Is the stock market going to tank?

[RoooR]

[Cono Este]

Best article I’ve found.

https://open.substack.com/pub/netint...utm_medium=web

Not previously knowing banks could take such risk I’m afraid others are sitting on unrealized losses they just haven’t been marked down yet.

[Bunion 2020]

What would make you think that? Because over the past 10 years a lot of safeguards were rolled back or ignored?

02/20/2018 05:01 AM EST

U.S. senators are planning to mark the 10th anniversary of Wall Street’s meltdown this year with a gift to the nation’s banks: a bill that would unravel regulations put in place after the crisis.

The proposed rollback of some key post-crisis rules – which could advance in the coming weeks – is one of the few examples of bipartisanship in Washington since President Donald Trump’s election.

Yet the bill is driving a wedge between Democrats and threatening to magnify the party’s divisions as it fights to win back Congress this year.

On one side are moderate Democrats such as Sens. Heidi Heitkamp and Jon Tester from Republican-leaning states who support the legislation because they say it will provide relief to small and regional banks and boost rural economies.

On the other are progressives like Sens. Elizabeth Warren, Sherrod Brown and their activist allies, who argue that the bill will put consumers at risk. They’re working to undercut the party’s centrists before the vote, with several of the moderates — as well as Brown — facing tough reelection campaigns this year.

That the legislation is coming a decade after the worst financial crisis since the Great Depression has fueled passions around the debate.

“I’m amazed that, on the 10th anniversary of the 2008 financial crisis, some Democrats are supporting the Trump administration and Senate Republicans on a bill to roll back the financial rules we put in place,” Warren, a Massachusetts Democrat, said in an interview.

The bill would scale back regulations that Democrats pushed through in the 2010 Dodd-Frank Act — the sweeping statute that rewrote the rules of the financial industry and was one of President Barack Obama’s signature achievements.

Now lawmakers on both sides of the aisle say the landmark law should be recalibrated to ease restrictions on lenders, in particular the smallest banks that were not responsible for the worst excesses that led to the crisis.

For moderate Democrats from states that Donald Trump won in 2016, it’s a chance to show voters they can work with Republicans and help their local economies. Trump administration officials have been supportive of the Senate legislation.

The infighting isn’t expected to take down the bill, which probably has enough support to escape a filibuster, thanks to the 12 Democrats co-sponsoring the legislation. House Republicans, who have proposed more dramatic rollbacks, might pose a bigger hurdle. But the Senate floor debate could have repercussions in this year’s elections and beyond, as Democrats try to convince voters they can effectively oversee the economy.

Democrats who oppose the legislation are emboldened by the expectation that most of their caucus will be on their side.

Brown, who is leading efforts to undermine the bill as the top Democrat on the Banking Committee, said his party is “overwhelmingly against it.”

“I’ve talked to damn near everybody about this,” he said.

Brown says the bill’s backers are overselling its benefits to the smallest lenders and that easing rules for larger banks would threaten the economy.

“The public doesn’t want us to lay down for the banks,” he said. “The public doesn’t have collective amnesia about what happened 10 years ago like senators do.”

The legislation, approved by the Senate Banking Committee last year, has also racked up other critics among Democrats who have been floated as potential presidential contenders in 2020. Sens. Kirsten Gillibrand (D-N.Y.) and Kamala Harris (D-Calif.) say they will oppose it.

Yet as Brown leads the charge against the bill, he himself confronts tensions back home in Ohio over his role.

Ohio is the base of a substantial financial services industry, including big regional banks such as Fifth Third Bancorp and KeyCorp.

Regional banks have been lobbying for years for the legislation. The Senate bill would benefit them by raising a key threshold above which banks are subject to stricter regulation. The new trigger that banks would face under the bill is $250 billion in assets, up from $50 billion now. The higher bar for bank oversight would scale back requirements for many of the country’s largest financial institutions, such as BB&T, American Express and SunTrust.

The bill doesn’t do as much to roll back regulations for the biggest global banks based in the U.S., such as JPMorgan Chase, Bank of America and Citigroup.

Brown flirted with the idea of going along with the legislative package last year, but he was unable to reach agreement with Senate Banking Chairman Mike o (R-Idaho).

Warren, who is expected to easily win reelection this year and is seen as another 2020 presidential contender, may have more of a free hand in the debate to antagonize banks and the Democrats who back the bill.

She said the issue is “whether or not senators are on the side of protecting the economy and taxpayers or on the side of giant banks.”

“Remember Countrywide?” she said, referring to the mortgage lender that became synonymous with the crisis. “It was about $200 billion, which is smaller than some of the banks that will be deregulated by this bill. The heart of this bill is to take 30 of the 40 biggest banks in this country off the watch-list so that they can load up on risks again and if things go wrong put the American taxpayer back on the hook.”

Brown and Warren are backed by outside activists that are mobilizing to stop the bill from getting traction. They’re trying to make it politically painful for Democrats to stand up for it.

