May 4, 2023 - Avoid Crisis hosts Reynaldo Arellano and Allen Plyler get strapped in for a Marathon Man reminder and question listeners with "Is it Safe”? The pleas for the Biden Administration to recognize the banking crisis is turning into a political crisis fall on deaf ears as the FDIC Hoodwinks the public by stealing from the poor regional banks, then in Hood Robin style, auctions off a give to a rich bank JP Morgan Chase. One bank, two bank, three bank, four. Four is a bunch and count on more.
Key Points from Rey:
- Is it safe out there? First Republic Bank is taken over.
- The Fed is so fixated on inflation. They were oblivious to the collateral damage. Silicon Valley Bank was a fatality. The Fed is saying the FDIC is an antidote. No. We called it here before. We need to stop the shorting on the regional banks, and to change the rules on banks.
- Let’s keep trying to get the word out the best we can. Let’s see if people can catch up and see what is going to happen. Our banking system was never designed to handle the money in and money out that is happening today.
- Social media can collude with short sellers to tank a bank, and they can keep doing that.
- The deal gave a good set of assets to JP Morgan Chase with the sale of First Republic Bank forpennies on the dollar.
- The consumers and investors are not protected here. The banking system is too volatile. The deposit flight is taking money away from regional banks, and some of that is going to bigger banks.
- The investor is in the chair and wondering if it safe. It is a mess. All we can say is adjust your portfolio if you feel you have exposures.
- The bank balance sheet needs to be fixed and the Federal Reserve needs to lend against devaluation of bonds based on interest rates.
- How far will this go before people understand this is pervasive in the system.
- Pension funds are investors as well. The Fed doesn’t realize the impact here. There is international exposure.
- Credit Unions have the same issues on the balance sheet as the regional banks.
- Even the press release from First Republic Bank didn’t sound that bad. Several weeks later they were gone.
Key Points from Allen:
- We need more than Oil of Cloves, it is not safe. What we needed was Jerome Powell needed to pause on interest rates. The interest rate moves makes it even worse on the regional banks.
- The mark-to-market rules continue to make it worse. The regional banks are getting slaughtered.
- Previously on Avoid Crisis we said the Fed must pause, they did not.
- We have urged listeners to do fact checking. We hear from Federal Reserve Jerome Powell the banking system is resilient. But look at regional banks stock prices falling. The market is not agreeing that it is safe.
- The Fed’s report showed there were regulatory failures, and even now, bank deals are not getting regulatory approval.
- The contagion and fear we talked about in our earlier episodes is getting real. Rey you said Jerome Powell needed to fall on the sword, you said the debt ceiling crisis was going to come to roost sooner than people think. Janet Yellen now is saying that. Who is not listening to this podcast?
- The long period of low rates and rapid rise of interest rates is driving the banking crisis.
- The FDIC has hoodwinked, or deceived the public with the idea that they are saving the banking system. In a Hood Robin style they are handing the poor regional bank to a rich bank JP Morgan with the First Republic Bank sale.
- The Silicon Valley Bank failure was something the regulators are to be blamed for because they did not step in and take action sooner. There are going to be more bank failures, even beyond First Republic Bank.
- How many banks have failed in 2023? The stock prices look like the stocks split, but they have not. It is just the stock prices have come down.
- This is not a Tra La La Moment, one bank, two bank, three banks, four, and now how many more will fail.
- There needs to be money thrown at this problem. How many things have we talked about in this show that are later picked up and discussed in the news and business media? Our government is not taking enough of a stance on this issue.
- The prediction here is the business media will now start talking about this issue since we are mentioning it now on this podcast. That is the issue of the largest shareholder in the regional bank is often a hedge fund. And those hedge funds can end up being the largest shareholder in more than one regional bank. When their investors see the losses, they may want to take their money out of the hedge funds, and the hedge fund will have to sell shares in the regional banks.
- If a short moratorium happens, it might be too late for some of those hedge funds that were forced to sell.
- You are going to hear it first here, on Avoid Crisis, there is also an issue with Credit Unions.
- Credit Unions can fail here too.
- The uninsured deposit issue is going to ripple into the big banks too.
Connect with Rey
linkedin.com/in/reynaldoarellano
Connect with Allen
linkedin.com/in/allen-plyler-cpa-mpm-3803992a/
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