"Out of the woods?" For one thing, they do think it is their money! Thirty billion dollars from 11 banks? Thirty billion dollars. Not whose thirty billion dollars, just thirty billion dollars. Oh well, compared to 6.9 trillion dollars, it is pocket change.
In theory, it is the nature of banking that when you deposit your money with a bank, you authorize the bank to use a portion of the money as investment capital, in return for which you receive interest.
Given the lack of required reserves and low coverage ratios at even the major "systemically important banks", how far from this theory reality has strayed would be a topic for an entire book worth of articles!
The ethics of the bailout alone are murky at best.
However, it is indisputably to the benefit of First Republic's other depositors that the bank not collapse in a bank run. It is indisputably to the benefit of the small and regional banking sector that there be no more panicked bank runs.
By far the larger question in my mind is whether the banking sector as a whole will own up to being asleep at the wheel while Powell's rate hikes triggered a $620 billion erosion in the fair market value of banks debt securities portfolios.
Interest rates began rising in 2021, BEFORE Powell started raising the federal funds rate. The debt securities portfolios started losing money when the market rates started rising, BEFORE Powell started raising the federal funds rate.
Yet here we are, over a year down the road and the banks STILL don't have a plan for resolving the $620 Billion haircut they can't avoid getting.
"Out of the woods?"
For one thing, they do think it is their money!
Thirty billion dollars from 11 banks?
Thirty billion dollars. Not whose thirty billion dollars, just thirty billion dollars.
Oh well, compared to 6.9 trillion dollars, it is pocket change.
In theory, it is the nature of banking that when you deposit your money with a bank, you authorize the bank to use a portion of the money as investment capital, in return for which you receive interest.
Given the lack of required reserves and low coverage ratios at even the major "systemically important banks", how far from this theory reality has strayed would be a topic for an entire book worth of articles!
The ethics of the bailout alone are murky at best.
However, it is indisputably to the benefit of First Republic's other depositors that the bank not collapse in a bank run. It is indisputably to the benefit of the small and regional banking sector that there be no more panicked bank runs.
By far the larger question in my mind is whether the banking sector as a whole will own up to being asleep at the wheel while Powell's rate hikes triggered a $620 billion erosion in the fair market value of banks debt securities portfolios.
Interest rates began rising in 2021, BEFORE Powell started raising the federal funds rate. The debt securities portfolios started losing money when the market rates started rising, BEFORE Powell started raising the federal funds rate.
Yet here we are, over a year down the road and the banks STILL don't have a plan for resolving the $620 Billion haircut they can't avoid getting.
620 Billion here, 6.9 Trillion there, pretty soon you're talking Real Money.