skip to Main Content

We’re In The Middle Of A Housing Market Bust, So We’re Gonna Watch Prices Tumble

A report from Reuters. “A ‘bull case’ scenario for the shares of beleaguered First Republic Bank as it considers its options became more difficult on Wednesday after Treasury Secretary Janet Yellen said there is no discussion on insurance for all bank deposits without approval from the U.S. Congress. ‘I have not considered or discussed anything having to do with blanket insurance or guarantees of deposits,’ she said. Her latest remarks affected all regional bank stocks, said R.J. Grant, head of trading at Keefe, Bruyette & Woods. ‘Yellen struck a different tone for sure. There was this feeling that there was behind-the-scenes talks in Washington that depositors would be protected,’ Grant said.”

“Even if it clinches a cash infusion, the lender will probably need to take losses on securities in its so-called held-to-maturity portfolio, the Morgan Stanley analysts wrote. A potential buyer would need to absorb $26.8 billion in mark-to-market losses from First Republic’s loan and securities portfolios, while an extra $9.5 billion is needed to recapitalize the bank, the Morgan Stanley analysts estimated.”

From Bloomberg. “‘It’s astounding that Yellen and Powell would have given contradictory messages on bank deposits at the same time,’ said Steve Chiavarone, senior portfolio manager and head of multi-asset solutions at Federated Hermes. ‘Powell essentially said that all deposits are safe, Yellen said, ‘Hold my beer.’ You would have thought that they would have coordinated.'”

Yahoo Finance. “Shares of PacWest Bancorp fell Wednesday morning after the company said it had $1.4 billion in new cash from a firm backed by Apollo, its deposits were down 20% since the start of the year and it had abandoned an effort to raise capital. The regional lender, based in Beverly Hills, Calif., came under intense investor pressure following the failures of Silicon Valley Bank and Signature Bank. Shares have dropped 49% since Silicon Valley Bank’s seizure by regulators on March 10, and were trading down more than 17% Wednesday as of 4:40 pm ET. PacWest’s bank was the nation’s 53rd largest as of Dec. 31, with $41 billion in assets.”

“PacWest added that it has drawn $3.7 billion in loans from the Federal Home Loan Bank, $10.5 billion from the Federal Reserve’s discount window and $2.1 billion from a new Fed program that offers one-year loans to banks holding assets that are now worth less as a result of rising interest rates.”

Business Insider. “Nick Sullivan was facing a sudden squeeze. For the past few years, his two Airbnb properties around Charlotte, North Carolina, had generated as much as $7,000 a month in revenue, which he and his wife stashed away for retirement. But this past fall, that income was slashed in half: Bookings dropped, his homes were empty more often than not, and his monthly revenue sank to $3,000. His cleaner was actually the first to point out the slowdown in bookings — she told Sullivan the same thing was happening with various rentals all over town. ‘We started panicking and started connecting with other folks who we know have short-term rentals,’ Sullivan told Insider. ‘We don’t know what’s going on.'”

“Sullivan is not alone. Whispers of an apocalyptic ‘Airbnbust‘ have spread online among short-term-rental hosts facing empty booking calendars, stiff competition for guests, and tumbling earnings. The shift has sparked fears of an irreversible slide in the business and a broader economic slowdown. Big Bear Lake, another popular vacation spot in Southern California, represents the flip side of La Quinta. The city has a permitting process for STRs but doesn’t limit the number of rentals allowed to operate there. From 2020 to 2021, the number of nights available at short-term rentals there increased by 17.3%, but demand grew by only 7.2%.”

“Evan Engle, general manager of Destination Big Bear, which manages more than 400 rentals on behalf of homeowners in the area, said business has returned to its pre-pandemic pace. But the outlook might not be so sunny for an investor who bought a home there when prices were at record highs. ‘People who purchased homes within the last two years paid 30% or 40% more than the previous owner, expecting to have 30% or 40% more revenue, and that’s just not happening,’ Engle said.”

The Orange County Register. “The median price of a Southern California home — or the price at the midpoint of all sales — was $690,000 in February, CoreLogic reported Wednesday, March 22. That’s down $2,000 from a year ago and down $70,000 from last April and May when home prices went into an eight-month nose dive. Sales, meanwhile, fell 37.6% to 11,068 transactions in the 12 months ending in February, CoreLogic reported. That’s the second-lowest tally for a February and the fourth lowest for any month in records dating back 35 years.”

“Homes are taking longer to sell and are going for a lot less. Just a third of Southern California’s homes sold above the seller’s asking price, compared with two-thirds a year ago, Redfin figures show. Time on the market averaged about eight weeks vs. 3 ½ weeks last year.”

From Cal Matters. “In this economy, who has enough money for a down payment on a house? Despite a projected $25 billion budget deficit, the state of California does. At least for now. The California Housing Finance Agency is poised to launch a scaled-down version of its new shared equity home loan program on March 27. With the Dream for All program, the state plans to provide $300 million worth of down payments for an estimated 2,300 first-time homebuyers.”

“The median price of a previously-owned, single-family home in California, as tracked by the California Association of Realtors, increased 47% from March 2020 to May 2022, when it peaked at $900,170. Since May 2022, the state’s median home price has fallen 16.5% to hit $751,330 in January. Jake Lawrence, a 41-year-old cannabis entrepreneur in Willits who also runs a nonprofit, said he liked what he heard. ‘I’m very interested. The problem we face is that there’s such a flux in what’s going on,’ Lawrence said. ‘We’re in the middle of a housing market bust, so we’re gonna watch prices tumble for a minute.'”

From Bisnow. “Commercial real estate valuations have been dropping this year, and some industry leaders are worried they are locked on a path toward disaster in the absence of government intervention. Of the $5.5T in debt tied to multifamily and commercial properties in the U.S., a shade over 50% was originated by banks, according to Trepp and Federal Reserve data cited by Real Estate Roundtable CEO Jeffrey DeBoer. Of that debt, $936B is scheduled to mature this year or next. ‘A deflationary spiral must be avoided at all costs,’ DeBoer said. ‘As recent events are only amplifying the contraction of credit, it is important for the agencies to take measures to maintain sufficient liquidity levels and support positive economic activity.'”

The Real Deal on Illinois. “Appraisers are still drilling Chicago offices, yet may have changed their tune on a prominent but troubled Central Loop hotel. New evaluations performed on 300 West Adams Street in the West Loop and a Lincoln Property Group-owned office complex in the western suburbs punished their owners in recent weeks as neither asset has generated much momentum leasing space that tenants dropped in recent years. It’s a massive loss in valuation from the time the loan against the hotel was issued in 2018, when the property was appraised at $560 million, loan data shows. A Cook County judge issued an order of foreclosure against the property’s owner, New York-based Thor Equities, for defaulting on its mortgage last summer, setting the hotel up to be auctioned.”

