Bank shares collapse as Yellen rules out full deposit guarantee despite 'reasoned arguments' - Politics | PoFo

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Financial Times wrote:
US Treasury secretary Janet Yellen ruled out a broad expansion of deposit insurance to protect savers with balances above $250,000 in the near term, comments that fuelled another sell-off in shares of smaller US banks.

Speaking at a Senate hearing on Wednesday afternoon, Yellen said there could be “reasoned discussions” on whether the current $250,000 limit for insured deposits should be lifted as part of long-term systemic reforms.

But the Treasury secretary said that in the current turmoil, the Biden administration was not considering a move to broaden deposit insurance, something that would require congressional approval unless the Treasury found a way to implement it unilaterally.

“I have not considered or discussed anything to do with blanket insurance or guarantees of deposits,” Yellen said.

Her comments came shortly after Jay Powell, the chair of the Federal Reserve, sought to reassure Americans that their deposits were “safe” because of actions already taken by policymakers, including a facility set up by the central bank to boost liquidity for smaller banks.

Yellen said uninsured deposits above $250,000 could be protected only if a failed bank was deemed to pose a systemic risk to the financial system, as occurred earlier this month with Silicon Valley Bank and Signature Bank. She said that determination would occur only on a case-by-case basis.

Earlier this week, in a speech at the American Bankers Association, Yellen had said the US government was ready to step in for individual banks if necessary. “Similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion,” she said at the time.

Yellen’s comments came on another brutal day for investors in smaller US banks. Shares of such lenders were already falling on Wednesday but the declines accelerated after the Treasury secretary’s testimony in the afternoon.

The KBW Bank index, which tracks shares in 24 large and midsize banks, dropped almost 5 per cent, reversing all the gains it made after Yellen’s comments at the bankers’ association on Tuesday.

The decline weighed on the broader S&P 500, with banks making up seven of the 10 worst performers on the benchmark index. First Republic led the declines, dropping 15 per cent. Comerica, M&T Bank and US Bancorp each fell more than 7 per cent.

Shares of PacWest, a Beverly Hills-based bank, fell 17 per cent, after it said it had lost 20 per cent of its deposits this year and announced it had bolstered its access to cash by tapping a $1.4bn lending facility from an investment firm.

Meanwhile, First Republic said executives would not be paid their bonuses for 2023 — while the founder and executive chair will stop receiving a salary — as the lender tries to win back investor confidence after its shares fell more than 85 per cent in a month.

Fitch, the rating agency, cut the San Francisco-based bank further into junk territory, warning: “[First Republic] is currently operating at a net loss that is not sustainable over the longer term absent a balance sheet restructuring.”

Democratic and Republican lawmakers, as well as some banking lobbyists, executives and economists, have called for the US to increase or suspend the $250,000 limit for insured deposits in order to prevent further deposit flight from small and regional banks.

However, there is no clear bipartisan consensus in Congress for such a move. Many Republicans are wary of lifting the limit on the grounds that it would expand the federal government’s role in the banking system and might result in higher fees for banks — which fund deposit guarantees — that might be passed on to consumers.

Meanwhile, some Democrats have concerns relating to moral hazard, and are worried that it could reward risky behaviour by banks.

Despite Yellen’s comments, the debate over expanding bank deposit guarantees in the US is expected to continue, particularly if there is further deposit flight as a result of the current turmoil.
Janet Yellen article wrote:...protect savers with balances above $250,000...

And let everyone else starve?


The current banking crisis is as "unprovoked" and "unpredictable" as the Russian invasion of Western-couped Ukraine was last year. It was totally predictable, and an example of the brinkmanship of our organized crime elites.

Our oligarchs seem to need us to be ignorant of both recent history and of macro-economics in order to thrive - in order to continue to play games with the rest of the world and their own domesticated helots.

Here in Canada, the most recent meme is that "our banks are better and safer" than the USA's banks (and Swiss banks?).

Reuters wrote:Canada's top six lenders have ample liquidity and manageable credit risks which will help them to emerge largely unscathed from the crisis of confidence that has rocked the global banks over the last two weeks, analysts said on Monday.

