Am I too tinfoil hat to think the big 4 planned it like this all along? I guess one could ask why WOULDN’T they have meetings trying to engineer exactly what is happening?
That doesn't really explain anything though. Every business is always trying to gain marketshare. The question then is why they are succeeding now and not before. Nobody forced SVB to put all their money into 10-year treasuries, nor did anybody engineer the tech-industry recession we've been going through (JPMC is big but Apple, Microsoft and Amazon are each bigger), both of which contributed to SVBs demise. Also the big banks tried to rescue First Republic a few weeks ago; not impossible that was some weird 4-D chess move but much more likely it was just a bailout that failed.
If I had to guess, it's less so "planned" and more so that the various institutional and regulatory incentives make this sort of outcome extremely likely.
I think this hits the nail on the head. I think after 2008 they setup a system (set of regulations/rules/policies not some group of monocle wearing dudes in a room scheming) where the BigBanks will eat the SmallBanks, the FDIC will insure what they do and some Federal agency will eat the SmallBank failures and then BigBank can swoop in as a "savior" essentially consuming SmallBank but all that is left is the profitable parts at that point.
Well, to accomplish something like that, they'd have to have hundreds of (past, present, and future) employees, dotted over dozens of institutions (media, regulatory and political).
They'd need the tacit permission of the other industries their owners are invested in.
And, they'd need tremendous amounts of capital. Plus a history of grand collusion and unethical behavior. And leverage against anyone that might call them out.
So... I've got nothing. I will say that failing to investigate this possibility seems naive; as would expecting a genuine investigation.
I think you are too tinfoil hat to think they planned it. They don't need to engineer what is happening, it was obviously going to happen at some point. They could have targeted some banks (active, hard), or they simply could have realized that a percentage would fail when rates went up, so they got in a position to do well picking up the pieces. And then they acquire whatever fails.
I'm willing to take my downvotes on this, but as someone who works in an industry that has been working for 14 years to set up an alternative to this system, and which feels like it's under systemic, engineered threat at the very same time this is happening, I think your tinfoil hat is stylish, and appropriate for the season and weather.
yes, and now they are "attacking" PacWest, whose stock is plummeting like First Republic
its an easy cycle - find a bank you want for nothing, feed bad press through the usual outlets, watch it fall, then watch depositors get spooked, then buy it for nothing
First Republic is probably just one of many banks intended to be undermined, trashed, and then sold for nothing
and remember all the times First Republic's CEO came out and defended his business as it was collapsing? me neither...makes you wonder...
Am I wrong in thinking that all banks should have no exposure to the stock market period?
The whole being able to trigger aggregate indebtedness violations through synthetic shares (options), seems like a systemic risk that no ones paying attention to.
Also, its hard to say we still have a fractional reserve system when required deposits have been set at 0% since the pandemic. There's no fraction, its 0 unless you change the definition (i.e. Basel III which uses capitalization as deposits).
Any bank with a ticker on a market. Technically no security on the market is safe from this mechanism. Banks are particularly vulnerable.
With a properly timed news drop, shorting, and forcing the market maker to exit delta-hedging (due to volatility) you end up having them create synthetic shares that in addition to the loaned shorted shares push the price downwards (because there will always be more shares since they were created via the contracts and are not constrained by short limits/availability and float). The market maker may even participate to offset losses.
Once the capitalization rate falls below a certain threshold you get aggregate indebtedness violations. At which point any loans they might have had create a liquidity event (i.e. frozen), which must be paid back and price levels returned to normal within 30 days (Basel 3), or 2 months (Nasdaq).
It creates a spiral which can't be recovered from, they will bleed deposits, and then the regulator will seize them, and sell their assets to one of the survivor banks for pennies on the dollar (with guarantees). Another form of bailout.
This is what largely happened with FRC, and now its starting to a lesser degree (a/o last night) other regional banks.
* Basel 3 counts capitalization as capital reserves instead of the normal deposit reserves we expect in fractional banking, this was adopted just recently (which is why the Fed site shows 0% deposit requirements).
If your reserves dip under the requirements you have 1-2 months to correct (from what I've read, although I'm not an expert and its very legalese, and dense so don't take that as advice). Basel is very opaque compared to Federal Reserve reporting in my opinion.
* Aggregate Indebtedness violations have to do with the SEC and market's net capital rules. In the case of SBLOCs or Securities backed loans, sudden drops in capitalization from price action can trigger illiquidity as any existing revolving credit can be frozen, and interest on utilization can balloon in addition to any further ballooning that might occur as a result of rating downgrades (S&P/Moodies).
Either are directly impacted by the company capitalization which is based on current ticker price and the shares outstanding.
Maybe you are confused by the words "common stock" in Basel 3 or something -- that's in the stockholders' equity line, book value, and is not defined by the market price of the company's own common shares.
