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Post by yogibearbull on Mar 12, 2023 22:39:15 GMT
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Post by Capital on Mar 12, 2023 22:50:00 GMT
IMHO the FED is scrambling to fix what they broke. MHO is that rates were raised too far too fast. It will be interesting if we hear anything tomorrow from the FEDs Emergency Meeting.
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Post by habsui on Mar 12, 2023 22:51:47 GMT
Thanks. Will see what the "market" reaction will be.. |
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Post by roi2020 on Mar 12, 2023 22:57:21 GMT
Hopefully, this plan will alleviate concerns about bank stability and prevent bank runs next week.
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Post by johntaylor on Mar 12, 2023 23:07:11 GMT
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Post by newtecher on Mar 12, 2023 23:36:21 GMT
Interesting that the Signature bank was also included. It has been showing on my value screens for many months but I would not touch a crypto bank with a 10-foot pole. Going forward, the Fed will probably focus on stemming the panic in regular banks but may be happy to let various crypto "assets" go though a shredder. And rightly so.
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Post by yogibearbull on Mar 13, 2023 0:42:49 GMT
I have searched the web on any news related to Silvergate Bank that also failed and is liquidating. NOTHING.
The Fed/Treasury/FDIC announcement mentions only the SVB Bank and Signature Bank.
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Post by yogibearbull on Mar 13, 2023 1:39:13 GMT
One interesting aspect of the new BTFP facility seems that banks can use securities as collateral and get advances for 1 year at their PAR value (not current value). Rate will be 1-yr overnight swap rate + 10 bps. That sounds like a great deal!
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Post by richardsok on Mar 13, 2023 1:54:52 GMT
I have searched the web on any news related to Silvergate Bank that also failed and is liquidating. NOTHING. The Fed/Treasury/FDIC announcement mentions only the SVB Bank and Signature Bank. I think Silvergate is just old news, announcing their liquidation four days ago. |
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Post by yogibearbull on Mar 13, 2023 2:06:06 GMT
richardsok, looks like so! With 3 banks failing over 4 days, the first one is now OLD news. But its winddown and liquidation is VOLUNTARY, so it may not need backstop so far. However, it becomes interesting if its uninsured deposits have losses too. Will it then be able to tap the new BTFP facility? What would 1-yr term loan mean then? I mean, how would a liquidated bank pay that back?
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Post by habsui on Mar 13, 2023 2:10:47 GMT
One interesting aspect of the new BTFP facility seems that banks can use securities as collateral and get advances for 1 year at their PAR value (not current value). Rate will be 1-yr overnight swap rate + 10 bps. That sounds like a great deal! Yes, the at par value is key.. |
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Post by Chahta on Mar 13, 2023 2:37:49 GMT
Thanks. Will see what the "market" reaction will be.. Futures don’t seem to care Sunday night. |
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Post by mnfish on Mar 13, 2023 11:26:28 GMT
BTFP = Better Than Failure Program
With so many banks sitting on unrealized losses they had to do something
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Post by steadyeddy on Mar 13, 2023 11:40:29 GMT
I am afraid there are many more banks in trouble...
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Post by Fearchar on Mar 13, 2023 12:09:40 GMT
Thing is, it is not just Banks...
Pension funds are also hurting.
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Post by newtecher on Mar 13, 2023 12:50:25 GMT
Thing is, it is not just Banks... Pension funds are also hurting. People generally cannot withdraw money from pension funds like they can from banks, so the risks are very different. |
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Post by johntaylor on Mar 13, 2023 13:15:48 GMT
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Post by Deleted on Mar 18, 2023 15:08:15 GMT
When FDIC takes over a bank, do deposits under 250K remain in the same instruments? eg: Does a 1yr 5% CD stay that way and is the newly controlled entity still a bank?.
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Post by Capital on Mar 18, 2023 15:22:52 GMT
This LINK should be helpful. There are two possible outcomes. |
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Post by Deleted on Mar 18, 2023 15:39:43 GMT
Thank you Capital. My read is that in the case of CD's and T-Bills, where the plan was to hold to maturity, a substantial loss may be realized due to interest rate changes that have devalued these instruments if peddled before maturity. One loses even though insured. Even if another bank acquires deposits they can adjust yields. My definition of "safe" has been adjusted.
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Post by yogibearbull on Mar 18, 2023 16:16:37 GMT
Thank you Capital. My read is that in the case of CD's and T-Bills, where the plan was to hold to maturity, a substantial loss may be realized due to interest rate changes that have devalued these instruments if peddled before maturity. One loses even though insured. Even if another bank acquires deposits they can adjust yields. My definition of "safe" has been adjusted. This is quoted from link by Capital, " How does a bank closing affect interest accruing on my deposits?
The FDIC's insurance coverage includes principal and interest through the date of the bank failure up to applicable insurance limit for each deposit. The accrual of interest ceases on all accounts once the bank is closed. If an open bank acquires deposits from the failed bank, the acquiring bank becomes responsible for re-establishing interest rates and beginning the accrual of interest after the date of the failure of the bank. The acquiring bank may change the interest rate on the acquired deposits, but the depositor may withdraw their insured funds without penalty if they chose to do so. If no acquiring bank is found for the deposits and the FDIC pays the depositors directly for their insured amounts, interest does not accrue past the date of failure." My read is that for CDs, the principal + accumulated interest up to that point will be paid in full and there won't be any early payment penalties. A new CD with new rates will be offered, but you may accept it or not. No actual money will be lost - of course, if you had a super high rate CD, that won't be offered again. It is as if the CD became callable upon bank failure. Realize that some shaky banks without any other sources of funding try to game the system by offering high rate brokered CDs. The FDIC keeps an eye on those, especially, if they appear on the top CD lists week after week. So, in case of bank failure, the new bank or the government won't be honoring those rates. T-Bills/Notes should just continue - they aren't obligations of the bank or FDIC. |
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