“Meanwhile for offices, the size of losses keeps growing. At 300 West Adams, a 12-story, 254,000-square-foot building across the street from the Willis Tower, the property value has fallen 47 percent to a $20 million appraisal as of February, down from $38 million in 2012 when its former owner, Pennsylvania-based Alliance HSP, obtained a $25 million loan against the property, Morningstar shows. And the Central Park of Lisle office complex had its value fall to $68.3 million this month, down nearly 50 percent from an appraisal of $135 million when its $79.5 million loan was issued in 2017. The Lisle asset’s loan has been in special servicing since September, and matured in January without being paid off, according to Morningstar.”

“Its value has slid enormously. Its appraisal fell to $130 million when its loan was sent into special servicing earlier during the pandemic, and it’s plummeted yet again, to $90 million, or $69 per square foot, down from $330 million when the $100 million loan on the property was issued in April 2015, Morningstar data from this month shows.”

Battlefords Now in Canada. “The head of the Saskatchewan Realtors Association called fraud charges laid against two now-former realtors in Saskatoon ‘unfortunate’ and ‘surprising.’ Chris Guerette, CEO of the association, said she’s only been learning the same limited information as the public from police about the investigation. ‘We don’t even know how such things are possible,’ she said on Gormley on Wednesday, calling it a ‘really unfortunate case.'”

“The confusion over how eight mortgage applications with false documents were discovered at a financial institution — with police searches eventually turning up more, linked to further banks — comes as a result of knowing the intricacy of real estate transactions. Guerette said a significant number of people are involved in every transaction, including the bank, realtors, appraisers and lawyers. ‘It’s a bit surprising that it did take this long to have such an unacceptable situation brought to light,’ she said.”

The Globe and Mail in Canada. “Long-time financial advisor Keith Brown heard from a young father who’d seen the payments on his $3.2-million mortgage soar in the last few months. He purchased the expensive house a couple of years ago and took out a $2.2-million mortgage at a low variable rate, with a $1-million down payment. Because his current payments are now at more than $14,000 a month – an extra $57,000 a year – he had come to Mr. Brown for advice. Mr. Brown, who’s been in the business for 40 years, usually works with high-income families on tax and estate planning. The man was not a client, but he was struck by his predicament.”

“‘You are going from 1.7 per cent or 2 per cent to 6.5 per cent in a period of months,’ he says. ‘People can sustain that for awhile, but eventually they run out of their cash or have to go into savings like RRSPs to pay their bills. We are in this market where people have been buying property and they’re over their heads because it’s so expensive. It’s not that unusual to see people paying over 50 per cent of their income on housing – and that’s too high.'”

This Post Has 131 Comments
  1. ‘Yellen struck a different tone for sure. There was this feeling that there was behind-the-scenes talks in Washington that depositors would be protected’

    Where did that ‘feeling’ come from RJ? Don’t tell me the media pulled it out of their a$$.

    ‘The confusion over how eight mortgage applications with false documents were discovered at a financial institution — with police searches eventually turning up more, linked to further banks — comes as a result of knowing the intricacy of real estate transactions. Guerette said a significant number of people are involved in every transaction, including the bank, realtors, appraisers and lawyers’

    Sound lending!

    1. That “feeling” came from the gov itself. The Fed and Congress have been spoiling us with bailouts for the past 20 years, so of course they’ll take care of us this time too.

      You can even see it in the tone of the Bisnow article you posted: “locked on a path toward disaster 🤡in the absence of government intervention. 🤡” As if government intervention is a given, like hanging on until the next social security check.

      1. of course they’ll take care of us this time too.

        The problem then becomes: Which of us get taken care of (in a good way) and which get thrown under the bus? And do you know which one you are!

        1. You are asking the same questions that Senator Lankford of Oklahoma asked of Janet Yellen. She has answers for you:

          1. Too big to fail banks get taken care of
          2. Regional banks get thrown under the bus
          3. You know you’re ok if you’re a) woke b) Chinese c) generous with your campaign contributions

  2. ‘We’re in the middle of a housing market bust, so we’re gonna watch prices tumble for a minute.’

    That’s the spirit Jake, let em bleed it out!

    1. While some people might think that a 190K job where you do zero work is a “dream job”, anyone with some sense knows that is a huge red flag and it won’t last,

      1. If she was earning $190K to basically do (or not do) HR recruiting, then what were the engineers — you know, the people who worked on actual Meta products — earning?!?

        1. On average, probably the same as she was, because they don’t want the men to be better paid than the womenfolk, even if they do different jobs. 200K is a decent coder salary in the bay area. Some with hot specialties will make more.

          Of course, now that profitability matters again, a lot of make work people are being shown the door, regardless of gender.

  3. ‘We started panicking and started connecting with other folks who we know have short-term rentals…We don’t know what’s going on’

    You picked a bad time to get into the hotel biz Nick. Sux to be you.

    ‘People who purchased homes within the last two years paid 30% or 40% more than the previous owner, expecting to have 30% or 40% more revenue, and that’s just not happening’

    Evan, these people are winnahs! The minor respiratory illness made those shacks gold, pure GOLD!

    1. STR’s should be zoned like hotels, permitted like hotels, insured like hotels, and taxes like hotels.

      1. There’s still something to be said for the original AirBNB, when you rented out a room in your personal home, or the granny flat or converted garage on your property; no big deal. It’s those single-family party houses that are the problem. And I still think the local jurisdiction should be able to vote on whether to allow STRs. A weekend rental in Rehoboth Beach is very different from a Thursday night party in a middle-class suburb.

        1. They’re also beneficial in college towns for big weekends – football, graduation, parents, etc. especially when hotels jack prices up so high. I have one booked in Tallahassee for next fall. The price I’m paying for 2 nights is the same as some 3 star hotels are charging nightly. And this one is in a duplex where the owner lives in the other half.

          1. ‘They’re also beneficial in’

            I’ve mentioned before I lived on an island that was probably 80% plus some sort of short term rentals. It was a resort town, lot’s of SF timeshare/condotels duplex fourplex, etc. Everybody knew it and it had long been that way. Tourism was the economy. What changed was forcing this into millions of places that weren’t like that by exploiting local guberments, bribing and throwing lawyers at them.

