Topic: Bank Bailouts and Stock Market. (Read 263 times)

SVB may have had an effect in the way people looked at banks these past few months but I don't think they directly affected the banking situation, cause you have to remember that SVB is a business bank, which means it handles balances and capitals of businesses which are probably worth tens of millions if not more. The regular consumer bank couldn't hope to amount to that value so I don't think bank runs will translate to consumer banks cause who the fuck is going to worry about them not being able to withdraw their 10 bucks on chase or AMEX?

Kiddings aside bank runs on business banks are still on the table and the 250k bailout that the government would give them wouldn't amount to the losses they incur in the process. Let it sink in.

The threat of bank runs across a regional banks. I agree bailing out the wealthy by letting inflation run rampant is the last things the government should be aiming to do but at the same time. I do believe there was a real threat that there would be many other banks facing similar bank runs to SVB leading to much larger economic impact. Majority of the blame for this should fall on the bank executives for making the decisions they did to invest in fixed interest long term assets and I agree they should not be profiting from this at all. But I think there is a little more nuance to the government's decision than just help their donors out.

It is true that many sources hold the Ukrainian-Russian conflict responsible for the economic instability and contagion of assets in the world. The conflict has created geopolitical uncertainty and tension, which could have a negative impact on the global economy.

The general question that arises Will economic instability end without a settlement of the Ukraine-Russia conflict??

I think there are several possible scenarios carried out by the parties where economic stability can be restored without a full resolution of the conflict. such as diplomatic resolutions, lifting of economic sanctions, diversification of energy sources and economic resilience.

I am not the biggest expert on this topic, but if I understand the issue at hand correctly, it is not only a liquidity crisis because of securities that have not matured. The banks' equity capital took some serious hits because they have unrealized losses on their balance sheets of $620 billion at yearend 2022.

But you are right as the report says that once the banks are going to sell those securities below their face values, they do indeed have liquidity issues as their cash flows are way below what was initially planned or expected.

That's interesting and I wonder why so many big and experienced banks get into trouble so easily when actually they should know better in the first place. But the risk is worth it, they can play the lottery day in day out because they get saved anyway.

It's not that simple to raise interest rates again when there's a liquidity crisis.

Understand the options the federal reserve have right now are either let the banks collapse and hope they get scooped up by the larger financial players (which is what would happen considering these banks are sitting on assets will eventually mature to somewhat of a return) OR they introduce liquidity into the system by pausing the interest rates hikes and bailouts which will prolong the inflation crisis.

The reason this crisis is occurring is because of interest rates hikes in the first place. Would the federal reserve rethink their course of action seeing the mess they've caused? I'm not in support of such matters but certainly the White House would support bailouts considering the world economy is in a fragile state. Elections are close.

It's probably just starting. During the last Banking/Financial Crisis, there where Banks that made press releases that they were "OK", one of them was Lehman Brothers.


As a response, the Federal Reseve SHOULD pause, BUT they CAN'T because of inflation.


"It's probably just starting".

 

Bitcoin to find a new bottom? Buy the DIP, and HODL.

That's one important aspect and the other aspect is that protection mechanisms will be tested from time to time no matter what. Who tells you that a bailout is certainly going to happen if no bank runs happened for a long time? The "what if" will always be around and systemic risk is no constant either, it can change over time.

Banks and financial institutions in general also know a lot more about state finances than the average individual person. If they sense faulty tendencies within the system, they also know that a situation where even the (indebted) government gets overwhelmed is not impossible.

It's not like everyone now thinks forever that because the government protected assets yesterday, they will do it without a doubt forever in the future. Lehmann Brothers are a good example that bailouts might be denied.


I think that these bailouts produce very, very bad incentives for big financial players because there are two mechanisms that a bank must pursue in order to never go bankrupt.

1) become very large and interconnected
2) load up the systemic relevance gained through 1) with leverage / risk

and you turn your institution into the house with an edge even over the government. It is not "make" or "break", it's "make" or "nothing happens".

As is stated here, AIG was bailed out while Lehmann was not because AIG was several times more interconnected than Lehmann. That's where the problem kicks in as I mentioned above. Banks have an incentive to become systemically relevant and then go all in.

Credit Suisse had a series of scandals, the consequences of which are devastating. Cutting 9,000 jobs means 9,000 people are left behind. The chain reactions of these events have a bigger impact than is often portrayed in the media.

But nobody is even interested in all this stuff anymore. It's part of our daily lives. Bailouts, banks crashing, sometimes not even worth the articles. But pumping up some Bitcoin news is worth the headlines. It is more interesting for people to read what this new thing is doing. That's probably not even a bad sign.

In addition, When Interests rates will increase it put a negative impact on the economy and eat it away slowly in the long term which in a result made more people in need of loans and there is high interest in loans for borrowers in the future. This will cause banks with less capital to bankrupt. So i am agreed with you. more interests are definetly going to be increased because they want to increase their interest profits. but I do not know what plan they have to deal it with later.

I was wondering how this increment in interest will help SVB's situation because as far as i think it will give borrowers a reason not to take loans from SVB which in a result reduces their Interest Profits. i think is it, giving people not chosen for being independent of taking interests from banks.