Indivisible, an increasingly influential liberal advocacy group that formed as part of the resistance to Trump’s election, has published a detailed script outlining how to rebut the bill in calls with Senate staffers.

Indivisible is also calling on its supporters to confront senators about the legislation during the congressional recess. In sample town hall questions, it suggests that voters ask Democratic senators whether they will commit to opposing “this Republican down payment on ending regulation of Wall street.”

Another progressive group, Demand Progress, has launched a social media campaign through its Rootstrikers arm identifying the bill’s Democratic co-sponsors as the "#BailoutCaucus.”

Public Citizen, the nonprofit consumer watchdog, has been making its case against the legislation on the Hill and by coordinating with allies in the states of Democrats who have co-sponsored the bill.

“We’re making it clear that there will be political consequences for being on the wrong side of this bill,” Demand Progress campaign director Kurt Walters said.

“We and others will then ramp up pressure on potential swing votes as necessary.”

o says he hopes the Senate will take up the bill shortly after lawmakers return from their Presidents Day break. Congress left town for a weeklong recess Thursday without teeing up the legislation.

For the bill’s supporters, the focus is on maintaining the core group that has helped the rare bipartisan compromise advance this far.

“We have enough votes right now to pass it,” Heitkamp said. “I know there are people who would like to see 70-75 votes. Maybe we can’t get there, but we’ll continue to have the discussion.”

“Why is it a bad bill? Why is it dangerous?” Tester said in an interview, when asked about the opposition to the proposal. “We give relief to community banks.

“This should have been done years ago. ... This is going to allow for access to capital in rural areas like Montana,” he said. “I don’t get it.”

The problem with winning over more Democrats is that there is little room to negotiate among the coalition of supporters when it comes to making changes that newcomers might seek. That’s why the biggest threat to the bill’s passage is the House, where Republicans want to do much more to dismantle Dodd-Frank. For now, it’s unclear what they will try to add to the bill and whether Senate Democrats would go along with it.

“There is a rule, and this goes to working with the House as well: You don’t get to amend this thing unless we all agree,” Heitkamp said.

Very odd that the website inserted the crap emojis where Larry o's name appeared. But fitting

[J. Barron DeJong]

Trigger warning for byates and stalefish!

Krugman’s thoughts on SVB:



https://twitter.com/paulkrugman/stat...sR_NcRK2VkCfkg

[Brock Landers]

I’m agreeing with Krugman? Fuck time to find myself a cocktail.

Best article I’ve found.

https://open.substack.com/pub/netint...utm_medium=web

Not previously knowing banks could take such risk I’m afraid others are sitting on unrealized losses they just haven’t been marked down yet.

Great article. If you haven’t, read that shit.

[JimmyCarter]

I’m agreeing with Krugman? Fuck time to find myself a cocktail.


Great article. If you haven’t, read that shit.

Seriously. Monday will be a good day to snatch up some cheap bank stocks

[pepperdawg]

Thanks.

If you see my Billy Goats in gear swap you’ll know shit the fan.

FWIW - Vibes.....shit I take the day off to go harvest some March corn w my daughter who had day off skool and damn....

[J. Barron DeJong]

Giannis knows what’s what.

[Brock Landers]

Seriously. Monday will be a good day to snatch up some cheap bank stocks

Only 3 regionals really sold off yesterday (the debt anyway). First repub, western, signature. Most others were meh and jpm debt gained. The Canadian banks actually took a bit of a whack as a whole.

We’ll see what happens come Monday but I’m sure they’re in a room right now “negotiating” over svb assets and deposits. Would Wells Fargo dare take a jump into the depositor base? And judging by who was buying the debt late yesterday afternoon I’m not sure BOA is getting it.

[schuss]

I think it's more likely an I bank buys up a bunch to juice access to startups.

[JimmyCarter]

Only 3 regionals really sold off yesterday (the debt anyway). First repub, western, signature. Most others were meh and jpm debt gained. The Canadian banks actually took a bit of a whack as a whole.

We’ll see what happens come Monday but I’m sure they’re in a room right now “negotiating” over svb assets and deposits. Would Wells Fargo dare take a jump into the depositor base? And judging by who was buying the debt late yesterday afternoon I’m not sure BOA is getting it.

FRC dropped 50ish percent in the morning, ended down 15%, and appears to be some lingering fear because it dropped another 4% AH. That might be gone by Monday, but there’s a lot of “end of the world” talk still floating around.

[LongShortLong]

Great article. If you haven’t, read that shit.

Thanks, seconding

[AK47bp]

FWIW - Vibes.....shit I take the day off to go harvest some March corn w my daughter who had day off skool and damn....

Thanks.

Harvesting some March powder today. The beauty of a season pass is you don’t have to spend any money to ski (other than gas).



Decades of wearing cheap Old Navy T-shirts and cutting my own hair and my wife finally appreciates my cheap ass money saving skills. Lol

[4matic]

Am I wrong to think the uninsured depositors should lose money unless there is private offer for assets?

