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America’s banks are missing hundreds of billions of dollars

economist.com

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Re: America’s banks are missing hundreds of billions of dollars

#61

Post by nugget »

harry8 wrote: post #56
csomar wrote: post #53

Earlier quoted context omitted.

This is a wrong characterization and makes it look like it's the Fed fault all along. Government bonds still have risks (ie: The government not paying) but more importantly, they are tightly linked to the main interest rate. Their prices can fluctuate significantly and do all the time. Bankers know that. That's kind of the first or second lesson they'd teach you at a basic financial course. Everything is priced in te…

> Wrong. This is corruption. Janet is picking winners and losers. Some people are losing their deposits and some are not. You are systemic if you had dinner with Janet yesterday. Big call. Huge. Got some data or similar to back it? Edit: If there's clear picking of winners, or even plausibly so it's gonna look pretty bad. [1] [1] https://www.theguardian.com/business/2021/jan/01/janet-yelle...

Watch the exchange between Sen Lankford and Sec Yellen yourself:

https://www.youtube.com/watch?v=Bcvl104tyRY

Yellen says unsecured depositors at TBTF banks will always be bailed out, but those at smaller banks are on their own. It's one of the most incredible moments I've witnessed. I'm not sure if there's some hidden agenda being pursued, or if Yellen is just so far removed from the real world that she doesn't understand the consequences of her statement.

I'm not sure why any company or individual would hold >$250k at a non-TBTF bank after this. It borders on financial malpractice.

Re: America’s banks are missing hundreds of billions of dollars

#62

Post by pauljurczak »

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

> it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly.

It printed too much money in 2008 and the following years. It raises rates very quickly now, because each time Fed tried to raise the interest rates or reduce their balance sheet after 2008, the political pressure made them backtrack. This Frontline documentary has a pretty good take on it: https://youtu.be/EpMLAQbSYAw.

Re: America’s banks are missing hundreds of billions of dollars

#63

Post by refurb »

albertopv wrote: post #60
nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

2. is wrong, we had years of central banks money printing without inflation, recovery from Covid19 and the war are the reasons of this high inflation. Actually Fed real error has been raising rates to counter an inflation not caused by monetary policies. SVB put all their investments in one bucket and it has been a very poor decision, really a rookie one

Inflation started going up before Covid and the war in Ukraine.

Saying “the central bank printed money for years without inflation” as proof it’s not the cause is like saying a gas leak didnt cause the explosion because it’s been leaking for years.

Re: America’s banks are missing hundreds of billions of dollars

#64

Post by dboreham »

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

HTM assets aren't supposed to be sold before maturity. So the problem must be they held too few liquid assets to support deposit outflows. In turn that must either be due to asset mix not being consistent with predicted deposit flows, or actual deposit flows not being as predicted.

Re: America’s banks are missing hundreds of billions of dollars

#65

Post by vxNsr »

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

This is all gonna get brushed under the rug by most journalists because of the political party that supported most of this mess.

Re: America’s banks are missing hundreds of billions of dollars

#66

Post by dboreham »

rwmj wrote: post #11
micah94 wrote: post #8

Earlier quoted context omitted.

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.

In the UK cash deposits in brokerage accounts are guaranteed in the same way as bank accounts (up to £85,000), through the Financial Services Compensation Scheme. Is that not the same in the US? Edit: To clarify, only the cash deposits, not any shares or bonds you buy of course. Also not all brokerage accounts, only ones based in the UK which have to be registered with the FSCS.

No. Most brokerages have a "bank" account option, which is fdic insured, but doesn't pay money market interest. The default "sweep" account for cash at a brokerage is usually a money market account, not fdic insured. You can move money between those two accounts as you please of course, if you have the "bank at brokerage" type account.

Re: America’s banks are missing hundreds of billions of dollars

#67

Post by HDThoreaun »

jkhdigital wrote: post #10

“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.

Waiting for years means you were wrong in finance.

Re: America’s banks are missing hundreds of billions of dollars

#68

Post by mianos »

thedangler wrote: post #45
nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

You are forgetting all the risky investments short selling and swaps.

Funny thing is swaps are sold on the back of bonds, whose holders are prepared to lose when the market interest drops to keep the capital value stable. They are the exact instrument that protects bond holders against the above scenario, over the long term.

Re: America’s banks are missing hundreds of billions of dollars

#69

Post by refurb »

bushbaba wrote: post #57
nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

The Covid liquidity injections will be known as the worst decision of a generation. PPP loans were greater than student loan forgiveness for all. Greater than the new deal cost. Such a missed opportunity.

There were economists warning back in 2008-2010 the dangers of it.

Despite the Fed being “independent” they are under enormous pressure from the government.

The prediction was that when it was time to stop printing money the Fed wont do it fast enough since the political pressure to keep the economy going will be too high.

Pretty much exactly what happened.

Re: America’s banks are missing hundreds of billions of dollars

#70

Post by pash »

dr_dshiv wrote: post #54
JimboOmega wrote: post #28

Earlier quoted context omitted.

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.

What’s the hidden risk of money markets?

Money-market accounts are not covered by government deposit insurance. But money-market funds make a return for themselves by investing their customers’ cash in risky assets, similarly to a bank. If there’s a run on your money-market fund akin to the bank runs we’ve recently seen, the FDIC isn’t going to save you.

(Kinda. The other big distinction between a bank and a money-market fund is that the latter don’t indulge the farce of “demand deposits”. Money-market accounts are fixed-term securities, so you’ve agreed to lock up your money until some agreed upon future date, just like with a bond. That might be inconvenient for you, in comparison to a bank account, but it vastly reduces the complexity the fund faces in matching maturities of liabilities and assets to minimize run risk. As a result, together with stricter regulatory controls on their risk-taking, money-market funds fail much less often than banks do. The last time a US money-market fund broke the buck, in 2008, during the last financial crisis, the Treasury stepped in to make investors whole.)

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