  4. ‘Homes are taking longer to sell and are going for a lot less. Just a third of Southern California’s homes sold above the seller’s asking price, compared with two-thirds a year ago’

    They aren’t even breaking down the various sh$thole crater. Nope, the entire southern part of the state is following bay aryans sinking like a turd in a well.

  5. ‘his current payments are now at more than $14,000 a month – an extra $57,000 a year…It’s not that unusual to see people paying over 50 per cent of their income on housing’

    Morer sound lending!

    1. “He purchased the expensive house a couple of years ago and took out a $2.2-million mortgage at a low variable rate, with a $1-million down payment.”

      The proverbial night crawler on the hook!

    1. “Future historians studying Great Depression 2.0 will ask in wonder who let Grandma Yellen take the wheel.”

      1). It’s not possible to guarantee all bank deposits in the U.S. $19.5T deposits vs. $23T GDP. U.S. Federal debt at $32T. Unfunded liabilities at $90-100T. Why do you think there’s a $250k limit now?

      2). Then there’s that moral hazard thingy. If all deposits taxpayer-backed, then no limit on risky investments. This leads to more bank failures. Duh!

      3). These are the same people promoting a $1T coin. Need 122-132 of these thingys. Right….

      – We’re in the very best of hands…. Morons running the country.

      1. You can’t usher in the Great Reset & CBDCs until you first destroy the existing economy. This is happening by design.

      2. – We’re in the very best of hands…. Morons running the country.”

        They don’t have the any idea of how it all works except for protecting their billions .

    2. Grandma Yellen just looks stupid. How she made it this far in life
      Is beyond me. She must have an IQ of 80.

  6. Ever notice how the super-wealthy who built their fortunes on the Fed’s “No Billionaire Left behind” monetary policies instantly turn into whiny lil’ bit*ches at any hint that “privatized wealth, socialized losses” might change to mean taxpayers & the Fed’s printing press won’t make them whole on their gambling losses?

    1. Their fearmongering to lobby for bailouts gets a little over the top at times: “If I don’t get my bailout, humanity is doomed.”

  7. “As long as it takes”

    Russia Today — Bloc’s members must arm Ukraine for long term – NATO (3/23/2023):

    “Ukraine’s foreign backers should be prepared to maintain their military support for a long time, NATO Secretary General Jens Stoltenberg has said.

    “The need [for weapons] will continue to be there, because this is a war of attrition; this is about industrial capacity to sustain the support,” the official told the Guardian newspaper on Wednesday.

    Former Russian President Dmitry Medvedev has also said he expects a drawn-out conflict. Discussing the confrontation between Western nations and Russia, he said that “years, even decades to come will not be calm”.

    But unlike Stoltenberg, Medvedev blamed Western nations for the hostilities. The “Anglosaxon world” cannot tolerate a sovereign Russia whose policies it can no longer influence in the way it did in the 1990s, he stated in an interview released on Wednesday. He claimed the Western goal is to split Russia into smaller pieces, which could then be demilitarized and exploited.

    Nobody in the U.S. outside of the Beltway supports Ukraine.

    American taxpayers stand with RUSSIA the nation of peace and prosperity, because they know we are natural allies, and that Ukraine is a parasite state.

  8. “Nick Sullivan was facing a sudden squeeze. For the past few years, his two Airbnb properties around Charlotte, North Carolina, had generated as much as $7,000 a month in revenue, which he and his wife stashed away for retirement. But this past fall, that income was slashed in half: Bookings dropped, his homes were empty more often than not, and his monthly revenue sank to $3,000.

    Die, speculator scum!

  9. Property taxes?

    House Judiciary Finds Biden DOJ Had ‘No Legitimate Basis’ To Target Parents As ‘Terrorists’ (3/22/2023):

    “House Republicans on the Judiciary Committee found the Biden administration had “no legitimate basis” for deploying counterterrorism resources against concerned parents who showed up at school board meetings, a Tuesday report concluded.

    The House Judiciary Committee published the interim staff report with the Select Subcommittee on the Weaponization of the Federal Government, accusing Attorney General Merrick Garland of colluding with left-wing interests to intimidate parents.

    “It appears, from these documents and the information received previously,” read the report, “that the Administration’s actions were a political offensive meant to quell swelling discord over controversial education curricula and unpopular school board decisions.”

    Republicans on the Judiciary Committee led by Ohio Rep. Jim Jordan launched an investigation into the Department of Justice (DOJ) days after the attorney general issued an October 2021 memorandum directing the FBI to label activist parents with “threat tags.” Garland’s guidance came five days after the White House approved recommendations from the National School Board Association (NSBA) that encouraged using counterterrorism measures against parents who spoke up at meetings.”

    You are not alone if you no longer recognize the country you grew up in.

    Marxist globalists have hijacked your country. Your property taxes will be extracted from you, at gunpoint if necessary, and used to finance the brainwashing and grooming of your children.

    And if you dare object, Merrick Garland (phony Anglicized name) will toss you into the January 6th gulag.

    Under Marxism, children are property of the state.

  10. ‘A deflationary spiral must be avoided at all costs,’ DeBoer said.

    Why? A mass extinction event of the speculators who binged on 15 years of QE would be the best thing that could happen to this country, along with tribunals and swift, severe justice for the gold collar criminals at the Fed and our captured, complicit regulators, enforcers, and ratings agency scumbags.

  11. Does it seem to risk asset HODLers like the Fed is through with rate hikes, and they can safely back up the truck now?

      Updated Thu, Mar 23 20239:12 AM EDT
      S&P 500 futures rise as investors bet the Fed is done hiking: Live updates
      Tanaya Macheel

      Stock futures rebounded on Thursday from a 500-point loss in the Dow Jones Industrial Average as investors bet the Federal Reserve was done hiking interest rates.

      Futures tied to the Dow Jones Industrial Average added 24 points, or 0.07%. S&P 500 futures rose 0.4%, and Nasdaq-100 futures advanced by 0.9%.

      Regional banks rose in the premarket, with the SPDR S&P Regional Banking ETF (KRE) climbing 1.7%. First Republic was the best performer, gaining more than 10%. PacWest and Western Alliance also advanced.

      The Fed’s decision and subsequent comments by Chair Jerome Powell at the conclusion of the policymakers’ two-day meeting on Wednesday weighed on stocks.

      The central bank raised rates by 25 basis points, as expected. It also hinted that its inflation-fighting tightening campaign could be nearing the end, with the removal of the phrase “ongoing increases” from its statement. While Powell said that “rate cuts are not in our base case” for the remainder of 2023, traders priced in expectations of the central bank lowering rates this year.

