Bank Run

[Erik88]

Weeks like this make me think our entire financial sector is just a scam that has been propped up by rock bottom interest rates for a decade. It feels like monopoly money. "Stonks only go up". I would not be surprised if the entire house of cards comes crashing down in my lifetime. 

[Chucktshoes]

4 minutes ago, Erik88 said:

Weeks like this make me think our entire financial sector is just a scam that has been propped up by rock bottom interest rates for a decade. It feels like monopoly money. "Stonks only go up". I would not be surprised if the entire house of cards comes crashing down in my lifetime. 

[jpx2rk]

1 hour ago, Erik88 said:

Weeks like this make me think our entire financial sector is just a scam that has been propped up by rock bottom interest rates for a decade. It feels like monopoly money. "Stonks only go up". I would not be surprised if the entire house of cards comes crashing down in my lifetime. 

Could happen before your lifetime is over.

[TGO David]

1 hour ago, Erik88 said:

Weeks like this make me think our entire financial sector is just a scam that has been propped up by rock bottom interest rates for a decade. It feels like monopoly money. "Stonks only go up". I would not be surprised if the entire house of cards comes crashing down in my lifetime. 

[Capbyrd]

17 hours ago, ck1 actual said:

Zerohedge is the best source for economic news.   If you don’t read ZH daily you are not going to make it.  
 

All eyes on Credit Suisse next.   This party is just getting started.  

Guess I ain’t gonna make it.  

[Capbyrd]

2 hours ago, Erik88 said:

Weeks like this make me think our entire financial sector is just a scam that has been propped up by rock bottom interest rates for a decade. It feels like monopoly money. "Stonks only go up". I would not be surprised if the entire house of cards comes crashing down in my lifetime. 

You’re starting to catch on.  

[gregintenn]

4 hours ago, Erik88 said:

Weeks like this make me think our entire financial sector is just a scam that has been propped up by rock bottom interest rates for a decade. It feels like monopoly money. "Stonks only go up". I would not be surprised if the entire house of cards comes crashing down in my lifetime. 

I like the way you think! Now, what do you propose we do about it?

[Garufa]

27 minutes ago, gregintenn said:

I like the way you think! Now, what do you propose we do about it?

“Suck it up” as my jr. high football coach instilled in us, lol.  We had no say in running up downs and sprints, just like there’s not a freaking thing the common man can do to change how the system works.

Edited March 16, 2023 by Garufa

[Chucktshoes]

3 hours ago, Garufa said:

“Suck it up” as my jr. high football coach instilled in us, lol.  We had no say in running up downs and sprints, just like there’s not a freaking thing the common man can do to change how the system works.

It’s not gonna stop. 
No it’s not. 

[Grayfox54]

On 3/15/2023 at 5:34 PM, BigK said:

Isn't it ironic that the same crooks we elected and sent to DC are the same ones that created the laws to regulate the shady bankers? Then the shady bankers outsmart them and taxpayers are left holding the bag for the cost of the flawed regulations. If the headsman's ax is coming out for one single shady banker it better be coming out for all the complicit .gov bureaucrats too.

I'll say it one more time. 

We have the best government money can buy. 

[BigK]

On 3/15/2023 at 5:45 PM, Chucktshoes said:

The difference being the armed criminal doesn’t spend tens of millions of dollars on lobbyists and political donations to gain the ability to write the laws to benefit them. It’s not an apples to apples comparison. 

that's fair

[analog_kidd]

I know we can't change the system, but what I want to know is what can we do to insulate ourselves from the impending doom?

Do we stockpile cash in jars in the back yard?

Start buying gold and silver?

Real Estate?

Do I need a years supply of stockpiled food?

[gregintenn]

17 minutes ago, analog_kidd said:

I know we can't change the system, but what I want to know is what can we do to insulate ourselves from the impending doom?

Do we stockpile cash in jars in the back yard?

Start buying gold and silver?

Real Estate?

Do I need a years supply of stockpiled food?

All solid ideas.

[NoBanStan]

1 hour ago, analog_kidd said:

I know we can't change the system, but what I want to know is what can we do to insulate ourselves from the impending doom?

