about systemic risk to the fund, not the brokerage.
SIPC insures the brokerage, not te position; if SPAXX goes to zero, you ain't getting nothing from SIPC.
And, to be clear: money market mutual funds ARE exposed to liquidity and credit risks, but a run on a mutual fund doesn't get the same protection as a run on a bank. https://www.fidelity.com/bin-public/060_www_fidelity_com/doc...
Re: America’s banks are missing hundreds of billions of dollars
#24ELI5. Does this mean money is being deposited in the banks but because it’s money market, it gets parked with the fed and banks can’t use it in other assets? Is that the problem?
Basically, yes; technically, not quite. The outflow that is posing serious risks is the flow from regional banks' check and savings accounts into brokerage accounts and then into repos/treasuries. It's unspecified if those brokerage accounts are at the same banks in question or at other institutions.
It's a good bet that the accounts are mostly at large brokerages and not at regional banks' brokerage services.
Doesn't matter much, really. The banks would have an issue either way.
Re: America’s banks are missing hundreds of billions of dollars
#25When was the last time anyone checked what percentage gold their gold bars are?
Today's Money Stuff opens with a story in which JP Morgan owned $1.3 million worth of nickel metal in a warehouse somewhere (for reasons having to do with metal futures trading). Somehow it was recently discovered that the bags of nickel, which have been there since early 2022, were actually full of worthless rocks.
Re: America’s banks are missing hundreds of billions of dollars
#26"The answer begins with money-market funds, low-risk investment vehicles that park money in short-term government and corporate debt. Such funds, which yield only slightly more than a bank account, saw inflows of $121bn last week as svb failed." Which banks' savings accounts are yielding anything close to money-market rates?
CapitalOne 360 yeilds 3.40%.
This is less than you would get buying short term treasuries, but not terrible.
Re: America’s banks are missing hundreds of billions of dollars
#27I’d managed to miss the memo that money market funds have such high rates now. I’ll have to consider doing the same, honestly…
Yeah, I had like $4k left in a brokerage account. Then one month I noticed ~$100+ dropped in there and I was like WTF? That's 10x what I see in my savings account for the same amount of money just sitting there! So my money market is now my savings account. The risk is that you could lose your principal...but I guess not anymore!?! Thanks SVB, FRC, et al.
I was curious so I checked PNC, and in the best case they only pay 0.04% until you have over $100k in it, then the rate jumps to 1.5%.
Re: America’s banks are missing hundreds of billions of dollars
#28"The answer begins with money-market funds, low-risk investment vehicles that park money in short-term government and corporate debt. Such funds, which yield only slightly more than a bank account, saw inflows of $121bn last week as svb failed." Which banks' savings accounts are yielding anything close to money-market rates?
SoFi offers 4.00%, and vanguards prime MMFA is 4.64%
64 basis points isn't nothing, but I think that qualifies at close - and I didn't go digging, those were just the first two that came to mind.
Re: America’s banks are missing hundreds of billions of dollars
#29I’d managed to miss the memo that money market funds have such high rates now. I’ll have to consider doing the same, honestly…
Yeah, I had like $4k left in a brokerage account. Then one month I noticed ~$100+ dropped in there and I was like WTF? That's 10x what I see in my savings account for the same amount of money just sitting there! So my money market is now my savings account. The risk is that you could lose your principal...but I guess not anymore!?! Thanks SVB, FRC, et al.
That's what I did very recently - I bought SHV which is basically short term treasuries. It pays more than a savings account, and is essentially risk free.
It pays 4.5% which only the very best savings accounts can match.
Re: America’s banks are missing hundreds of billions of dollars
#30“The scheme was a seemingly innocuous change to the financial system’s plumbing that may, just under a decade later, be having a profoundly destabilising impact on banks.” Innocuous only to the fools at the Fed, I suppose. Outlets like ZeroHedge have been watching this for years, carefully documenting the transformation of the RRP facility from an “emergency” stabilization measure into a deposit roach motel.
but zerohedge has predicted 932 of the last 3 financial crises