      1. So does it seem like the FED lost the war on inflation after the first sign of bank failures ?

        1. Wouldn’t cascading defaults help cure massive credit expansion?

          The Fed curing its own creation is somehow funny.

    2. Axios Homepage
      13 mins ago – Economy & Business
      Bank of England raises interest rates again after hot inflation report
      Courtenay Brown
      Andrew Bailey, governor of the Bank of England, at a news conference last month.
      Photo: Chris Ratcliffe/Bloomberg via Getty Images

      The Bank of England raised rates by a quarter-percentage point on Thursday, the latest central bank to press on in an effort to tackle inflation despite signs of stress in the global banking system.

      Why it matters: The move came after a surprisingly sharp jump in price gains in the U.K., where inflation in the year through February reached 10.4%.

      What they’re saying: In a statement, Bank of England officials said they expect inflation will “fall significantly” in the coming months, thanks to a government cap on household energy bills and a drop in wholesale oil prices.

      Officials also said that the U.K. banking system was “resilient,” though noted the sharp moves in global financial markets since the failure of Silicon Valley Bank and in the lead-up to UBS’s purchase of Credit Suisse.

      The bottom line: Hotter-than-expected inflation continues to complicate policy decisions for central bankers.

      Before Thursday’s decision, the Bank of England had previously hinted its aggressive rate hiking campaign — underway since December 2021 — could soon pause after a more benign outlook for inflation.

    3. Economic News
      Think Inflation Is Bad in the US? See What Other Countries are Dealing With
      A map of global inflation shows inflation is under better control in the U.S. than in most large economies
      By Diccon Hyatt
      Updated March 22, 2023
      A woman works at the Buenos Aires Central Market on March 16, 2023 in Buenos Aires Province, Argentina. Official inflation rate hits 102.5% in the last twelve months and it is the worst register since 1991. Inflation, along with corruption and poverty, is one of the main concerns of the Argentinians who will be heading to polls in October to vote for president.
      Tomas Cuesta / Getty Images

      The U.S. isn’t the only country contending with increasing prices that are squeezing household budgets—countries around the world are also grappling with inflation, and in most cases it’s worse.

      The Federal Reserve raised its benchmark interest rate again Wednesday, the latest move in its year-long effort to tame consumer price increases running at 6% a year as of the latest data. Other central banks around the world are facing similar problems. On Tuesday, inflation in the U.K. came in hotter than economists had anticipated, rising to a 10.4% annual reading in February from 10.1% in January, the British government said Wednesday.2

      The map below shows the inflation rates in most of the world’s biggest economies, those of the G20.

    4. From groceries to clothes, inflation-weary Americans flock to cheaper products online
      By Matt Egan, CNN
      Published 9:56 AM EDT, Tue March 21, 2023

      New York CNN —

      Nearly two years of high inflation has caused many consumers to say goodbye to premium goods in favor of cheaper alternatives.

      New research from Adobe Analytics, shared with CNN, spells out the scale of this trading-down trend playing out in online shopping.

      Across 11 categories of e-commerce, high-priced goods have lost meaningful market share to low-cost ones, according to Adobe.

      For instance, the most expensive quartile of personal care products held 31% of the market as of January 2019. As of the end of February this year, these pricier products make up just 7% of the market, according to Adobe.

      The cheapest tier of personal care products doubled its market share over that span to 54%.

      “As inflation hits consumers and really impacts their buying power, they are shifting to the cheaper products offered online — across the board,” said Vivek Pandya, lead analyst at Adobe Digital Insights.

      The trend is taking place even as inflation continues to cool off from a 41-year high hit in the middle of last year.

      A similar story is playing out in groceries, where prices on everything from meat and fruit to eggs have spiked over the past two years.

      1. Thrift stores are seeing hefty business. Yesterday I tried to go to Salvation Army to kill 15 minutes of time, and couldn’t find a parking space.

    5. The Financial Times
      Federal Reserve
      ‘Close to thin ice’: looming credit crunch puts pressure on Fed
      US central bank’s rate-raising campaign thrown off course by worst bout of financial turmoil since 2008 crisis
      Jay Powell
      The US central bank, whose chair is Jay Powell, raised rates by a quarter-point on Wednesday
      Colby Smith in Washington yesterday

      As Jay Powell fielded questions from journalists on Wednesday following the US Federal Reserve’s decision to plough forward with another interest rate rise, he quipped that it had been “quite an interesting seven weeks”.

      The Fed chair was speaking after the bank raised rates by a quarter-point and signalled it might be close to concluding its campaign to stamp out inflation following the most aggressive monetary-tightening campaign in decades.

      The end of painful rate rises would normally be a cause for relief, even celebration, but for one inconvenient fact: the reason the Fed thinks it can afford to let up is the worst bout of banking turmoil since the great financial crisis of 2008 — and one that critics of the US central bank argue it should have seen coming.

      1. The Financial Times
        Credit Suisse Group AG
        Swiss regulator defends $17bn wipeout of AT1 bonds in Credit Suisse deal
        Writedown after takeover by UBS enraged holders of risky bonds
        Credit Suisse signage
        US bondholders are preparing to fight the Swiss government over its decision to write down $17bn of Credit Suisse bonds
        Sam Jones in Zurich and Oliver Ralph in London 7 hours ago

        Swiss financial regulator Finma has defended its decision to wipe out a huge swath of risky subordinated bonds as part of the Credit Suisse rescue deal.

        The move taken on Sunday, which rendered SFr16bn ($17bn) of investments worthless, has become one of the most controversial elements of the shotgun marriage between Credit Suisse and its larger rival, UBS, brokered by Swiss authorities.

        Just hours after the deal was announced, other large market regulators began to distance themselves from the decision, fearful that it would endanger banks’ ability to raise capital in the future.

        1. “shotgun marriage”

          That’s an interesting alternative model to the too-big-to-fail bailouts that were so popular back in 2008.

    6. DOW 30 +0.71%
      S&P 500 +0.96%
      NASDAQ 100 +1.51%

      Stocks may crash 30% and the US economy could suffer a 2008-style collapse as the ‘everything bubble’ bursts, expert says
      Theron Mohamed
      Mar 23, 2023, 4:53 AM
      Stephanie Pomboy.
      John Lamparski/Getty Images

      – Stephanie Pomboy expects US stocks to plunge 30% and a broad economic downturn to take hold.

      – Consumers, businesses, and real estate developers are being hit by soaring interest rates, she said.

      – The Macro Mavens founder and economist warned the impending crash could rival the Great Recession.

