Next two weeks are going to be a hell of a ride for sure. We've never had this scenario before. Rising rates, super-deep bond-yield inversion, a major bank failure, with an Eastern European war on top as the cherry.
Risky Bet on Crypto and a Run on Deposits Tank Signature Bank Regulators said keeping open the 24-year-old institution, which held deposits from law firms and real estate companies, could threaten the financial system’s stability. https://www.nytimes.com/2023/03/12/business/signature-bank-collapse.html Signature Bank, a New York financial institution with a big real estate lending business that had recently made a play to win cryptocurrency deposits, closed its doors abruptly on Sunday, after regulators said that keeping the bank open could threaten the stability of the entire financial system. To some extent, Signature is a victim of the panic around Silicon Valley Bank, which regulators seized on Friday. Its closing underscores the challenges that face small and midsize banks, which often focus on niche lines of business and have a narrower base of customers than Goliaths like JPMorgan Chase or Bank of America. That leaves them especially vulnerable to old-fashioned bank runs. Silicon Valley Bank, a lender to start-ups, imploded on Friday after some ill-timed financial decisions left it struggling to meet customer withdrawal requests — and just as slowing venture capital funding prompted fledging companies to tap their accounts more. Similarly, Signature became one of the few banks to welcome cryptocurrency deposits, just before the overheated industry blew up last year. As word about Silicon Valley Bank’s troubles began to spread last week, business customers of Signature began calling the bank, asking if their deposits were safe. Many were worried that their deposits could be at risk because, like business customers of Silicon Valley, most had more than $250,000 in their accounts. The Federal Deposit Insurance Corporation, the entity that seized Silicon Valley, insures deposits only up to $250,000. In announcing the closure of Signature on Sunday, regulators said that customers of both banks would be made whole regardless of how much they held in their accounts. “Many depositors at these banks are small businesses, including those driving the innovation economy, and their success is key to New York’s robust economy,” Gov. Kathy Hochul of New York said in a statement. But on Friday, with customers panicking about their money, Signature saw a torrent of deposits leaving its coffers, according to a person with knowledge of the matter. Its stock, along with the stocks of some of its peers, also continued to tank. Still, the bank’s leaders expected to be able to weather the storm because the outflows had slowed by Sunday morning, the person said. When regulators told bank executives that they were effectively seizing the bank, which had 40 branches across the country, some of them were shocked. In shuttering the bank, New York bank regulators, acting in concert with the F.D.I.C., also removed its executive team. The demise of Signature, with assets of under $100 billion, is a blow to many of the professional services firms that have come to rely on it. The bank long specialized in providing banking services to law firms, providing escrow accounts for holding client money and other services. Scott Shay, Joseph DePaolo and John Tamberlane founded Signature in 1999 with backing from Israel’s biggest lender, Bank Hapoalim. On a personal bio page, Mr. Shay described himself as a “thought leader, and author of several widely read books on profound issues facing the Jewish community.” The bank went public in 2004. One of Signature’s specialties was financing the purchase of taxi medallions, which authorize holders to operate cabs. It was known in New York for providing banking services to law firms and real estate companies, and for catering to wealthy families in the area. Its clients had included some individuals associated with the Trump Organization, former President Donald J. Trump’s company. The bank lent money to Jared Kushner, Mr. Trump’s son-in-law, and to Mr. Kushner’s father, Charles. It also helped finance Mr. Trump’s Florida golf course. Over the past decade, Signature had begun to expand its business nationally, and to the West Coast in particular. But Signature ran afoul of some of the same issues that led to the demise of Silicon Valley Bank, in that most of its customers had holdings above $250,000. Regulatory filings show that more than $79 billion, or close to nine-tenths, of Signature Bank’s roughly $88 billion in deposits were uninsured at the end of last year. As of last week, Signature said more than 80 percent of it deposits were from law firms, accounting firms, health care companies, manufacturers and real estate management companies. The bank also said its digital asset-related client deposits stood at $16.52 billion. Signature was one of the few financial institutions that had opened its doors to taking deposits of crypto assets, a business it entered into in 2018. That ended up being a fateful decision because the bottom fell out of crypto assets after the collapse of FTX and an ensuing criminal investigation. Another cryptocurrency-focused bank, Silvergate Bank, was forced to voluntarily close last week. “This story has more to do with crypto, huge error in judgment by veteran bankers,” said Christopher Whalen of Whalen Global Advisors, which specializes in analyzing and consulting on financial institutions. “Result was the same in a deposit run.”
A lot of trading halts on banks today including some in this list. Current Trading Halts https://www.nasdaqtrader.com/Trader.aspx?id=TradeHalts
https://www.bankrate.com/banking/list-of-failed-banks/ There is a lot of info in the above link. Bank failures since 2009 Year Total number of bank failures: 513 2023 2 2022 0 2021 0 2020 4 2019 4 2018 0 2017 8 2016 5 2015 8 2014 18 2013 24 2012 51 2011 92 2010 157 2009 140 Source: Federal Deposit Insurance Corp.
gwb-trading said: “This story has more to do with crypto, huge error in judgment by veteran bankers,” said Christopher Whalen of Whalen Global Advisors huge error in judgment ...lol by veteran bankers...lol So many errors in judgements have been made over recent years..its just too hard to even put into words. Veteran Bankers...like Lehman Brothers (Barclays), Bear Sterns (JP Morgan), Merrill Lynch (Bank America), Citi, ..weve changed the names to protect the guilty. There is no such thing as judgement...bankers can and will do whatever they want because the Fed will bail them out regardless..."fully Bail them out"...regardless of what mess they get into. The veterans know this better than anyone
Four points: 1) your deposit money is safe in any U.S. bank regardless of the bank's solvency. 2) The Fed DOES NOT bail out insolvent banks. It assists solvent banks by helping them to deal with liquidity problems. The Fed does not give money away. That's illegal. 3) Yes, you are right. Bankers do make bad decisions sometimes. That does not affect the safety of your money deposited in their banks however. If you have invested in Banks that make bad decisions, that's an entirely different matter. You could lose money on your investment. Common stock holders in banks that undergo resolution will likely lose 100% of their investment. 4) Bank's CAN't do whatever they want and expect the Fed to bail them out. The Fed only bails out qualified, solvent banks. And they never give money to banks. They will, for example, exchange reserves for assets that are temporarily ill-liquid. To survive a bank must have assets worth more than their liabilities.This is why some banks fail that have liquidity problems and some survive.The ones that fail are insolvent. This has only a trivial affect on you as a depositor. Do not buy into ridiculous media hype, intended to attract an audience and sell advertising. As a trader just enjoy the volatility created by the media.