22 Mar The “risk of contagion”
So . . . this sounds bad.
“Treasury Secretary Janet Yellen said Tuesday that the government is willing to take further action to guarantee bank deposits are safe. She noted steps that authorities already have taken to backstop deposits and said ‘similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.’ Bank stocks, particularly at regional institutions, rose following the news.” –https://www.cnbc.com/2023/03/21/treasury-secretary-yellen-says-the-government-could-backstop-more-deposits-if-necessary.html
Well, hey. At least the stocks went up. 😒
How ubiquitous will this contagion be? I don’t know for sure, but I highly, highly doubt we’ve seen the last of it.
“The comments come in the wake of several bank failures, most notably Silicon Valley Bank and Signature Bank. Customers worried that liquidity problems caused by duration risk with the banks’ holdings could cause similar institutions not to be able to meet deposit requirements.
In response, regulators said they would guarantee all deposits, going beyond the previous $250,000 level for the two banks. Yellen’s comments indicate that the authorities are prepared to do the same for other institutions that need it.” -CNBC, Ibid.
I don’t think this is a coincidence. If they are out in the public talking about bailing people out IF the banking crisis gets worse, it seems like a fair guess that things will get worse.
“‘The situation is stabilizing. And the U.S. banking system remains sound,’ Yellen said. ‘The Fed facility and discount window lending are working as intended to provide liquidity to the banking system. Aggregate deposit outflows from regional banks have stabilized.'” -CNBC, Ibid.
Yeah . . . OK . . .
I don’t give advice or tell anyone else what to do. For me, I’m going to assume that no, the situation probably isn’t stable and no, the US banking system is probably not completely sound. I’m also going to operate with a degree of moral hazard and not assume that anyone is coming to bail me out. I’m not a billionaire or a celebrity or some politician, so I realize I don’t matter to the fat cats and I had damn well better look out for myself.
In tomorrow’s podcast episode, I’ll be discussing an excellent documentary from Frontline PBS titled, “Age of Easy Money.” Unfortunately, I think the power brokers and shadow bankers will get their money for nothin’ and you will get your job loss for free. 😣