Do we stockpile cash in jars in the back yard?

Start buying gold and silver?

Real Estate?

Do I need a years supply of stockpiled food?

Definitely have some cash on hand, because if the economy were to completely tank, you will need kindling.

I like the idea of precious metals, i really do, but i can't help feeling like they're only good for when you're backing something with it, like cash.

real estate is great if you can pay for it outright, but then you'll have taxes

Food is always a good idea, more importantly the ability to replace said food (and protect it)

Ultimately, prayer is the best answer IMO.

[bersaguy]

I called my banker the other day and asked her if I needed to worry about my small 2 accounts and she pulled up my accounts and told me that I need not worry as my accounts would be covered by FDIC if anything should happen to my bank but she also added that my bank is a small town bank chain with no branches outside of Tennessee in regards to the banks that are going belly up and they have no connection with any of them at all. I did go and draw out some cash to have on hand incase stores quit taking my bank card.

[NoBanStan]

DIdn't i hear rumor that this bailout money that "didn't come from taxpayers" was FDIC money?

[bersaguy]

11 minutes ago, NoBanStan said:

DIdn't i hear rumor that this bailout money that "didn't come from taxpayers" was FDIC money?

I have heard and read a couple options about the broke banks with a couple bigger banks have made offers to buy them out and pay their debts in the Chapter 11 bankruptcy and Our Liar N  Chief has said the Taxpayers will NOT be on the hook to bail them out.

[gregintenn]

1 hour ago, bersaguy said:

I called my banker the other day and asked her if I needed to worry about my small 2 accounts and she pulled up my accounts and told me that I need not worry as my accounts would be covered by FDIC if anything should happen to my bank but she also added that my bank is a small town bank chain with no branches outside of Tennessee in regards to the banks that are going belly up and they have no connection with any of them at all. I did go and draw out some cash to have on hand incase stores quit taking my bank card.

Your local bank is likely sound under normal operating circumstances. The trouble comes when fear spreads and everyone shows up at once demanding to withdraw their money. I doubt there is a bank in existence prepared to handle that.

If you have 100k in a savings account, they don’t just stick it in a safe in the back and pay you interest for getting to store it. They loan it out or invest it or whatever.

 

My feeble understanding is that Silicon Valley Bank had bought a bunch of government bonds a one point something percent interest. Once the interest rates on bonds rose due to the federal reserve raising the prime rates, the face value of the bonds held by SVB declined rapidly. At this point, you can hold them to maturity and get back their face value or sell them on the open market and lose your shirt. Word got out and customers got nervous and started demanding their money. Selling the bonds wouldn’t generate enough money to cover the withdrawals, so here we are.

I’m sure it’s way more nuanced than this, but you get the basic idea.

Edited March 17, 2023 by gregintenn

[GlockSpock]

12 minutes ago, gregintenn said:

Your local bank is likely sound under normal operating circumstances. The trouble comes when fear spreads and everyone shows up at once demanding to withdraw their money. I doubt there is a bank in existence prepared to handle that.

If you have 100k in a savings account, they don’t just stick it in a safe in the back and pay you interest for getting to store it. They loan it out or invest it or whatever.

Winner.

You deposit $100,000, they keep $10,000 and then loan $90,000 to someone else. They spend it on firearms and then another person deposits that $90,000. They (the bank) keep another $9,000 of that and loan out $81,000. So on, and so on, and so on.

A single $100,000 deposit creates so much more than that in deposits. This is of course an oversimplification of the big picture but in a gist it represents how it works. It is regulated by a reserve rate.

So what happens when the bank that has $10,000 of your money and $9,000 of the next guy's has a run and both of you demand your $100,000 and $90,000 back?

Edited March 17, 2023 by GlockSpock

[jpx2rk]

28 minutes ago, NoBanStan said:

DIdn't i hear rumor that this bailout money that "didn't come from taxpayers" was FDIC money?

The current administration is saying something to that effect.  Consider the source. 

