Replying to It'sMe

Bankers begging for TARP 2.0 ... trillions of dollars of aid from taxpayers, the same people they've been cheating and screwing ever since the last bailout. https://www.americanbanker.com/opinion/u-s-banks-need-tarp-2-0-a-trapped-asset-relief-program [www americanbanker com]

Their assets aren't really "troubled", the bankers are just getting lower interest rates on them than they could if they could reissue those loans. If they can just hold them until maturity, they'll be fine.

The real issue is that the FED is trying to punish you and me with the interest rate increases (FED chair Jerome Powell said this repeatedly, so it is without question), but banks borrow short-term and often lend long-term. Rapid interest rate increases will hurt them because of that business model.

Instead of begging for taxpayer money to line the pockets of banking execs, call out the FED's Open Market Committee for being out of touch and for intentionally harming the people they're meant to protect.

db
It'sMe 2y ago

Addendum:

The way it hurts banks is that as interest rates in general rise, their depositors start moving their money to places that pay better interest rates. As with Silicon Valley Bank, this results in the bank having to sell assets for less than book value (such that the purchaser can obtain current market interest from them) and accept a loss on their accounting books. Once this happens a couple of times, banking regulators notice that the bank's capital position is starting to weaken.

Essentially, the losses start eating into the shareholders' equity and the bank's operating funds. Investors start selling the stock and depositors who may have more than the FDIC protected amount in that bank start trying to move their excess funds. This in turn requires more asset sales.

Banks could push Certificates of Deposit with tough lockup clauses, but no one is going to do that for 1-2% APR.

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