    7. Finance ·Banking
      ‘A historic, sad and very challenging day’ as Switzerland goes from 2 financial giants to just one and the world banking system teeters
      BY Jamey Keaten, Ken Sweet and The Associated Press
      March 20, 2023 at 8:17 AM PDT
      Axel Lehmann, Chairman of Credit Suisse, left, sits beside Colm Kelleher, Chairman UBS, during a press conference in Bern, Switzerland, Sunday March 19, 2023.
      Peter Klaunzer—Keystone/AP

      Banking giant UBS is buying troubled rival Credit Suisse for almost $3.25 billion, in a deal orchestrated by regulators in an effort to avoid further market-shaking turmoil in the global banking system.

      Swiss authorities pushed for UBS to take over its smaller rival after a plan for Credit Suisse to borrow up to 50 billion francs ($54 billion) failed to reassure investors and the bank’s customers. Shares of Credit Suisse and other banks plunged this week after the failure of two banks in the U.S. sparked concerns about other potentially shaky institutions in the global financial system.

      Credit Suisse is among the 30 financial institutions known as globally systemically important banks, and authorities worried about the fallout if it were to fail.

      The deal was “one of great breadth for the stability of international finance,” said Swiss President Alain Berset as he announced it Sunday night. “An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.”

      Switzerland’s executive branch, a seven-member governing body that includes Berset, passed an emergency ordinance allowing the merger to go through without shareholder approval.

      Credit Suisse Chairman Axel Lehmann called the sale “a clear turning point.”

      “It is a historic, sad and very challenging day for Credit Suisse, for Switzerland and for the global financial markets,” Lehmann said, adding that the focus is now on the future and in particular on the 50,000 Credit Suisse employees, 17,000 of whom are in Switzerland.

      Following news of the Swiss deal, the world’s central banks announced coordinated financial moves to stabilize banks in the coming week. This includes daily access to a lending facility for banks looking to borrow U.S. dollars if they need them, a practice which widely used during the 2008 financial crisis. Three months after Lehman Brothers collapsed in September of 2008, such swap lines had been tapped for $580 billion. Added swap lines were also rolled out during market turmoil in the early stages of the COVID-19 pandemic in March of 2020.

      “Today is one of the most significant days in European banking since 2008, with far-reaching repercussions for the industry,” said Max Georgiou, an analyst at Third Bridge. “These events could alter the course of not only European banking but also the wealth management industry more generally.”

      Colm Kelleher, the UBS chairman, hailed the “enormous opportunities” that emerge from the takeover, and highlighted his bank’s “conservative risk culture” — a subtle swipe at Credit Suisse’s reputation for more swashbuckling, aggressive gambles in search of bigger returns. He said the combined group would create a wealth manager with over $5 trillion in total invested assets.

  12. Propaganda and lies from The Atlantic:

    “The fact that six weeks ago almost no one was talking about banks’ balance sheets, let alone bank runs, and today everyone is makes it seem as though this crisis came out of nowhere. But its true origins go back almost exactly three years, to spring 2020. The banking system’s current woes are in real sense a product of the pandemic.

    After COVID-19 hit the U.S., bank deposits soared. The pandemic-relief measures—including stimulus payments, expanded unemployment insurance, and Paycheck Protection Program funds—put more money in people’s hands, even as consumer spending fell. At the same time, businesses cut back sharply on spending and investment. The result was a flood of money into the banking system. In 2020 alone, according to the Federal Deposit Insurance Corporation, bank deposits rose by 21.7 percent, the largest increase since the 1940s. The following year, deposits rose by another 10.7 percent. At the end of 2021, total bank deposits were an astonishing $4.4 trillion greater than they’d been just two years earlier.”

    CCP Flu didn’t print all that fake money. Government printed all that fake money.

    There was no pandemic. Every alleged covid death was the flu re-diagnosed using phony PCR testing, and the majority of those who died were fats and olds.

    CCP Flu was the means to orchestrate the biggest wealth transfer from the working class and middle class to the 0.01% pigmen.

    “We’re all in this together” = enjoy the hyperinflationary destruction of your savings, and the permanent erosion of your standard of living.

    Greatest fraud of my lifetime.

    1. What I find interesting is that technically the banks were pre-bailed out back in 2020. They were hit with a tidal wave of fresh money. The ones failing now had to work really hard to screw things up so badly in just a couple years. The reality is that serious fraud is being conspicuously overlooked.

      1. The reality is that serious fraud is being conspicuously overlooked.

        Lots of stories of insider loans from the failing banks.

        1. “Lots of stories of insider loans from the failing banks.”

          Sure, then use the funds to short the same lender.

    2. “At the end of 2021, total bank deposits were an astonishing $4.4 trillion greater than they’d been just two years earlier.””

      They are conveniently forgetting that during 2022, those same consumers spent that astonishing $4.4 trillion, either on post-pandemic celebrations or just buying high-price food and gasoline. Consumers have already withdrawn that $4.4 trillion and are now building debt on their credit cards. Nothing to do with the banking system.

      1. during 2022, those same consumers spent that astonishing $4.4 trillion

        Not according to the Fed. The household savings rate has not gone negative.

  13. A reader sent these in:

    Does this yahoo know how reckless his comments are? Heck. I don’t even have to NAME him. “I would be surprised if deposit outflows don’t accelerate immediately.”

    “I think right now what we need to focus on is the fact that the committee members now see the terminal rate at the end of 2024 as being higher, 4.3% instead of 4.1%…the implication is higher for longer than the markets are anticipating.” #fed

    Hope @Carvana can handle rejection. “A group of funds holding most of Carvana Co.’s more than $5 billion in bonds will oppose a restructuring plan that the online auto seller wants as a way to rein in its debt load.”

    Few appreciative we now have THREE large US banks that have tried & failed to raise capital. YES, THIS IS SERIOUS.

    Powell: Rate cuts are not in our base case…and that’s all I have to say. * Powell then literally leaves the conference *

    A failed bank by any other name is…“*FIRST REPUBLIC CUT TO B FROM BB BY FITCH, MAY BE CUT FURTHER”

    Blackstone’s Global Head of Private Wealth Solutions Joan Solotar warns that traditional office real estate in the US is “much worse than people think”

    This is “RICH”! The two biggest crook Ponzi participates are going after the FED cause they don’t like rate increases!

    ALL increases to home values in excess of inflation are related to interest rate manipulation. This wasn’t an accident, its was a robbery

    CITI: “This was the first week of [Citi credit card] data following the disruption within the financial sector, and we were curious if it might have had an impact on the consumer. It sure did. .. biggest decline in total retail spending .. since the pandemic began (April 2020).”

