Stock market on verge of major collapse
- Thread starter MichiganHerd
- Start date
I’d say there will been a big bank run on Monday but I’m already seeing videos of lines to banks today
It’s actually $250k per account title/ownership.
Carl can have 1 or unlimited accounts in his name alone…totaling $250,000…and those are all insured.
Carl and wife can have 1 or unlimited accounts in their name jointly…totaling another $250,000…and those are all insured.
Carl’s wife can have 1 or unlimited accounts in her name alone…totaling $250,000…and those are all insured.
Same with Carl payable on death to wife.
Same with wife payable on death to Carl.
Several other ways, but you can get creative and get way insured than most people realize.
Good info.
I didn’t know that.
My wife and I are both on all/each of our accounts. We do that for full family finance harmony (it’s not my money it’s our money). But maybe that’s not best for FDIC.
I actually misspoke now that I think about it. In this scenario, I believe the joint account(s) would be insured for $500,000.
In most cases, FDIC coverage is a paper tiger. This past week probably had a bunch of people sweating though. But there are multiple ways to insure large sums of money, for events just like this one.
I agree with your approach. It’s been “our” money from day one as well. Just better that way.
Nor is it the best for when your wife gets some ideas by watching any episode of Dateline where the doctor-husband dies under mysterious circumstances.
US Govt stepped in. But....it's not a bailout. 
This seems to be turning into a pattern. Every 10 years or so we get hit with another banking crisis. I don't care which side of the aisle you sit on we need to make these banks get their crap together
welp…
I have an investment in a feeder fund for a start up pre IPO. The feeder fund banks at Signature Bank.
We’ll see how this plays out.
Addendum:
My investment just funneled through Signature. Money is already probably burned through in fledgling start up. So either way it’s probably up in smoke. But interesting anecdote, I thought I had no relationship with any of these banks.
I have an investment in a feeder fund for a start up pre IPO. The feeder fund banks at Signature Bank.
We’ll see how this plays out.
Addendum:
My investment just funneled through Signature. Money is already probably burned through in fledgling start up. So either way it’s probably up in smoke. But interesting anecdote, I thought I had no relationship with any of these banks.
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Like many other things in life , it’s a few bad actors ruining it for everyone. And too weak punishments for those that are terrible or negligent in their jobs/risk management.
It’s partially (though obviously not all of it) why your health insurance requires prior authorization for some things. Some docs using expensive drugs/procedures that aren’t indicated. Most are good eggs, but the few bad ruin it for everyone.
Little bit. Not sure this will have much of an impact yet but I’m trying to read up on this, and I have a call at 9 AM in the morning.
Banks fail for the same reasons any other business does. If your bank is sound financially, has a strong balance sheet, and is well-capitalized, they should be fine. We go through strenuous stress testing constantly, and are capitalized well above regulatory standards, so I’m not worried.
Is it hard keeping customers cash when savings rates /CD rates at Truist (and pretty much most banks) are well below money market accounts right now?
It’s hard to keep so much cash in checking when MM or treasuries are paying almost 5%.
There is no good answer. It honestly depends. We can compete across-the-board whenever we want, and could price small banks out of the market if we wanted, but we will almost never lead our advertising with interest rates. Instead, you try to make the best decision possible in that situation for that particular client. You try to do whatever you can to keep or win the business, but you can’t price your entire portfolio out of profitability either. Some places will simply take a loss on a deposit in order to get that deposit because they have to have it from a regulatory standpoint.
Poor decisions lead to what you just saw happen with SVB. We try hard to avoid poor decisions, although we make plenty. When money is moving back-and-forth at a blinding pace, inevitably you are going to win some and lose some. It’s times like this where you rely a lot on relationships that you have built with your clients. From a bank’s perspective, you want that money to be in the lowest cost of funds account as possible. But that’s just not reality.
I still think a money market savings account is the better option to CDs right now, despite the fact that they are variable. I don’t believe we have seen the top of the rate environment yet, so until that happens, there’s probably not much reason to tie up your money.
Edit: I might have misread some of your original question/comment. We are moving money all the time from checking accounts to money market savings accounts. No reason a client should keep a dime more in a checking account than they have to, when a MM is just as accessible and pays good interest.
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It’s not just about banks being capitalized. It’s about banks being appropriately hedged against various risks caused by govt (FOMC) mismanagement.
SVB appears to have taken on huge amounts of long dated bonds because of their “safety” long term. Not necessarily a poor decision by itself. The mistake was not hedging those positions and basically doing nothing when “Rome” started burning in 2022 (tech sector meltdown while FOMC raised interest rates).
