Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-65928 Thu, 21 Dec 2023 09:38:12 GMT Rich Charlatan, Poor Readers http://implode-explode.com/viewnews/2023-12-21_RichCharlatanPoorReaders.html iehi-feed-65923 Sun, 10 Dec 2023 18:28:00 GMT Famed Fed watcher expects interest rates stay high for ‘much, much, much longer' after unsustainable ‘free money era' http://implode-explode.com/viewnews/2023-12-11_FamedFedwatcherexpectsinterestratesstayhighformuchmuchmuchlonger.html Grant stands out from the Wall Street pack in another respect: Where many investment gurus are calling for the Fed to start cutting rates at some point in the coming year or two, Grant predicts an era of higher rates that could last a generation.

Fed Chair Jerome Powell has repeatedly warned that rates will need to remain "higher for longer" to truly tame inflation. But many Wall Street leaders, encouraged at inflation's steep fall from its June 2022 four-decade high, believe peak rates are already here.

Grant, however, takes a historical reading of monetary policy, and argues we're in for a generation of rising rates, with some volatility in between. "The phrase would be higher for much, much, much, much longer--but we have to underscore and italicize the conditional--if past is prologue," he told Fortune.

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"We seem to have hit some major point of demarcation with interest rates in 2020 and ‘21," he added. Based on history, he said, this new regime should last 40 years. Still, Grant clarified that the generation-long uptick likely won't be a straight line up. If a recession hits, there could be a "substantial," although temporary, pullback in interest rates.

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iehi-feed-65912 Sat, 02 Dec 2023 16:07:26 GMT ‘We will coup whoever we want!': the unbearable hubris of Musk and the billionaire tech bros http://implode-explode.com/viewnews/2023-12-03_WewillcoupwhoeverwewanttheunbearablehubrisofMuskandthebillionair.html iehi-feed-65902 Sun, 19 Nov 2023 23:47:38 GMT A 30-Year Trap: The Problem With America's Weird Mortgages http://implode-explode.com/viewnews/2023-11-20_A30YearTrapTheProblemWithAmericasWeirdMortgages.html iehi-feed-65892 Fri, 10 Nov 2023 23:31:32 GMT Is the Yield Curve a Reliable Recession Signal Anymore? http://implode-explode.com/viewnews/2023-11-11_IstheYieldCurveaReliableRecessionSignalAnymore.html iehi-feed-65874 Mon, 23 Oct 2023 02:41:22 GMT Economists, central bankers on bubbles, distortions, inflation: time for rethink | Fortune http://implode-explode.com/viewnews/2023-10-23_Economistscentralbankersonbubblesdistortionsinflationtimeforreth.html iehi-feed-65788 Tue, 02 May 2023 18:32:35 GMT Here's how the debt limit fight could impact the banking crisis http://implode-explode.com/viewnews/2023-05-03_Hereshowthedebtlimitfightcouldimpactthebankingcrisis.html iehi-feed-65787 Tue, 02 May 2023 17:00:12 GMT PacWest, Western Alliance Stocks Lead Renewed Regional Bank Selloff http://implode-explode.com/viewnews/2023-05-03_PacWestWesternAllianceStocksLeadRenewedRegionalBankSelloff.html PacWest Bancorp and Western Alliance Bancorp led the big selloff in regional lenders Tuesday, as renewed fears over the health of the financial system hit Wall Street after the second-largest US bank failure ever. 

Trading in both firms triggered multiple volatility halts after PacWest fell as much as 42% while Western Alliance plunged 27%. The KBW Regional Banking Index dropped as much as 7%, the most since the crisis that engulfed Silicon Valley Bank in March. 

Charles Schwab Corp., a brokerage with a banking arm that's come under pressure in the recent rout, sank 5.3%. Comerica Inc. and Zions Bancorp. each fell more than 10%.

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Part of what's driving bank shares down is the fact that many regional bank investors assumed the Federal Deposit Insurance Corp. would announce a change to deposit insurance alongside its announcements about the First Republic receivership process, said Gary Tenner, an analyst at DA Davidson. The level of uninsured deposits at Silicon Valley Bank and Signature played a key role in the bank runs that led to their downfall.

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iehi-feed-65785 Mon, 01 May 2023 15:18:28 GMT First Republic Bank Is Seized by Regulators and Sold to JPMorgan Chase - The New York Times http://implode-explode.com/viewnews/2023-05-01_FirstRepublicBankIsSeizedbyRegulatorsandSoldtoJPMorganChaseTheNe.html Regulators seized control of First Republic Bank and sold it to JPMorgan Chase on Monday, a dramatic move aimed at curbing a two-month banking crisis that has rattled the financial system.

First Republic, whose assets were battered by the rise in interest rates, had struggled to stay alive after two other lenders collapsed last month, spooking depositors and investors.

