CIA backed financial turmoil

[BeBMan]

Just to stay in tune with the wisdom these days: that SVB thing is certainly no coincidence. And no wonder, Biden has already revealed himself in this matter

The US will do "whatever is needed" to shore up banks after a string of failures raised fears about financial stability, President Joe Biden said.


His comments came after the US guaranteed all deposits at Silicon Valley Bank and Signature Bank, which both collapsed last week.

The US is trying to stop people taking out funds from banks after SVB collapsed amid a rush of withdrawals.

Americans should "rest assured that our banking system is safe", Mr Biden said.

People and businesses who have money deposited with SVB - the country's 16th largest bank - would be able to access all their cash from Monday, he said.

Taxpayers will not bear any losses from the move, which extends protection beyond the $250,000 (£205,000) in deposits typically insured by the government. The cost will instead by funded by fees regulators charge to banks.

"Let me also assure you we will not stop at this. We'll do whatever is needed," Mr Biden said.

(...)

This last line sounds like a threat to me

In a more serious note, let's hope this thing stays rather limited. Just a thought.

Edit: Ooopsus, no linkey, here it is: https://www.bbc.com/news/world-us-canada-64935170

[My Wife Hates CIV]

and people voted for this puppet. there is nothing like a bunker, precious metals, freezed dried food and ammo/weapons. oh! and a hyper metallic blue camero! true - also a good water filter and a lot of fuel (several types). let the liberals (try) and rule. you fools who voted for biden should be very sorry.

[BeBMan]

no beer in that bunker???

[My Wife Hates CIV]

no beer in that bunker???

captain - but you are right.

[PLATO]

To guarantee all deposits, even those above the $250K limit of insurance, is a massive move by the government. This sets a precedent that will eventually cause FDIC to become insolvent in future crisis. A "taxpayer bailout" for the depositors would have been politically unsavory but in the long run will cost the taxpayers less.

It was a necessary thing for the depositors to be made whole for economic reasons, but the logic used here is idiotic in the long run.

[pchang]

Logic has nothing to do with it. It is all about the short term sell. Just look at how people describe Social Security.

[Dauphin]

To guarantee all deposits, even those above the $250K limit of insurance, is a massive move by the government. This sets a precedent that will eventually cause FDIC to become insolvent in future crisis. A "taxpayer bailout" for the depositors would have been politically unsavory but in the long run will cost the taxpayers less.

It was a necessary thing for the depositors to be made whole for economic reasons, but the logic used here is idiotic in the long run.

Bump up the premiums the banks pay into FDIC. Let's see if the market can carry it.

[PLATO]

Bump up the premiums the banks pay into FDIC. Let's see if the market can carry it.

Not sure how much the premiums would need to increase to insure all deposits but I bet it would be prohibitive. Plus Banks are likely to be very resistant to an increased fee as many are operating on lower loan margins due to rate increases and increased cost of funds.

[Berzerker]

We carry everything

[Dauphin]

Not sure how much the premiums would need to increase to insure all deposits but I bet it would be prohibitive. Plus Banks are likely to be very resistant to an increased fee as many are operating on lower loan margins due to rate increases and increased cost of funds.

As of December 2022 there were $17.7 trillion dollars of deposits held at FDIC insured banks, of which $10 trillion was insurable. Assuming the change would make the entire balance insurable (which it may not) you would need to increase coverage for an additional $7.7 trillion in deposits. Current reserves are $128 billion, and represent 1.27% of the insurable amount. Setting aside the 2008-2013 period of the financial crisis when that ratio was nil to negative, the long term ratio has been between 1.0% an 1.4% in reserves. If it goes above 1.5% the funds are permitted to be dispersed back to the banks. The statutory minimum target for the reserve is 1.35%.

So assuming you just increased coverage, your reserve coverage drops from 1.27% to 0.72%. Not great, but still above most of the early 2010s.

You'd probably need to increase annual premiums one off by 77% to get a steady balance on the new insurable amount. And you may need a short term additional increase in premiums to build up the fund by the required $100 billion shortfall. Spread that over 5-10 years is not a huge stretch as that is exactly what happened in the early 2010s.

FDIC insured banks made $64 billion in profits in Q4 2022.

The above is guesswork on what is required. I may be wrong, but it appears achievable from what I can see.

[Dauphin]

BTW, I am not saying it should be done, only that I don't see a prohibitive cost involved.

[BeBMan]

Looks like Swiss banks aren't what they used to be

I am withdrawing my billions from Switzerland asap.

[PLATO]

As of December 2022 there were $17.7 trillion dollars of deposits held at FDIC insured banks, of which $10 trillion was insurable. Assuming the change would make the entire balance insurable (which it may not) you would need to increase coverage for an additional $7.7 trillion in deposits. Current reserves are $128 billion, and represent 1.27% of the insurable amount. Setting aside the 2008-2013 period of the financial crisis when that ratio was nil to negative, the long term ratio has been between 1.0% an 1.4% in reserves. If it goes above 1.5% the funds are permitted to be dispersed back to the banks. The statutory minimum target for the reserve is 1.35%.

So assuming you just increased coverage, your reserve coverage drops from 1.27% to 0.72%. Not great, but still above most of the early 2010s.

You'd probably need to increase annual premiums one off by 77% to get a steady balance on the new insurable amount. And you may need a short term additional increase in premiums to build up the fund by the required $100 billion shortfall. Spread that over 5-10 years is not a huge stretch as that is exactly what happened in the early 2010s.

FDIC insured banks made $64 billion in profits in Q4 2022.

The above is guesswork on what is required. I may be wrong, but it appears achievable from what I can see.

Sheds new light on my thinking. Thanks Dauphin.

[BeBMan]

So, I don't claim to be an expert on banks, but I understood that Credit Suisse is one of those "too big to fail" banks. Now it's rescued in form of a takeover by UBS, so the whole exercise results in a much bigger bank...

[Dinner]

Maybe after the crisis passes they could break the bank up into multiple competitors.