Even a novice investor should understand “interest rate risk” for bond investing. This bank appeared to buy into the hopes that the fed rate hikes would slow or even reverse, thus improving their financial positions.
I don’t view this as criminal….it’s plain incompetence
SVB appears to have taken on huge amounts of long dated bonds because of their “safety” long term. Not necessarily a poor decision by itself. The mistake was not hedging those positions and basically doing nothing when “Rome” started burning in 2022 (tech sector meltdown while FOMC raised interest rates).
Even a novice investor should understand “interest rate risk” for bond investing. This bank appeared to buy into the hopes that the fed rate hikes would slow or even reverse, thus improving their financial positions.
I don’t view this as criminal….it’s plain incompetence
Thanks.
That was my reading of it…just really dumb lack of hedging. It wasn’t that they were in risky assets…it was just odd to take such a huge position on such long bonds.
Im far from an expert in hedging (though I did read Spitznagels last book), but it seems management at SVB really F’d up.
I’m pretty knowledgeable on a wide range of subjects, but when I hear you experts talk about finance, it is like the adults talking in a Charlie Brown special: Wah-Wah-Wah . . .
I’m seeing that Barney Frank is on the board of Signature Bank.
Signature Bank will most likely be saved.
Signature Bank will most likely be saved.
I missed this before I posted the same thing in another thread. Unless people know his roll after the 2008 collapse they might not get why this is noteworthy
I’m still digesting it all and not sure what to think but this sentiment makes some sense. Need to figure out a way to rid the bad actors/poor performers. At some point if you can’t figure that out populism will demand a central digital currency and that terrifies me.
Read somewhere about how SVB was full of diversity hires, so it makes sense that it failed. You hire the most qualified persons - regardless of race/ethnicity, gender, sexual orientation, etc. - to run a business, not the most diverse.
As much as I hate woke I’m not sure this is it.
However, the Venn diagram of woke and distracted by mission creep and really bad at actual risk management (ie not able to live in real world and perceive possible consequences) probably does overlap.
tech bros talked each other into a bank run. lol. I wonder who shorted SVB....
I think this may be correct.
hard to know how much of a systemic/contagion risk there was but make no mistake, tech VC's were absolutely hyping things up over the weekend.
I didn't get the sense they were shorting but definitely protecting their own assets. "Everyone's a libertarian until their bank goes under."
Wife and kids are out of town and I was entertaining myself with deep dives on this all weekend while I sat around or worked out.
How many times do I have to ask why your "conservative" bank ran your subprime auto department into the ground before you answer?
Did the bank "run it into the ground" or did rising interest rates and no one willing to buy the paper (market forces) run it into the ground?
I'm talking out my a** here but I wonder if that was the Suntrust wing bringing that paradigm in?
Suntrust was throwing money at me all the time. They had a concierge physician wing that was always begging to get you in on loans and lines of credit, etc. Approving me for insane mortgage numbers.
BB&T was never like that before. They honestly did seem super conservative. They had good to great customer service, but rates on savings accounts, CD's (low), mortagages (seeminginly higher) did seem conservative to me. Weren't hounding me for risky-ish loans all the time, etc.
The bank is responsible either way.
Rising interest rates, at least regarding the subprime consumer, doesn’t factor in. Those rates haven’t changed. The rates have changed for near-prime and prone consumers.
If you’re referencing the cost of funds for the lender/BC’s bank, that hopefully shouldn’t be an issue unless their securitization was nixed, which shouldn’t happen to such a large and conservative bank.
Subprime lenders don’t work that way (begging to throw money around). They have to be conservative with a consumer base that will default 40% of the time. They balance that risk by charging auto dealers a fee, and hopefully, knowing basic economics. But not in this case.
People not making their car payments would seem to be a rising risks. Would it not even be more of a risk given today's economic climate? All these people who ran out during Covid with a little extra money and bought the truck or car on the 7 to 10 year loand, who were high risk to begin, with or going to start defaulting on those loans. Smart move to get out of it.
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If you are falling behind on auto loan payments, experts say there are some things you can do to prevent the problem from snowballing.
So a "conservative" bank should continue to take on loans that have a 40% default (in a good economy) and ignore the macro changing to even greater risk?
Again, if there are no buyers of the paper, it sounds like a wise decision to get out of that business. Especially if you believe the economy/car market are going to cool off...which it is.
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