[4matic]

The ex-Boeing CEO was a serious cyclist. Good way to grind out the guilt with endorphins

“That was the last question Greg Becker, CEO of Silicon Valley Bank, fielded at an investor conference on Tuesday this week.

“Cycling is my advice,” he replied. “Living in Northern California and being on the peninsula. That’s just—I think it’s the best bike-riding cycling in the world, period.”

[JimmyCarter]

Am I wrong to think the uninsured depositors should lose money unless there is private offer for assets?

I don’t think they’re getting any public money (beyond FDIC). They’ll sell what they can now, pay a large chunk of dividend with that, and the rest they’ll probably hold and pay out over time via income/ maturities.

[4matic]

I forget which commentator was talking about the failure of Silicon Valley. Instead of all that creativity going for good it has been wasted on gamification and manipulation. So if this flush resets the tech startup market and quells the money for nothing mindset let it happen. It’s what the Fed wants I think.

[4matic]

I don’t think they’re getting any public money (beyond FDIC). They’ll sell what they can now, pay a large chunk of dividend with that, and the rest they’ll probably hold and pay out over time via income/ maturities.

Clamoring for a bailout is all over the place

[JimmyCarter]

Clamoring for a bailout is all over the place

They don’t need a bailout, the money is almost all still there

[dunfree]

Clamoring for a bailout is all over the place

welfare cunts gonna welfare

[Kevo]

They don’t need a bailout, the money is almost all still there

Uhhh, I don't think the money is still there.

SVB bought long dated treasuries and MBS that have low rates. They were forced to start liquidating positions as depositors pulled money out. The instruments that they were invested in are down in the range of 25% because the Fed funds rate has increased pretty dramatically.

If you look at their filings everything looked dandy, but SVB (and other banks their size) are not required to mark their positions to market until they sell. Now that they have been forced to liquidate their positions they are going to be short by many billions of dollars.

TLDR- SVB was chasing yield and in a low rate environment and got caught with their pants down as rates went up.

[JimmyCarter]

Uhhh, I don't think the money is still there.

SVB bought long dated treasuries and MBS that have low rates. They were forced to start liquidating positions as depositors pulled money out. The instruments that they were invested in are down in the range of 25% because the Fed funds rate has increased pretty dramatically.

If you look at their filings everything looked dandy, but SVB (and other banks their size) are not required to mark their positions to market until they sell. Now that they have been forced to liquidate their positions they are going to be short by many billions of dollars.

TLDR- SVB was chasing yield and in a low rate environment and got caught with their pants down as rates went up.

Certain investments are down 25 percent but their problem was more cash flow timing mismatch. It’s not that they don’t have the “value”, it’s that they didn’t have enough of it liquid to meet client demands. As the longer dated assets mature and pay income, they should recover plenty over time, I’d guess maybe a 10 percent loss offset by FDIC insurance puts them in the single digit percentages (note: highly unscientific analysis that could end up being way off)

[LongShortLong]

They don’t need a bailout, the money is almost all still there

That's my read of the article. They either have it all, or almost all of it. The problem is it's tied up in bonds maturing over the next 6 years. So if everybody wants it now, and regulations are followed, it's not there. If everybody wants it when they normally would have withdrawn it, there would be no problem for the depositors. Technically they might be short a billion on 200B in deposits. They should have been able to raise capital to cover the deficit (presumably the institution has/had some value that would attract investors). Unfortunately for them the capital raise was badly timed, it failed, and the run accelerated.

The stockholders were in a less good place, because the bank's investments turned out to be suboptimal, meaning SVB was making less money than they could have been. I.e. they are at a competitive disadvantage compared to other banks. With the run, SVB was forced to realize losses that made its finances worse. With the failure, whether the stockholders get anything depends on how much the receiver gets for selling the assets.

If someone doesn't understand bank runs and why a good bank never has all the money, watch "It's A Wonderful Life."

I'm not an expert, just summarizing the article.

Are any startups going to fail because of this? Maybe. One that was about to withdraw and spend most of its deposit may not be able to access their funds quickly enough (say to launch their product). That one company might be unable to secure other funds and lose out on its deal. Losing the deal may result in the business failing. My guess is 99% of SVBs clients don't need all their money right away, and by the time they need it, SVB's successor institution will have it. It'll be a headache for those companies' CFOs but will work out in the end.

[LeeLau]

Cono. That substack article by Rubinstein was really good...Thx.

Imo the mark to market rules hit SVB hard; as they should have. Am still in awe that they either didn't hedge or hedged poorly

[Mustonen]

I didn’t look at their balance sheet, but they probably aren’t so leveraged that the money isn’t there. At $200B I’m sure they had ~$10B to $15B in net worth that can be liquidated. Financial institution financial performance is ruled by the balance sheet, it is very different from most other businesses, and they got on the wrong side of it plus a few other perfect storm things happened.

Fascinating to watch it play out.