Breathtaking speed for SVB bailout: Rumors Thursday, failed Friday, new Fed program Sunday!

Investment Analysis Clubs Macro Economic Trends and Risks
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Federal Reserve Rolls Out Emergency Measures to Prevent Banking Crisis

Depositors will have access to all of their money starting Monday, regulators say

By Nick Timiraos, The Wall Street Journal, March 12, 2023

Federal regulators rolled out emergency measures Sunday night to stem potential spillovers from Friday’s swift collapse of Silicon Valley Bank, including measures to backstop all depositors.

Regulators announced the action in a joint statement from Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and Federal Deposit Insurance Corp. Chair Martin Gruenberg. The group said that depositors at SVB will have access to all of their money on Monday.…

“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.”

The Fed said it would make additional funding available to banks to ensure they have “the ability to meet the needs of all depositors” through a new “Bank Term Funding Program,” which will offer loans of up to one year to banks that pledge U.S. Treasury securities, mortgage-backed securities and other collateral. … .

The agencies said that “any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.”[end quote]

Wow, isn’t it great how the Fed can use its imagination to whip up a brand-new program to meet the needs of the moment? Now whoever buys SVB can use its AAA securities as collateral for a loan from the Fed. I wonder what the loan terms will be? What yield?

Signature Bank also failed this weekend.

This quick response from the Fed will help prevent a spreading bank panic.

There was no mention of protecting investors in any way.

Wendy

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The Fool finally put SVB in the penalty box today. Athletes in this condition are sent to the ICU.

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Of course the FED has that power. The FDIC has no say even if the money flows through them. The law gives them no powers of the sort.

Is this over? That is a dangerous question. The larger global pensions funds might say no. The larger financials are going to be reporting losses as well in some of their bond/asset holdings.

The reality is all of this is very crazy yet.

It might take us a few days of watching and discussing to see any possibly imputes for further failures.

Meanwhile what if the FED and treasury are insisting on higher rates to bring some of the inflation down and using potential failures to boost the money supply for economic growth…?? what I just wrote is the opposite of stagflation. It is possible.

I guess I did not need to wait a few days for a dynamic to appear in my mind.

Wow…flush with cash and lower inflations the markets could rise from here. Not a new bull market mind you. The timing would be excellent for me as I sell NFTs into it.

The stockbroker clienteles would be avoiding bonds to a larger degree. Possibly while chasing other asset classes, perhaps.

This may be an interesting and needed twist and turn in normalizing the US economy and banking system.

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