The FDIC insurance money (fund) you reference is made up of assessments (a %) on all insured bank deposits reported on the quarterly FDIC call reports.  This fund is to cover/insure customer deposits up to the maximum amount (currently 250K per account/depositor) in the event a bank is closed by the FDIC and no other bank assumes (buys) the assets and liabilities of the failed bank.  In most cases (failures) another local or regional bank purchases the "failed bank" (assets, liabilities and RE) and life goes on for the customers except for the hassles of dealing with a different bank and their policies, etc.   IF no other bank purchased the failed bank, then the FDIC insurance fund would pay the depositors as needed up to the max limits.  The FDIC would operate the bank only long enough to collect on all the outstanding loans, and pay off all of the liabilities (deposits),  

The FDIC insurance fund would be replenished by the ongoing assessments  on all other banks under the FDIC insurance program, but if the "fund" were to be depleted due to a large bank failure with no purchasing bank, then the quarterly insurance assessments would be increased to replenish the fund, and those banks would probably have to increase their fees or reduce the interest rates they pay to cover the insurance assessment increase.  So, the taxpayers could/would end up paying for it.

[btq96r]

On 3/16/2023 at 1:55 PM, Erik88 said:

Weeks like this make me think our entire financial sector is just a scam that has been propped up by rock bottom interest rates for a decade. It feels like monopoly money. "Stonks only go up". I would not be surprised if the entire house of cards comes crashing down in my lifetime. 

[btq96r]

26 minutes ago, jpx2rk said:

The FDIC insurance money (fund) you reference is made up of assessments (a %) on all insured bank deposits reported on the quarterly FDIC call reports.  This fund is to cover/insure customer deposits up to the maximum amount (currently 250K per account/depositor) in the event a bank is closed by the FDIC and no other bank assumes (buys) the assets and liabilities of the failed bank.  In most cases (failures) another local or regional bank purchases the "failed bank" (assets, liabilities and RE) and life goes on for the customers except for the hassles of dealing with a different bank and their policies, etc.   IF no other bank purchased the failed bank, then the FDIC insurance fund would pay the depositors as needed up to the max limits.  The FDIC would operate the bank only long enough to collect on all the outstanding loans, and pay off all of the liabilities (deposits),  

The FDIC insurance fund would be replenished by the ongoing assessments  on all other banks under the FDIC insurance program, but if the "fund" were to be depleted due to a large bank failure with no purchasing bank, then the quarterly insurance assessments would be increased to replenish the fund, and those banks would probably have to increase their fees or reduce the interest rates they pay to cover the insurance assessment increase.  So, the taxpayers could/would end up paying for it.

FDIC can borrow from the government, issue debt, and likely have money appropriated by Congress.  It's not easy to tap their cash reserves, but it became a conversation during the 2008 GFC.  That was one of the drivers behind the Fed and Treasury marrying the banks up making Too Big(ger) to Fail.  It saved the question of how far the FDIC could stretch from becoming an operational problem.

[bersaguy]

29 minutes ago, GlockSpock said:

Winner.

You deposit $100,000, they keep $10,000 and then loan $90,000 to someone else. They spend it on firearms and then another person deposits that $90,000. They (the bank) keep another $9,000 of that and loan out $81,000. So on, and so on, and so on.

A single $100,000 deposit creates so much more than that in deposits. This is of course an oversimplification of the big picture but in a gist it represents how it works. It is regulated by a reserve rate.

So what happens when the bank that has $10,000 of your money and $9,000 of the next guy's has a run and both of you demand your $100,000 and $90,000 back?

If I had $100,000. 00 in the bank I sure would not be living in Gordonsville in a house that needs a new roof that I am going to help my Daughter and Son-in-Law pay to have one put on soon. 

[bersaguy]

6 minutes ago, btq96r said:

FDIC can borrow from the government, issue debt, and likely have money appropriated by Congress.  It's not easy to tap their cash reserves, but it became a conversation during the 2008 GFC.  That was one of the drivers behind the Fed and Treasury marrying the banks up making Too Big(ger) to Fail.  It saved the question of how far the FDIC could stretch from becoming an operational problem.

Anything can fail at some point if it is not operated correctly.......JMHO

[AuEagle]

On 3/15/2023 at 3:59 PM, gregintenn said:

If only we could swap over to a government controlled digital currency, this sort of thing couldn’t happen any more.