More yet! :-).

 

Did SVB break the Fed? Officials mull risks of more rate increases

"At an early January meeting of the Virginia Bankers Association, executives were already nervous that Federal Reserve interest rate increases were making it hard to compete for deposits."

"Everywhere I go in the industry people are feeling that kind of pressure," the featured speaker of the day, Richmond Fed President Thomas Barkin, said in response to a question from the audience. The influence of Fed rate hikes "is going to hit...That is how it is designed."

"When Fed officials meet this week the suddenly urgent question is whether the level of pressure on the banking industry has become so great it risks a larger financial crisis - the sort of event associated with deep and hard-to-arrest economic downturns - and warrants a slowdown or pause to further rate increases."

(.25 increase, token effort, it's an illusion to try and sell you on the idea that they are still fighting inflation.)

"The Fed and global central banks, after a tense 10 days with banks teetering in the U.S. and Europe, launched a second round of weekend efforts to buttress the system by expanding the Fed's ability to ship dollars where needed."

(It ought to be sending alarm bells ringing on how serious this is going to be eventually ...)

"The issue for Powell and his colleagues is whether the calming words and a bank lending new program are enough to stem broader problems..."

(Dont we already know the answer to that question?

Or can you just not tell?)

"If banking stress was to some degree hiding in plain sight, with deposits falling since the middle of last year and some common bank assets losing value as interest rates rose, the flashpoint was not hit until March 10 when the failure of the Silicon Valley Bank triggered doubts about the health of a swath of mid-sized banks and raised concerns of an old-fashioned deposit run."

(But if the economy is so strong?

Why have bank deposits been falling since the middle of last year?

"some common bank assets losing value as interest rates rose"

Bond yields.

So?

Deposit are falling so there's less assets for the bank.

Raising interest rates eats at the yields of the bonds they do hold

and then they have to pay more to borrow $ to begin with,

so what could possibly ever go wrong?)

"The financial system, meanwhile, has been thrown extra support under a new Fed lending program for banks, while its traditional lender-of-last-resort cash window was tapped for a record $150 billion."

(157 billion of which they wont tell you who it went to or how many institutions utilized it.

"its traditional lender-of-last-resort cash window was tapped for a record $150 billion"

Tells you how bad it's going to be and that they know it's coming.)

"To many officials, the fact that inflation has been slow to respond to higher rates, while the economy has continued to grow and spin out hundreds of thousands of new jobs a month, was evidence rates needed to move higher still. Because nothing had "broken" in the economy, further rate increases were seen as cost-free."

("the fact that inflation has been slow to respond to higher rates"

To much $ in the system, 

Supply line issues 

The War in Ukraine 

Worker shortages due to generational factors etc

Higher rates just wont fix any of  that.

"the economy has continued to grow"

Only because wealth inequality is so great now?

The top 20% income bracket can keep it moving.

"spin out hundreds of thousands of new jobs a month"

Only because people need three to get by.

How smart do you really gotta be to figure out all of that?

Not very.)

"On March 10 something broke, symbolically in the failure of the country's 16th largest bank, but more broadly in the perception that the system might not be as stable as Fed officials have felt in the years since regulatory reforms forced financial firms to better buffer themselves."

(Well go figure, who could have ever known the risk would have been moved where the regulators weren't?' See Dodd-Frank repeal yet again.)

"None of those reforms prevented SVB from funneling its rapidly growing deposits into long-term government bonds that lost value as the Fed raised rates. That left the firm potentially short of the cash needed when depositors began to demand withdrawals -- a dynamic the Fed worried could spread to other banks facing similar constraints."

(Count on it.)