Cruising stocks getting hammered today. (March 2023)

[SusieAV8R]

19 hours ago, kguerriero said:

 

As someone with an inside/outside perspective at the moment, the communication is definitely not clear, and it seems like it takes several different news sources to get the full picture. There's a few programs running concurrently here, leading to confusion, as the FDIC steps in to wind down SVB/Sig, and the Fed handles the turbulence in the rest of the market:

-For the SVB/Sig holders, all deposits are being insured through the FDIC fund, including balances above $250k. The Fed is fronting this money to the FDIC, who is then in charge of selling off the banks' remaining assets to recoup as much as possible, and pay back the Fed. Any outstanding balance will coming from the insurance pool, which will then be restored by the other banks. Until the assets are sold, there's no clear number of how much or even if the FDIC will need to dip into the insurance fund. Bonds are actually ticking up since the event, so losses, if any may be lower than estimated.

-To prevent the chance of another similar bank run on any other existing financial institution, the Fed has also created a program allowing banks to offer up collateral in exchange for capital on an if-needed basis, at a .1% interest rate, to avoid selling bond portfolios at a loss and stay liquid. This was a smart move IMO, to keep consumer confidence up and money in the banking system.

It's true the money has to come from -somewhere- if there is an impact to the insurance fund, but it's also true banking margins in both retail and commercial institutions are so remarkably padded at this point, that nearly any decent bank is forecasted to absorb the cost than pass it on in the existing environment. If anyone tries to tell you that you're paying a fee on your checking account or debit card because of SVB, you should probably switch banks. 

I strongly believe in the Dunning-Kruger effect, but from my POV it seems the path taken makes the most sense in terms of keeping employment numbers in check, shoring up banking confidence, and minimizing gov/taxpayer expenses. The FDIC is doing its job and using the allotted resources to stabilize the situation.

TANSTAAFL

[mac66]

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