First Republic was taken over by the Federal Deposit Insurance Corporation and immediately sold to JPMorgan. The deal was announced hours before U.S. markets are set to open, and after a scramble by officials over the weekend.

Later on Monday, 84 First Republic branches in eight states will reopen as JPMorgan branches.

JPMorgan will "assume all of the deposits and substantially all of the assets of First Republic Bank," the F.D.I.C. said in a statement. The regulator estimated that its insurance fund would have to pay out about $13 billion to cover First Republic's losses. JPMorgan also said that the F.D.I.C. would provide it with $50 billion in financing.

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iehi-feed-65763 Tue, 28 Mar 2023 16:36:16 GMT Schwab's $7 Trillion Empire Built on Low Rates Is Showing Cracks http://implode-explode.com/viewnews/2023-03-29_Schwabs7TrillionEmpireBuiltonLowRatesIsShowingCracks.html At the root of Schwab's income is idle client money. The firm "sweeps" cash deposits from brokerage accounts to its bank, where it can reinvest in higher-yielding products. The difference between what Schwab earns and what it pays out in interest to customers is its net interest income, among the most important metrics for a bank.

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After a year of rapidly rising rates, there's greater incentive to avoid being stagnant with cash. While many money-market funds are paying more than 4% interest, Schwab's sweep accounts offer just 0.45%.

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"As a result of rapidly increasing short-term interest rates in 2022, the company saw an increase in the pace at which clients moved certain cash balances" into higher-yielding alternatives, Schwab said in its annual report. "As these outflows have continued, they have outpaced excess cash on hand and cash generated by maturities and pay-downs on our investment portfolios."

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To plug the gap, the brokerage's banking units borrowed $12.4 billion from the FHLB system through the end of 2022, and had the capacity to borrow $68.6 billion, according to an annual report filed with regulators. Schwab borrowed an additional $13 billion from the FHLB so far this year, the filing showed.

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iehi-feed-65760 Mon, 20 Mar 2023 16:38:30 GMT US banks sitting on unrealized losses of $620 billion on low-interest rate-era bonds http://implode-explode.com/viewnews/2023-03-21_USbankssittingonunrealizedlossesof620billiononlowinterestrateera.html iehi-feed-65759 Sun, 19 Mar 2023 19:44:24 GMT Before Collapse of Silicon Valley Bank, the Fed Spotted Big Problems http://implode-explode.com/viewnews/2023-03-20_BeforeCollapseofSiliconValleyBanktheFedSpottedBigProblems.html In 2021, a Fed review of the growing bank found serious weaknesses in how it was handling key risks. Supervisors at the Federal Reserve Bank of San Francisco, which oversaw Silicon Valley Bank, issued six citations. Those warnings, known as "matters requiring attention" and "matters requiring immediate attention," flagged that the firm was doing a bad job of ensuring that it would have enough easy-to-tap cash on hand in the event of trouble.

But the bank did not fix its vulnerabilities. By July 2022, Silicon Valley Bank was in a full supervisory review -- getting a more careful look -- and was ultimately rated deficient for governance and controls. It was placed under a set of restrictions that prevented it from growing through acquisitions.

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It became clear to the Fed that the firm was using bad models to determine how its business would fare as the central bank raised rates: Its leaders were assuming that higher interest revenue would substantially help their financial situation as rates went up, but that was out of step with reality.

By early 2023, Silicon Valley Bank was in what the Fed calls a "horizontal review," an assessment meant to gauge the strength of risk management. That checkup identified additional deficiencies -- but at that point, the bank's days were numbered. In early March, it faced a run and failed within a matter of days.

Major questions have been raised about why regulators failed to spot problems and take action early enough to prevent Silicon Valley Bank's March 10 downfall.

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The picture that is emerging is one of a bank whose leaders failed to plan for a realistic future and neglected looming financial and operational problems, even as they were raised by Fed supervisors. For instance, according to a person familiar with the matter, executives at the firm were told of cybersecurity problems both by internal employees and by the Fed -- but ignored the concerns.

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iehi-feed-65758 Sun, 19 Mar 2023 19:40:57 GMT UBS Group doubles offer and acquires Credit Suisse for $2B http://implode-explode.com/viewnews/2023-03-20_UBSGroupdoublesofferandacquiresCreditSuissefor2B.html iehi-feed-65757 Thu, 16 Mar 2023 21:21:09 GMT Bank shares rebound off lows as big banks come to the aid of First Republic http://implode-explode.com/viewnews/2023-03-17_BanksharesreboundofflowsasbigbankscometotheaidofFirstRepublic.html iehi-feed-65756 Thu, 16 Mar 2023 02:15:44 GMT First Republic Bank Weighs Options, Sale After Cut to Junk by S&P, Fitch http://implode-explode.com/viewnews/2023-03-16_FirstRepublicBankWeighsOptionsSaleAfterCuttoJunkbySPFitch.html First Republic Bank, the San Francisco-based lender that was cut to junk by S&P Global Ratings and Fitch Ratings on Wednesday, is exploring strategic options including a sale, according to people with knowledge of the matter.