    “I don’t think the Fed should pause the 25 basis point hike,” says Former Dallas Fed President Richard Fisher. “Banks are responsible for managing risk as [the Fed] raises rates… they failed.”

    When boomers complain about how hard they have it, remember, a household headed by someone with a high school degree in 1960 made $6,300/yr or $63,600/yr adjusted for inflation. Median income high school today: $41,028. Median home price 1961 $19,382.20 or $195,667.

    “Those idiots at SVB didn’t understand deposit concentration risk” – multifamily GP who only buys in Phoenix

    Global Inflation Rates…

    Global Central Bank Update:
    -The Fed hiked rates for the 9th time, 25 bps increase to 4.75-5.00%. This is now the highest Fed Funds Rate since September 2007.
    -Hong Kong: 25 bps hike to 5.25% (9th hike)
    -Saudi Arabia: 25 bps hike to 5.50% (9th hike)

    Curve starting to steepen now. Credit cycle downturn fast approaching and the steepest leg of bear mkt right around the corner. Mega techs always last, they’re the most liquid.

    A few regional banks will blow up next in a matter of days, then commercial and residential real estate, then auto lenders like Ally and Capital One. I’m assuming freedom of speech still allows this Tweet, and I’m not going to jail for spreading “fear”.

    Signature shut down
    Wells notice for Coinbase after hours
    US enforcement moving to shut down crypto
    Good fu*cking riddance. Several years too late but I’ll take it
    Crypto is a categorical, unequivocal, and absolute net-negative for the world

    As of this week, the average used auto loan rate is OVER 14%. We haven’t seen these numbers in decades.

    Reminder that banks & brokerages are making a KILLING on your un-invested cash, when Uncle Sam’s <6 month Treasuries or Money Market Funds pay almost 5%. Meanwhile in 4Q22, the average cost of payables to brokerage clients was 0.35% at $SCHW 😖. Get that cash working, for you!

    Take-a-ways from FOMC presser:
    (1) soft-landing fallacy has finally been disposed of (a banking crisis will do that)…expectation is now of a hard landing
    (2) Fed is still committed to holding in a restrictive posture until there is more distress in credit markets

    Jerome said they are not worried about CRE (which means they are using Dame Judy Dench’s logic)

    (4) they may take additional steps to protect the banking sector (while maintaining a restrictive posture)…which suggests they intend to leave non-banks out in the cold by selectively protecting only banks and letting credit otherwise deteriorate

    $COIN is down 20% after receiving an SEC Wells Notice. Since 2/8/2023, no one on $COIN’s team has purchased shares in the company. Instead, company insiders sold over thousands of shares before the big drop. Here are the attached transactions.

    There is now one official who sees rates ending this year between 5.75% and 6%, compared with zero in December.

    1. “I’m assuming freedom of speech still allows this Tweet, and I’m not going to jail for spreading “fear”


      “This sucker could go down” — George W. Bush, 2008

    1. My klaxon horn sounds-off whenever I see a celebrity acting as an oracle for some investment scheme or product.

    2. FWIW bitcoin is at 28,500 today, it has almost doubled off the lows. Either there is a massive amount of easy money still being passed around or there is a well orchestrated fraud occurring. Maybe both?

    1. California announces deal on oil, gas refiner profit penalties
      By Eli Walsh Bay City News 9 hrs ago
      Valero Refinery in Benicia

      Gov. Gavin Newsom and the leaders of both houses of the state Legislature announced a deal this week on a proposal to penalize oil and gas companies for allegedly artificially inflating gasoline prices.

      The proposal, Senate Bill 2, would allow the California Energy Resources Conservation and Development Commission to establish a cap on an oil company’s refining margin, the price difference between the cost of crude oil pre-refinement and the cost of gasoline once it leaves the refinery.

      With Monday’s approval from state Senate President pro Tempore Toni Atkins, D-San Diego, and Assembly Speaker Anthony Rendon, D-Lakewood, the bill is expected to start moving through the committee process as soon as this week, according to Newsom’s office.

      1. California announces deal on oil, gas refiner profit penalties

        The time to flee from California is now.

        1. two years ago/twenty years ago

          Getting to be way too late.

          Honestly if you can’t see it by now and are staying, well that’s on them.

    2. “gas lines”

      If the Marxist globalists get their way, there won’t be any gas to wait in line for.

      Go eat your bugs.

    3. I knew a guy who worked at a gas station during those times and an attractive young lady made him an offer for a tank of gas he could not refuse on one of thos afternoons when they weren’t selling gas because of the 7 am – 12 pm odd – even licence plate days.

  14. Property taxes?

    Parental Rights Advocates Battle With Activist Media Over Child Sex Change Treatments (3/22/2023):

    “Parental rights advocates are reporting mounting frustration with activist media corporations over their reporting on efforts across the country to limit sex change treatments for children.”

    Real Journalists.

    “A styleguide from the Trans Journalists Association (TJA), advised reporters to de-emphasize stories on detransitioning and avoid terms like ” biological male” and “biological female” and the term “transgenderism.” The Human Rights council’s guidance recommends against “deadnaming” transgender people, a word describing when a name used before a person’s transition is used after their transition. AP’s style guide similarly condemns “deadnaming” since it is “akin to using a slur and can cause feelings of gender dysphoria to resurface,” National Review reported. Now, it is common practice for most major corporate media outlets to use activist-approved language in their reporting.”

    Remember, you are not alone if you no longer recognize the country you grew up in.

    The national divorce is already happening, it’s happening in the state legislatures.

    And the next step will be secession from Weimar America. They’re not gonna let you go peacefully, so be ready…

  15. “With the Dream for All program, the state plans to provide $300 million worth of down payments for an estimated 2,300 first-time homebuyers.”

    Fixed the typo:
    With the Dream for All Non-White people program…

  16. “‘Powell essentially said that all deposits are safe, Yellen said, ‘Hold my beer.’ You would have thought that they would have coordinated.'”

    Seems like they decided to not favor one kind of risk asset gambler over another. Makes sense.

  17. A Southwest pilot became incapacitated yesterday during a flight. An off duty pilot from another airline who was a passenger helped to land the airliner.

    I wonder how many pilots are having lesser medical events which do not fully incapacitate them and thus do not get reported in the media. As in “Joe, I’m not feeling so great, how about you land the bird?”

    1. Wonder how the passengers feel when they hear a page for anyone who is a pilot to please assist in the cockpit?

    1. What was the second dude doing trying to avenge his body slammed budy?

      1-2-3-4 now we start our thumb war?