Overall, these banks are taking advantage of people's needs by giving them or i do not know how to buy by convincing them to take interest so that their plans could succeed. because the more the condition of the economy will go down the more will people came to take loans and the more interest and profits they will make.

while bankruptcies and layoffs may continue to occur, it's important to remember that the stock market and bitcoin are not necessarily accurate indicators of the overall state of the economy

regarding your thoughts on the banking contagion being over, while it's true that the government and federal reserve have taken measures to protect banks and prevent bank runs, it's important to note that the underlying economic conditions that led to the contagion in the first place have not necessarily been resolved.

 economic instability and uncertainty can still lead to further shocks in the financial system, and it's difficult to predict how people will react to future events

Many sources credit the ukraine-russia conflict as being responsible for economic instability and asset contagion in the world.

If that is true, is there a scenario where economic instability ends without the ukraine-russia conflict being resolved?

If a poll was conducted where people of the world were asked what the number #1 leading cause of economic instability was, I wonder what source most would hold accountable? I have not seen any anger or negativity directed towards Putin or russia as being responsible for these issues. If such is a major trend in america, I have not seen much evidence for it.

At present, there appears to be a large disconnect between narratives published by the media and public opinion. As time passes, this disconnect appears to be growing larger and more pronounced.

Whatever official sources and experts are saying. Fewer and fewer people appear to be accepting their message over time. Which is an interesting scenario.

I think layoffs won't be avoided, that will happen one way or another, that is coming for sure, however if bailouts happen then we are going to see a lot less banks and bankruptcies as well.

They should be able to save themselves if there is an injection of money, just like we saw in the 2008 crash that when you give these banks hundreds of billions of dollars to save themselves, they will somehow manage to do that and it could be a big debt on their shoulders but they will manage to handle it when they are conservative with their money instead of betting on silly stuff. They just need years to get it back but they will do so, so I do not think that we will lose any more banks if bailouts happens.

To keep fighting for low interest rate and lower inflation from FED isn't really going far for how long this have been yet know solution to bring cost down. High rates is a function of recession caused by COVID-19 and cost rates won't just drop automatically because of regulation. How that regulation affects an unregulated market like bitcoin is yet to be known.

The only beneficiary is the big giants, which are the banks that have assets higher than a trillion dollars, as the possibility of their bankruptcy is less, and therefore all liquidity will be transferred to those banks, and then there will be no global financial crisis.
Generally, the scenarios are open to all possibilities, but changing the speed of interest rates may not be an option at the present time.

    -   When the Fed announced about the emergency bank funding programs to prevent banks from collapsing. Because of this, the closed bank like SVB, its depositors will get all their money, which is why it is considered a bailout.

https://www.nbcnews.com/business/business-news/treasury-says-will-back-silicon-valley-bank-deposits-rcna74570

And due to the FED's announcement, bitcoin suddenly pumped up.

Raising the interest rates won't help for calming down the financial markets. Having higher interest rates would make many banks and companies more vulnerable to the risk of getting bankrupt, because their debts will become more expensive.
The only thing FED could do is to provide some sort of financial support to the problematic banks. AFAIK, those banks aren't insolvent, they are illiquid, which means that they can't pay all their liabilities because most of their capital is locked in long term assets(which takes time to be sold and converted into money). I don't know what the Federal Reserve will do, but raising the interest rates isn't the best move right now.

The cryptocurrency market has also been affected, with the USDC "stablecoin" initially falling after its creator Circle said it had made a sizable investment in SVB. Nonetheless, the crypto market has shown signs of resilience, with the Bitcoin price dropping as low as $19,549.09 before surging to nearly $26,386.00 in the near term.

I think the Federal Reserve is trying to calm financial markets after the collapse of the SVB, and will probably raise interest rates another size at its next meeting in response to the situation. This is despite the fact that inflation remains high, and the stock market is likely to continue to see further bankruptcies and layoffs.

What kind of new bottom are you talking about these past few days? I thought you were done with your predictions which were 100% wrong and now for some reason you are still spreading FUD.


You are the first one who is completely lost and you got it all wrong, but if you want to dig yourself an even deeper hole, go ahead.

Well, no.

Because SVB served businesses mostly, and not individuals, which means there are a lot of accounts with millions of dollars of funding inside of them, that will all be hit because of their liquidation. So FDIC protection is really only good for consumer banks - business account bank runs will still be a thing.

The fact that bank stocks price is going down does not mean that they are hit by bunk run. It only means that investors are scared that it will continue.

What FED did is they simply changed a bank investments into YOLO trades. As a bank, you either make a good investment and profit or bad investment and be bail-out. We leave in a YOLO times right now. All 3 banks that went bust did terrible mistake in their balance sheet.

Just like OP. I don't think that it will affect rate hikes.

If you are looking at the bond markets, which are generally correct (except last week) they are saying we will get rate CUTS at the end of the year. And what the fed did, still didn't stop the bank runs we had today. Look how many regional banks traded at negative double digits, pretty much like a repeat of that Covid crash day 3 years ago.

I think they will pause and see what happens. If the CPI is still going to keep printing high and unemployment is going to go lower, then they will obviously have no choice but to reverse course. However so far their increase rate hikes is breaking things and they need to slow down.