The bank, which is also weighing options for shoring up liquidity, is expected to draw interest from larger rivals, said some of the people, all of whom requested anonymity discussing confidential information. No decision has been reached and the bank could still choose to remain independent, they said. A spokesperson for First Republic Bank declined to comment.

First Republic said Sunday that it had more than $70 billion in unused liquidity to fund operations from agreements that included the Federal Reserve and JPMorgan Chase & Co. Still, its stock fell 21% Wednesday in New York trading to a decade-low of $31.16, giving it a market value of $5.8 billion.

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The lender specializes in private banking and wealth management, and has made an effort to differentiate itself from Silicon Valley Bank, which has been seized by US regulators. Unlike SVB, which counted startups and venture firms among its biggest clients, First Republic said that no sector represents more than 9% of total business deposits.

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iehi-feed-65754 Tue, 14 Mar 2023 17:02:02 GMT Was This a Bailout? Skeptics Descend on Silicon Valley Bank Response http://implode-explode.com/viewnews/2023-03-15_WasThisaBailoutSkepticsDescendonSiliconValleyBankResponse.html ... many academics agreed that the plan was more about preventing a broad and destabilizing bank run than saving any one business or group of depositors.

"Big picture, this was the right thing to do," said Christina Parajon Skinner, an expert on central banking and financial regulation at the University of Pennsylvania. But she added that it could still encourage financial betting by reinforcing the idea that the government would step in to clean up the mess if the financial system faced trouble.

"There are questions about moral hazard," she said.

One of the signals the rescue sent was to depositors: If you hold a large bank account, the moves suggested that the government would step in to protect you in a crisis. That might be desirable -- several experts on Monday said it might be smart to revise deposit insurance to cover accounts bigger than $250,000.

But it could give big depositors less incentive to pull their money out if their banks take big risks, which could in turn give the financial institutions a green light to be less careful.

That could merit new safeguards to guard against future danger, said William English, a former director of the monetary affairs division at the Fed who is now at Yale. He thinks that bank runs in 2008 and recent days have illustrated that a system of partial deposit insurance doesn't really work, he said.

"Market discipline doesn't really happen until it's too late, and then it's too sharp," he said. "But if you don't have that, what is limiting the risk-taking of banks?"

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iehi-feed-65753 Mon, 13 Mar 2023 14:05:00 GMT First Republic drops, bank stocks decline http://implode-explode.com/viewnews/2023-03-13_FirstRepublicdropsbankstocksdecline.html ``First Republic said Sunday it had received additional liquidity from the Federal Reserve and JPMorgan Chase

. The bank said the move raises its unused liquidity to $70 billion, before any funding it could get from the new Fed facility.

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While First Republic is not as concentrated in one industry as SVB was with technology, the bank does tend to cater to businesses and wealthy individuals who tend to have large uninsured deposits.

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While SVB had an unusually high percentage of uninsured deposits, there are other mid-sized banks that could be at risk of large withdrawals.

"We believe regionals with less diversified and large uninsured deposit bases are at risk of deposit flight but not at the speed of SVB and they should have time to tap wholesale funding markets (such as FHLB) and raise cash levels. In a fragile environment like we are in, we believe banks should be cautious about the potential negative signaling effect of raising deposit rates to keep deposits," Citi analyst Keith Horowitz said in a note to clients.

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iehi-feed-65751 Sun, 12 Mar 2023 22:52:32 GMT Banking Regulators Guarantee All Silicon Valley Bank and Signature Bank Deposits, Invoking Systemic Risk Exemption http://implode-explode.com/viewnews/2023-03-13_BankingRegulatorsGuaranteeAllSiliconValleyBankandSignatureBankDe.html After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.

We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.''

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iehi-feed-65750 Sun, 12 Mar 2023 22:51:59 GMT Crypto-Friendly Signature Bank Shut Down by State Regulators http://implode-explode.com/viewnews/2023-03-13_CryptoFriendlySignatureBankShutDownbyStateRegulators.html iehi-feed-65749 Sun, 12 Mar 2023 22:48:03 GMT Fed and Treasury Announce New $25B Bank Liquidity Backstop Program http://implode-explode.com/viewnews/2023-03-13_FedandTreasuryAnnounceNew25BBankLiquidityBackstopProgram.html The financing will be made available through the creation of a new Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets will be valued at par. The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution's need to quickly sell those securities in times of stress.

With approval of the Treasury Secretary, the Department of the Treasury will make available up to $25 billion from the Exchange Stabilization Fund as a backstop for the BTFP. The Federal Reserve does not anticipate that it will be necessary to draw on these backstop funds.

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