Cryptocurrency: BANK RUN PANIC Spreads Around Globe, Crypto and Gold Demand Skyrockets, FDIC Coverup

[grarpamp]

> Not your keys, Not your Money...

US small, regional, internet banks down ~20-30% / 52wkhi
US large banks and financials down ~15-20% / 52wkhi

"This Should Scare The Hell Out Of Bankers & Regulators Worldwide"

https://www.ft.com/content/b556badb-8e98-42fa-b88e-6e7e0ca758b8
https://twitter.com/biancoresearch/status/1634885127179325440
https://twitter.com/biancoresearch/status/1634329593124618240
https://twitter.com/biancoresearch/status/1634329594328391680

>From "everyday joes" to the corporate CFOs, men, women, and others,
are frantically battling a prisoner's dilemma about their banking
relationship this weekend: "I’m fine if they don’t draw their money,
and they’re fine if I don’t draw mine..."

But, given the lines outside banks and less than reassuring sentiment
from Washington, we suspect it is too late and the that dilemma is
over - now it's every man, woman, and child for themselves. As The FT
report on one CFOs decision-tree:

    “I got a text from another friend - he was definitely moving his
money to JPMorgan. It was happening,” the finance chief said.

    “The social contract that we might have collectively had was too
fragile. I called our CEO and we wired 97 per cent of our deposits to
HSBC by midday on Thursday.”

And as explained below, the new normal 'bank run' is instant, huge,
and devastating.

Given that there are many 'bad' (read: biased and/or uninformed) takes
on the situation at SVB, Bianco Research's founder and President, Jim
Bianco, tried to clarify in a brief Twitter thread:

This is not a solvency crisis like 2008.

Bad loans or poor investments were not made. Money was not lost. So,
everyone is going to get their money back. (And please no takes about
no interest rate hedging. Asset/liability mismatches are how banking
works.)

[We agree broadly but do worry, as we detailed on Thursday, about the
CRE/office exposure overhang on small banks and how higher rates will
actually translate to actual loan losses, not just HTM "temporary"
losses.]

Instead this is an old fashion 1930s liquidity crisis.

Too many depositors demanded cash at once (as in right now) and SVB
(and SI) could not convert loans and securities (and crypto) to cash
that quickly. So, everyone is getting their money back from SVB (and
SI), just not at 8AM Monday. And, yes this is a big problem as this is
working capital for a lot of companies. They have payrolls to meet and
vendors to pay next week. And if they don’t pay bills and employees,
they in turn don’t pay their bills and this can quickly cascade into a
major economic problem.

The important question is why so many demanded their money back at once.

And I’m not referring to the last two days. I’m asking about the
days/weeks leading up to this last two days forcing SVB to sell
securities and realize a $1.8B loss, necessitating a capital raise.
Why were depositors withdrawing in big enough amounts before
Thursday/Friday?

First, welcome to the world of mobile banking.

Gone are the frictions of standing in line with tellers instructed to
count money slowly. (Media images of lines Friday were largely
gawkers)

Question: How did $42 billion get withdrawn Friday alone without
thousands in line?

Answer: your phone!

This is not the Bailey Savings and Loan anymore.

This should scare the hell of bankers and regulators worldwide.

The entire $17 trillion deposit base is now on a hair trigger
expecting instant liquidity.

Add in social media and millions get a message, like Peter Thiel
telling Founders companies to pull out, or Senator Warren gloating
that SI went under, and pick up their phone open a Chase account and
Venmo-ed their life savings into it in 10 minutes.

[Once SI died, Warren's dancing on its grave started the dominos falling...]

Instant liquidity (not solvency) crisis with everyone still in bed.

Banking will never be the same.

The second, and I did a long thread on this on Friday... banks are
over-reserved, after 14 years of QE, and are still paying 0.50% on
accounts when T-bills are yielding 5.00%. They don’t need to compete
for deposits.

    2/14

    Over the past year, banks kept rates on checking/saving accounts
extremely low compared to MM funds. The avg yield on a MM (blue)
reached as high as 4.43% recently, while bank rates (orange) remained
at just 0.48%. The gap was almost 4% (red). pic.twitter.com/96PwaEpsrx
    — Jim Bianco biancoresearch.eth (@biancoresearch) March 10, 2023

Initially as rates passed 2%, 3% and 4%, the public did not notice. So
bankers thought deposits were well anchored at their bank and not
moving regardless of the interest rate paid.

But at 5% the public finally noticed, and millions reached for the
phone at once and transferred to a money market account or Treasury
direct to buy T-bills. Banks were squeezed to convert loans and
securities to cash instantly so depositors could leave for better
rates.

Add in the bleed out from tech firms struggling, and Senator Warrens
tweeting with glee about SI going out of business, and depositors at
SVB got the message and picked up their phones and acted.

This is why I have been tweeting that this has to stop now.

The Fed is meeting Monday at 11:30. Too late!

They need to meet today (Sunday) at 11:30.

What needs to be done?

Two things.

    The FDIC needs to raise the deposit insurance ceiling to unlimited
as they did this in 2008. Besides $250k is a made up number anyway. So
make up a bigger number.

    Banks need to get their deposit base to stop figuring out how to
buy a 4.5% money market fund. They need to raise the interest rates
they pay 3.00% - 3.50%, from 0.50%, immediately. Yes, this will kill
bank profitability so expect Bank Execs to balk at doing this.

This way the public gets the message that you money is safe, no matter
the bank, or the amount, and the rate paid on your money is at least
competitive with other alternatives.

Otherwise, if they do nothing and wait for the Fed to START a meeting
at 11:30 Monday, hundreds of billions of deposits will have moved by
phone and it will be far worse.