I tried to sell one but there is no market price. Yikes…
edit: PACW - too much depositor cash in these regional banks means they are worth nothing - interesting times
edit2: PacWest, Western Alliance crash as regional bank fears continue to shake markets
The cash can move. Loans can’t. And they aren’t making as many loans.
Yikes. What exactly do you mean by there is no market price? Sounds very bad.
Related to this, because its bringing down overall markets, is I’m considering moving the IRA out of VOO and QQQ for the short term (i.e. past debt crisis). But that would put my funds into the settlement fund, which is basically a money market. Those are not FDIC insured, and I’d be way past the $250k limit anyway. So that makes me just stay put, and I’m unsure which way is better right now.
7-10 years from retirement. Nvidia RSU’s will help me there (hoping for $500 a share, but even at just $200 a share it will help me with retirement). Would love to see the IRA at least gain +50% by then if not a double.
Wanting to see more. Aside from PACW, what are the other reasonably sized regional banks? I’m not familiar with this corner of the market. How big is this problem?
I use a regional Credit Union for my banking needs.
“While credit unions don’t receive FDIC protection, member funds are generally insured up to $250,000 by the National Credit Union Administration. (All federal credit unions and most state credit unions offer this coverage.) That means the average credit union customer won’t have to worry about losing their money even if their institution becomes insolvent.”
My CU has emailed me, assuring that “we” are in good shape and I (me, ralph) should just skip happily through the bluebonnets and trust my CU team.
This CU receives direct deposit funds and is my bill pay service, as well as my “immediate emergency funds” cache.
What a headache if the CU should “fail”.
Should I create a back up from which to pay bills?
ralph
Credit Unions seem to fail at about the same rate as banks but because they are generally so much smaller, they don’t make national news.
For example, there have been 3 bank failures this year and 2 CUs. Last year, there were 7 CU failures and no bank failures.
It’s trading again, possibly it was halted briefly.
So regional banks are mostly a collection of risks - regional economic downturns and/or deposit flight. The deposit flight can occur because of FDIC limits.
Those limits are some sort of vague check on the banks, the people and the gov’t not wanting to bail out banks, some sense of moral hazard and all that. But it also means that US dollars have an FDIC limit, which is ridiculous, though I suppose people could buy treasuries.
There really should be some way of insuring all of the deposits. Or get rid of the regional banks and fold them all into one single national bank.
If you can, I’d split the money between two banks, both in FDIC or Credit Union insured funds. I have money at Capital One (along with checking), but also money at Vanguard. Would both fail or get hurt? Unlikely.
I’ve moved significant figures out of the market and into short term CD’s (90 days, mostly). All FDIC, earning 4+%. Some of it is in Schwabs treasury backed money market, some in their more popular MM, both also earning 4+%.
Not perfect, but a reasonable port in a storm. This is all in the IRA and no-tax-implications accounts. The tax prone I have pared back as much as possible, most of that is in Berkshire anyway and has been for a decade.
I had not considered short term CD’s in the IRA. Vanguard brokers them, meaning I could buy a variety from multiple banks and keep under the limits.
Is it possible to more your money is smaller portions, say $100K at a time?
DB2
What’s wrong with money markets? The money is mostly in treasuries. Pretty safe. Brokers have them. They are paying 4.5% and at major brokers reasonably safe.
For decades, I have used two banks or a CU and a bank. One was “primary” and the other was a “backup” in case the primary poofed (not just meaning taken over, but also including one of them “going stupid”–specifically meaning management). I was using two banks and one “went stupid” (mgmt choice). I changed the backup bank to primary. I then closed the accounts at the “stupid mgmt” bank and moved it all to another financial institution (CU) and made that my new “backup”. Oh, the bank that went stupid reversed their “stupid mgmt” policy but the damage was done (self inflicted). They never got back to the level of depositors before they changed (and then reversed their temporary “stupid”) policy. The bank was purchased a few years ago by a bigger bank and the old bank is history.
I used Wells Fargo for a bit as they were convenient (across the street–literally). However, they raised their minimum requirements for a free account (a modest number of transactions per month was ok) to a significant ongoing average balance, so I dropped them and switched to another backup bank. Their bank “across the street” is now gone, so the convenience factor is no longer in play. Most banking and other transactions are done electronically, so having a location “nearby” is not of real value unless something must be done “in person”.
@bjurasz -
If you decide to sell your securities, I would consider buying some CD’s that are now paying in the 4.5% range and would be FDIC insured if you purchase CDs from various bank offers.
This is what I have done. I actually moved LOTS of cash from MMF to CDs. I was able to catch some nice returns on CDs ranging from 3 months to 18 months and some paying 5.5%.
I’m sleeping much more soundly since doing that.
'38Packard
Update.
I have a brokerage account at Schwab.
As of yesterday, I now also have a Schwab bank account. The application was super easy, funding the account with the required minimum from the brokerage account was smooth as silk.
A rep reached out to me, offering assistance. We are now buds!
And already, I’m less stressed.
Now after I get the bill pay connections set up, I’ll be even less stressed, since I’ll have a ready back up.
Thanks @unholydave for the OP, and @Hawkwin @bjurasz and @jerryab2 for your comments.
ralph
This is a reasonable request.
The limits of deposit insurance are bizarre. This is not about loans, just guaranteeing the US dollars in deposit. Is there any good argument against such a guarantee?
Expanding FDIC is expensive.
Doing it now means for years the rich skated without insurance did not pay for insurance and now have insurance. As failures might happen the federal government picks up the tab for the rich suddenly.
OTOH the rich do not need to leave the banks if they are insured. But most of the top 20% of households by any measure income or assets have been leaving the banks for months now. So this might not work to any avail anyway. The banks did not want this some months ago because of cost now the banks need it as if they have not lost their clients…they mostly have lost their larger clients already…we are talking regional banks.
So what’s going on out west? It seems that the banks having these problems are headquartered in the west.
Silicon Valley - Santa Clara
PacWest - Los Angeles
First Republic - San Francisco
Western Alliance - Phoenix
They are all under the supervision of the San Francisco Fed.
DB2
from the article:
“To stop the cascade before the market literally drives more bank failures, we wonder if it’s time for the Treasury and the Fed to step up and potentially create some sort of backstop,” wrote Najarian."
Deposit flight is causing bank failures. Those failures have effects on large regions. The additional failure mechanism of duration risk could happen to any region that benefitted during one distinct interest rate environment. In theory we might need to shut down all banks that served silicon valley during 2010 to 2020.
There are many different variable at work, too many for existing regulations to cope with. And then the rate changes that were created entirely by the Fed, which is now acting aloof.
Most of the banks involved so far have been in CA, and one in NY. If we leave this situation to stew and enter common discussion do you think the middle of the country will want to bail out the coastal banks? Or just increasingly fulminate on those scooter-riding green slime-drinking tech weirdos that blew up the economy?
Another update on navigating the Credit Union.
As part of my activities on getting ahead of any “issues”,
I decided to prepay a couple months apartment rent, and some credit card balances.
When I entered the website of my CU, a pop up said that one of the branches is “temporarily closed”.
That caused a Dwayne the Rock eyebrow:
I logged in and scheduled the payments. Now, I wait to see if “temporarily closed” is contagious.
As a plus, I was alerted by a credit card that my FICO is up 10 pts, after opening the Schwab bank account.
Some FICO love!
ralph