The collapse of two the U.S. regional banks- the Silicon Valley Bank and Signature Bank this month --and the Swiss government-brokered deal for UBS to buy Credit Suisse has raised concerns about the health of global banking sector.

"The U.S. contagion is unlikely to spill over to Canadian banks as the issues in U.S. are unique and specific to certain business models or lending activities," said James Shanahan, banking analyst with Edward Jones to Reuters.

Still, the six big banks have collectively lost 9% or C$57 billion ($41.7 billion) in market capitalization in the past two weeks, according to DBRS Morningstar. In comparison, the U.S. bank index has fallen 21.5% in last two weeks. ...

So we're totally safe here in Canada, even though our top six banks just lost the equivalent of $1400 per Canadian in the last two weeks. Losing $700 per week... is a disaster for most people. And our railroads aren't even safe enough to ride off to farm jobs in the prairies anymore (like my grandfather did).
Rancid wrote:@QatzelOk don't you want the banks to collapse though?

Anyway, I'm all for raising the 250k limit.

Who cares what I want. We're not in a daycare center arguing over toys here, Rancid.

We're discussing the upcoming banking disasters that our banksters have blindly lead us to.

That organized crime runs our banks and media... was never a problem for most people. But it will be soon...
Rancid wrote:I'm not arguing.

Question, what you do to resolve this?

The answer is you burn the bitches down.

You get all Kimberly Jones on their asses.



Pure frustration. Go there and scream at those banks!!


The truth is very few people understand how horrible GREED in a systemic way. Because economics is the tool of GREED in capitalism. Many have to lose for the few can win. But living in denial of what it means is not the way to cope.

I need you to look in the mirror Rancid and say, 'burn that bitch to the ground!'
wat0n wrote:What do you mean? Everyone else's deposits are already insured :eh:

While this may be true, would you like to claim that the little guy is being protected by the actions of the Federal Reserve and major banks?

Would you claim that all the tinkering with money supply (QE) and interest rates... will help protect ordinary people from sudden poverty?

Or, like me, do you perceive all the economic gymnastics of the bankster class as "class warfare" aimed at stealing from salaried workers and the young?

Tainari88 wrote:

It's an interesting thing, to burn down your own home because you don't really own it.

This "being serfs in your home and community" was dealt with by Revolutionary Cuba.

source wrote:The political, economic, and social situation in Cuba in 1959 demanded that the Revolutionary Government exercise its right to nationalize. More than half of agricultural land was in foreign hands, and eighty-five percent of peasants worked land they did not own.

Without a revolution, all we can look forward to going forward (backward into depression) is burning down our own communities, followed by marshal law.
Last edited by QatzelOk on 24 Mar 2023 13:52, edited 1 time in total.
QatzelOk wrote:money supply (QE) and interest rates

Do you know the difference between QE and interest rate increases?

Or are you just taking the MAGA approach and just raging at everything you are willfully ignorant of?
Because prison and that is who the FED will take the money from.

Why would the FED care what happens to depositors if its not up to it to both ensure and chase the banks afterwards. Instead of passing the buck and the liability to depositors?
QatzelOk wrote:Sometimes I worry that the people running our banks are no more concerned about long-term consequences than you are.

Our banking system is a one-line-post (usury) that has no other tricks up its sleeve.

Did you say we were going to starve back in 2008?
Fasces wrote:
Only at a state-owned bank run not for profit with low interest rates and high fees - offer a safe option to make the risk of the unsafe option more visible, and giving consumers a choice between the two.

Yes, not a bad idea.
ness31 wrote:
Sorry, I just don’t get it. I just don’t get the whole fucking debacle. If shareholders are liable it’s seems a bit ridiculous that they get to sell their shares on a whim. Like wtf?

The fancy name is inverted yield curve.

A less fancy name might be screwed. This has happened before, when interest rates were raised. Banks suddenly have to pay more to get money than what they are making from the old low interest rate deals they've made.

I could be wrong, but my impression is that the Fed screwed up massively when they started doing big interest rate jumps.

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