It's

 

just not good...

Any which way you wanna slice it...

Why regulators seized Signature Bank in third-biggest bank failure in U.S. history

"That run on deposits quickly led to the third-largest bank failure in U.S. history. Regulators announced late Sunday that Signature was being taken over to protect its depositors and the stability of the U.S. financial system.

“I think part of what happened was that regulators wanted to send a very strong anti-crypto message,” said board member and former congressman Barney Frank."

"The sudden move shocked executives of Signature Bank, a New York-based institution with deep ties to the real estate and legal industries, said board member and former U.S. Rep. Barney Frank. Signature had 40 branches, assets of $110.36 billion and deposits of $88.59 billion at the end of 2022, according to a regulatory filing."

“We had no indication of problems until we got a deposit run late Friday, which was purely contagion from SVB,” Frank told CNBC in a phone interview."

"Problems for U.S. banks with exposure to the frothiest asset classes of the Covid pandemic — crypto and tech startups — boiled over last week with the wind down of crypto-centric Silvergate Bank. While that firm’s demise had been long expected, it helped ignite a panic about banks with high levels of uninsured deposits. Venture capital investors and founders drained their Silicon Valley Bank accounts Thursday, leading to its seizure by midday Friday."

"Worries spread

That led to pressure on Signature, First Republic

 and other names late last week on fears that uninsured deposits could be locked up or lose value, either of which could be fatal to startups."  

(And like Mark Cuban says, that will ripple through the economy...)

"Signature Bank was founded in 2001 as a more business-friendly alternative to the big banks. It expanded to the West Coast and then opened itself to the crypto industry in 2018, which helped turbocharge deposit growth in recent years. The bank created a 24/7 payments network for crypto clients and had $16.5 billion in deposits from digital-asset-related customers."

"According to Frank, Signature executives explored “all avenues” to shore up its situation, including finding more capital and gauging interest from potential acquirers. The deposit exodus had slowed by Sunday, he said, and executives believed they had stabilized the situation."

"Instead, Signature’s top managers have been summarily removed and the bank was shuttered Sunday. Regulators are now conducting a sales process for the bank, while guaranteeing that customers will have access to deposits and service will continue uninterrupted."

"Poster child

The move raised some eyebrows among observers. In the same Sunday announcement that identified SVB and Signature Bank as risks to financial stability, regulators announced new facilities to shore up confidence in the country’s other banks."

"Another bank that had been under pressure in recent days, First Republic declared that it had more than $70 billion in untapped funding from the Federal Reserve and JPMorgan Chase."

For his part, Frank, who helped draft the landmark Dodd-Frank Act after the 2008 financial crisis, said there was “no real objective reason” that Signature had to be seized.

“I think part of what happened was that regulators wanted to send a very strong anti-crypto message,” Frank said. “We became the poster boy because there was no insolvency based on the fundamentals.”

MEANWHILE:

Something broke, but the Fed is still expected to go through with rate hikes

'Markets still expect the Fed to keep up its inflation-fighting efforts, despite high-profile bank failures that have rattled the financial system."

"So with the second- and third-largest bank failures ever in the books happening just over the past few days, and worries of more to come, that would seem to qualify as significant breakage and reason for the central bank to back off."

"Not so fast.

Even with the failure over the past several days of Silicon Valley Bank and Signature Bank that forced regulators to spring into action, markets still expect the Fed to keep up its inflation-fighting efforts. Suring bond yields played into the demise in particular of SVB as the bank faced some $16 billion in unrealized losses from held-to-maturity Treasurys that hold lost principal value due to higher rates."

(The lack of good options available...etc...)

“We think Fed officials are likely to prioritize financial stability for now, viewing it as the immediate problem and high inflation as a medium-term problem,” Goldman told clients in a note.

Krosby said the Fed is at least likely to discuss the idea of holding off on an increase.

Next week’s meeting is a big one in that the FOMC not only will make a decision on rates but also will 

update its projections for the future, 

including its outlook for GDP, 

unemployment 

and inflation."

(Pretty big meeting next week then...)

'Citi, in fact, sees the Fed continuing to raise its benchmark funds rate to a target range of 5.5%-5.75%, compared to the current 4.5%-4.75% and well above the market pricing of 4.75%-5%."

“Fed officials are unlikely to pivot at next week’s meeting by pausing rate hikes, in our view,” Hollenhorst said in a client note. “Doing so would invite markets and the public to assume that the Fed’s inflation fighting resolve is only in place up to the point when there is any bumpiness in financial markets or the real economy.”

(Peter Schiff and a few others have been saying all along that the Fed will "cave" in it's fight AGAINST INFLATION ONCE THE ROAD GETS ROCKY BECAUSE IT KNOWS IT CAN COME NO WHERE NEAR WHAT IT NEEDS TO IN ORDER TO GET INFLATION DOWN TO 2%.

Yup.

Truth.)

"Bank of America said it remains “watchful” for any signs that the current banking crisis is spreading, a condition that could change the forecast."

“Our outlook for monetary policy is always data dependent; at present it is also dependent on stresses in financial markets.”

"Michael Gapen, BofA’s chief U.S. economist, told clients."

I reiterate:

It's just not good...

Any which way you wanna slice it...