Realcent.org

Is this one of the big financial blunders that you guys here on RC are always readily preparing for?

I am simply amazed by how,when one bank topples, it suddenly starts a chain reaction. I don't think I will ever fully understand the why- is it because:

1. all banks are doing the same as the troubled one, and their numbers just come up at the same time?
2. other banks that are stressed, but hiding it, reveal their issues when they see another bank (in this case, SVB and First Republic) getting attention?

It is perplexing to me. I will say though, that I'm glad I listened to you guys and paid down some of my credit debt this month!!

Apart from the colossally stupid mismanagement of SVB, and almost as bad management of a handful of others, keep in mind that banking is almost totally about trust. It doesn't matter which bank it is or how large, even Bank of America, they are all based on fractional reserve banking and if the depositors ever lose faith in a given bank, that bank will go down. That's partly why there is so much posturing by them, and why they adopt pretentious names, and why they build giant buildings to project their image of strength and stability. It's all a mirage, and if they lose trust, they are dead meat.

Even with SVB's comically under-diversified portfolio, there's a chance it would have been perfectly fine if depositors hadn't started a run on it.

That's why SVB's failure is such a big deal, IMO. While it's a much (much, much) larger bank than others that have failed in the last decade-or-so, the reason for the failure is something that can topple even the most well-managed and conservative banks -- and it's a reason we haven't seen happen since the Great Recession. No bank can immediately cover all of the deposits it holds at any given moment.

To echo 68C's post, it's all about trust. Without the trust, the curtain falls.

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Unrelated: One thing I'm interested in is the investigation on insider trading for the SVB execs. Hopefully something actually comes of that. That amounts, timing, etc., just doesn't pass the ole sniff test.

The end of the banking/financial system is inevitable at some point. Fear and greed will destroy it one way or another.

So, is this the big one?... only time will tell.

When the bank runs spill over into the big banks, you know the party is close to being over. When it starts the Fed, US government and US Treasury will attempt to bail out everything in order to keep their fiat debt based usury scam system going.

Perhaps TPTB will let smaller regional banks fail to push everyone into larger banks and CBDCs (?)

Do not keep large amounts of cash in the bank, just enough to pay your monthly bills. Don't think your brokerage and retirement accounts will be safe either... everything will be frozen.

I've been prepared for something like this for the last 15 years. If you're not ready you'd better stock up on food and ammo today. Don't wait.

Understanding that banks only have MAYBE 10% of their assets in readily available currency (whether paper or electronic) is scary and that very fractional reserve currency system is based solely on trust as 68camaro stated. Thus you or I can go into any of our banks and pull ALL of our money out anytime even if it is in check form and not cash. But one whiff of fear and thousands of depositors start pulling out all their cash and ...BANG...the bank is done in days.

But, even scarier as I listened to various doom and gloom podcasts this past week, the FDIC fund used for providing depositors who have experienced a failure of their bank is ALSO only fractionally funded. I heard figure as low as 1.5 cents on the dollar!!!!

So in theory, the "system" that runs along so smoothly (at least without kinks to folks like me who don't look under the hood any given day) could very VERY quickly go bad in domino fashion should the fear and herd mentality take over the public. And it would seem those dominoes stretch all the way around the world....yikes!

Stack.

Keep in mind that things aren’t necessarily as they appear.

Here’s a specific example of what I mean. Hedge funds often look for vulnerable stocks to sell short. Certainly many small publicly traded banks could be on their lists. I’ve heard many stories about things they’ve done in the past to further their agenda.

Sadly, one thing I’ve heard about (can’t remember the specific company) is hiring people to stand in line to appear like they are upset and about to take their $ out. So what happens when they get to the front of the line and the teller realizes they don’t even have an account? Sadly, they’ve apparently thought this through as they act frustrated when they get near the front of the line and say something like “I can’t wait anymore. I’m gonna be late for my appointment.” as they leave the bank.

So… if you see a long line, don’t necessarily assume the worst case scenario.

Also, in some cases I’d actually prefer having an account with a small bank that isn’t publicly traded (vs. a small publicly traded bank). That’s because there is no stock for hedge funds to sell short.

Regarding the concept of a temporary dip, let’s look back to 2008. Bear Stearns failed in March. Yet Lehman Bros., AIG and Merrill Lynch didn’t fail until September 15. So it took a while, essentially 6 months.