  18. This song is about New York City in the 1970s, but it could well be describing any city now in the Western U.S. with the homelessness and drugs and other crime.

    Rolling Stones — Shattered:

    “Don’t you know the crime rate’s going UP UP UP UP UP?
    To live in this town, you must be tough tough tough tough tough tough
    They got rats on the West Side, bedbugs Uptown
    What a mess, this town’s in tatters”

    1. The Financial Times
      Silicon Valley Bank
      Credit funds scrutinise ‘mythical, enormous’ Silicon Valley Bank loan book
      Bids for collapsed US lender’s $74bn portfolio are due on Friday
      A Silicon Valley Bank branch
      The largest portion of the Silicon Valley Bank loan book consists of so-called subscription lines to private equity and venture capital funds
      Eric Platt in New York 9 hours ago

      As private credit investors comb through the $74bn loan portfolio of Silicon Valley Bank, they are finding vast portions that are not all appealing.

      The Federal Deposit Insurance Corporation is auctioning the loan book and other parts of the California lender after a bank run led to its collapse this month. After failing to find a regulated bank willing to buy SVB’s commercial bank in its entirety, the regulator in recent days opened a “data room” to other potential buyers ahead of a Friday deadline to place their bids.

      Blackstone, Apollo, Carlyle, Sixth Street and HPS Investment Partners are among the alternative investment groups inspecting SVB’s loans to prepare possible offers, a cohort that mostly had been excluded from the data room during the FDIC’s earlier auctions for SVB, according to people with knowledge of the matter.

      But the composition of the portfolio suggests that some types of loans will receive far weaker demand than others.

      “The FDIC is really in a challenging situation,” said a person involved in the bidding process. It is “such a unique book of business compared to any other [bank]”.

      1. “As private credit investors comb through the $74bn loan portfolio of Silicon Valley Bank, they are finding vast portions that are not all appealing.

        Got schlonged? 🙂

    1. The Financial Times
      Silicon Valley Bank
      Executive pay at SVB soared after big bet on riskier assets
      Bonuses jumped when wager on long-dated bonds boosted lender’s returns
      A montage showing Greg Becker, the Silicon Valley Bank logo and US bank notes
      Greg Becker’s cash bonus peaked at $3mn in 2021, more than double the amount he received four years earlier
      Antoine Gara and Patrick Temple-West in New York and Tabby Kinder in San Francisco 2 hours ago

      Executive pay at Silicon Valley Bank soared after the bank embarked on a strategy to boost profitability by buying riskier assets exposed to rising interest rates, according to a Financial Times analysis of securities filings and people familiar with the matter.

      The jump in pay for chief executive Greg Becker and chief financial officer Daniel Beck was a result of large multiyear bonus awards pegged to the bank’s return on equity (RoE), a key measure of profitability that rose sharply between 2017 and 2021, the filings show.

      Becker’s cash bonus peaked at $3mn in 2021, more than double the amount he received four years earlier. Beck earned a $1.4mn bonus in 2021, more than four times the amount he received in 2017 after joining the company.

      The higher bonuses helped push Becker’s total pay to $10mn in 2021, an increase of almost 60 per cent compared with four years earlier. Beck earned nearly $3.8mn, a jump of roughly double over the same time period.

      Current and former SVB executives told the Financial Times that SVB boosted returns by buying long-term paper, especially mortgage bonds, that bolstered earnings because they generated higher yields. The strategy backfired when interest rates rose sharply and depressed the value of the bonds.

      1. Financial Times
        Bill Winters
        StanChart chief says Fed’s SVB deposit guarantee a ‘moral hazard’
        Bill Winters’ remarks come amid US regulators’ efforts to reassure investors over curbing contagion in financial system
        Standard Chartered chief executive Bill Winters: ‘The issue isn’t so much does the regulator have confidence in our solvency, but it’s does the market have confidence in our liquidity?’
        Cheng Leng in Hong Kong 24 minutes ago

        The Fed’s decision to guarantee non-insured depositors of Silicon Valley Bank is “the most wonderful example of moral hazard we’ve come across for quite a while”, says Standard Chartered chief Bill Winters.

        Winters’ remarks, made on Friday at a Hong Kong financial conference, come after US regulators pledged to protect deposits at failed Silicon Valley Bank and Signature Bank.

        He added that there appeared to be “non-viable business models remaining, at least in the US”, with other banks that had similarly narrow customer bases.

  19. Now that the SVB and Credit Suisse contagion risks are contained, is the banking crisis over?

    1. The Financial Times
      Markets Briefing Equities
      Deutsche Bank leads slide in European bank shares
      German lender falls 13% as concerns over impact of interest rate rises linger
      A Deutsche Bank building
      The drop in Deutsche Bank’s shares came after the cost of buying insurance to protect against it defaulting on its debt pushed higher this week
      Martha Muir and Katie Martin in London and Hudson Lockett in Hong Kong 3 minutes ago

      European bank stocks took a heavy hit on Friday, with Deutsche Bank falling as much as 13 per cent, as efforts by policymakers to reassure investors over the health of the sector failed to calm nerves in the wake of a string of failures on both sides of the Atlantic.

      The Euro Stoxx 600 banks index, which contains the region’s biggest lenders, fell 4.6 per cent by mid-morning, outstripping weakness in broad national indices. Germany’s Commerzbank fell 9 per cent, while France’s Société Générale lost 7 per cent and Finland’s Nordea shed 9.8 per cent.

      After the outbreak of stress in US regional banks, and last weekend’s hasty takeover of Credit Suisse by its rival UBS, global authorities have repeatedly tried to assuage investors’ concerns over the financial hit that banks may take from central banks’ aggressive interest rate rises of the past year.

      European Central Bank president Christine Lagarde last week said there was “no trade-off” between seeking to control inflation and seeking to foster financial stability. On Thursday, US Treasury secretary Janet Yellen said regulators were “prepared to take additional actions if warranted” to ensure the safety of bank deposits. But bank stocks are now falling into an increasingly stubborn pattern of brief periods of stability followed by intense periods of stress.

      “There’s still a nagging question amongst market participants over whether the turmoil in the banking sector is over or if there will be wider contagion,” said Mobeen Tahir, director of macroeconomic research and tactical solutions at WisdomTree Europe. “It is also now evident from central banks that the turmoil is not going to put a hard brake on their monetary policy actions — that’s sending jitters through markets because it might exacerbate or expose new vulnerabilities in the banking sector.”

