What is going on with the banks lately? Are they running scared as stuff is about to hit the fan? What is going on in the economy right now?
There was the collapse of the Silicon Valley Bank where all of the investments treasuries and so forth dried up and the bank collapsed. All of the Silicon Valley start-ups and venture on capital companies had a lot of money in this bank and they lost it all. Will this prove contagious making other banks follow?
But the minute there was such major news which looks bad there was an immediate pivot in the monetary policy. First we had the US Treasury Secretary Yellen stating that there would be no federal bailout for the collapsed Silicon Valley bank:
Then we get the immediate pivot point with the FDIC and Treasury stepping in and saying that those customers who had up to $250 000 deposits were safe. The rest and anything beyond that were screwed. A reminder that the average deposit in these accounts in this bank was that of 2.2 million dollars. Clearly the FDIC which stands for the Federal Deposit Insurance Corporation which is basically the insurance version of the Federal Government insuring the bank deposits is insured up to $250 000. But they have trillions to insure when it comes to the Silicon Valley Bank.
“The Federal Deposit Insurance Corporation insures deposits up to $250 000 but many of the companies and wealthy people who used the bank — known for its relationships with technology startups and venture capital — had more than that amount in their account. There are fears that some workers across the country won’t receive their paychecks.”
The big concern is the contagion factor because there could be runs on the bank liquidity.
The world is already witnessing this in Africa and some European countries and now this is happening inside the U.S specifically with the big banks. There is concern about runs-on the bank in the U.S.
Then again we get another pivot point where the Biden administration sends Yellen on Sunday talk shows on tv reassuring the public that they are going to take care of the depositors and that Silicon Valley Bank won’t be bailed out. Really? Doesn’t this show to customers that this bank is insolvent? Doesn’t this show that the Biden administration is concerned or no?
What is going on? Does the emperor have clothes?
Is it the start of the bank collapse season?