    2. Barron’s
      Economy & Policy

      Today’s Bank Panic Has Alarming Historical Echoes
      By Irene Finel-Honigman
      March 23, 2023 2:59 pm ET
      Customers line up to enter a Northern Rock branch in Bromley, in southeast London, Sept. 14 2007.
      Ben Stansall/AFP/Getty Images
      About the author: Irene Finel-Honigman teaches international finance and economic policy at the School of International and Public Affairs at Columbia University.

      The demise of three banks within just one week this month bears eerie resemblance to September 2007. That month saw Northern Rock, the U.K.’s fifth-largest mortgage lender, succumb to a bank run. The immediate crisis faded, but in hindsight Northern Rock was the proverbial canary in the coal mine for the global financial crisis that followed soon after.

      On Sept. 13, 2007, the BBC evening news announced that the Bank of England had provided Northern Rock with emergency liquidity support. Instead of reassuring the public of the bank’s soundness, the news bulletin instigated a full-scale bank run.

      The next morning, Sept. 14, thousands of people stood on line at Northern Rock branches in Newcastle upon Tyne to withdraw their funds. Images in newspapers and on television of middle-aged and older pensioners waiting to enter the bank sparked global shock. Northern Rock’s shares dropped over 30%.

      The last U.K. bank run had occurred in 1866. Through wars and recession, U.K. banks had maintained a reputation of ironclad stability.

      Initially, Mervyn King, governor of the Bank of England, was persuaded that this was a one-off situation and the matter was resolved. The chancellor of the exchequer, Alistair Darling, reassured the public that the government would guarantee all deposits, the shares would recover, and the bank run was presumably over.

      But within two days, it became clear that the situation was far worse and risked provoking contagion. The initial funding was based on the collateral the bank could provide based on its prime residential mortgage assets. However, the quality of the assets were far less solid than assumed, as the bank had dabbled in U.S. based noncollateralized mortgage-based instruments.

      King was urged, despite serious concerns about moral hazard, to reverse the Bank’s traditional noninterventionist stance and inject 10 billion pounds into the banking system. This sudden reversal caused further consternation and volatility, corroborating the public’s fears that other banks were also at risk.

      For the first time the public lost confidence in the Bank of England.

      Northern Rock since its founding in 1965 had a solid reputation for caution, focusing on well-collateralized mortgage lending.

      Despite warnings in the summer of 2007 as three smaller mortgage-based lenders affiliated with the French bank BNP Paribas froze funds and the property market began to falter, Northern Rock continued to expand its portfolio of riskier mortgage loans.

      The CEO, Adam Applegarth, and an inexperienced board that government investigators later deemed “reckless” did not exercise due diligence or oversight, insisting till the end that the bank could be salvaged.

      By February 2008 the bank was nationalized. It was renamed and sold to Virgin Money in 2012.

      Northern Rock failed under Basel II’s lax regulatory oversight, a hands-off approach by central banks, and lack of enforced buffers and compliance.

      By October 2008, the full-blown U.S. banking crises had hit European and U.K. banks, ultimately requiring the U.K. government to take majority-stake holdings in the Royal Bank of Scotland and HBOS. They were, effectively, nationalized.

      With that sequence of events in mind, now consider what has unfolded in the U.S. and Switzerland in recent days.

      Silvergate, a small bank heavy on crypto assets, was liquidated. Signature, a medium-sized commercial bank focused on small business loans, and Silicon Valley Bank, the largest bank by deposits in Silicon Valley and 16th largest U.S. bank, both required emergency support from the Federal Reserve and the FDIC.

      By March 9, 2023, rumors of a severe liquidity crisis at SVB spread on social media, provoking depositors to panic, instigating a bank run.

      Major news outlets soon showed long lines of young and middle-aged depositors lining up at SVB branches, worrying whether they could withdraw their funds to meet immediate business needs including payroll. Depositors withdrew over $42 billion, exacerbating the liquidity crises. On March 10, the FDIC closed the bank. Shortly after, the FDIC, the Federal Reserve, and eventually President Biden, assured the public that all deposits, including those above the FDIC limit of $250,000, would be guaranteed.

      SVB, like Northern Rock, had a reputation for being cautious and prudent with its deposits. Once the books were open and the quality of assets probed, it was discovered that the bank had held on to long-term bonds months after rate increases took hold. The bank depended on business deposits from start-ups, which required constant infusions of cash, and it needed loss provisions to meet withdrawals. Worse, despite all the regulatory and compliance requirements, SVB spent most of 2022 without a risk management officer in place.

      The CEO, Greg Becker, who had been a member of Board of Directors of the San Francisco Federal Reserve, insisted that the bank could be salvaged and paid out bonuses on the day the bank closed.

      On March 17, SVB declared bankruptcy, was put into receivership under a government-appointed CEO.

      The next attempt to avert disaster was First Republic Bank. It required a resolution model developed for Long-Term Capital Management, a hedge fund that collapsed in 1998. Major banks pooled $30 billion into deposits at First Republic. It is not clear whether that effort will ultimately succeed. The bank has said depositor withdrawals have slowed, but its stock is down roughly 90% this month.

      Meanwhile, fear of global contagion spiked on Friday, March 16, as news emerged that Credit Suisse —the weakest globally systemically important bank—was on emergency life support. The bank had floundered for two years, instigating massive withdrawals. It required a $54 billion bailout from the Swiss National Bank after its two major shareholders declared they would not provide additional assistance.

      This proved insufficient and on March 19, Credit Suisse was acquired by UBS in a forced merger orchestrated by the Swiss National Bank.

      In each crisis the central bank fulfilled its role as responsible steward of the nation’s banking sector and avoided endemic shock.

      In 2007, Northern Rock collapsed under the weight of a reckless management strategy that ignored warnings and weakness in the markets and the economy at large. In the present day, SVB refused to shift its strategy or increase buffers and loss provisions despite months of rate increases, a sharp drop in tech stock valuations, the collapse of crypto, and persistent inflation. In each case management continued to believe that the situation could be resolved, that conditions would improve, and the crisis would be contained.

      But perhaps depositors know best. Since the 18th century, bank runs have been glaring alerts that the public has lost faith in the institution’s ability to manage their money. SVB’s clients were the new high-tech elite, but they wanted their withdrawals in fully protected U.S. dollars!

      After rapid and drastic measures, calm may return to the markets and banks. But the question we cannot yet answer is whether, just as in 2007, these banks’ problems are a series of unrelated shocks, or whether they are the first sign of the next global financial crisis.

      1. “The CEO, Greg Becker, who had been a member of Board of Directors of the San Francisco Federal Reserve, insisted that the bank could be salvaged and paid out bonuses on the day the bank closed.”

        It’s a big club…

Comments are closed.