John Carney: US will presumably beget more bank failures forward


well all right tough stuff for the collapse of this Silicon Valley Bank is this going to cause a financial meltdown Bank stocks getting hammered the whole stock market's getting Hammer it's not the only thing going on but it's a big thing joining us John Carney Breitbart economics and finance editor co-author.

Of the Breitbart business digest John welcome back as always um you just told me I didn't know this the FDIC has seized the bank uh presumably thrown out all the officers in connection with the California banking authorities can you tell us more about that that's right so they they've been officially put into receivership.

They say that all the insured depositors will get their deposits back but that's not really very reassuring because a large percentage of the deposits at this Bank are not insured they're they're above the insurance level and so if you are a business and you had a lot of money in this Bank you now do not know I mean look the odds are I bet people will.

Be able to get most almost all of their deposits out I don't think the FDIC is looking to inflict harm on depositors and that would also cause a you know further Panic about other Banks next week but the but this bank had something like 90 percent of its deposits are uninsured so there are people who are at risk of losing their deposits uh at.

Least on paper so um svb biggest lender to the Silicon Valley companies the techies have had a very bad run in the last year maybe two years uh but you're saying there's also not to be too detailed but it's important that there's a mismatch between the cost of their liabilities and the return on their assets sure what.

I mean one of the problems was when money was so freely available to all these startups they didn't borrow a lot so they had a ton of deposits coming in and not a lot of opportunity to make loans out to people I mean yeah you can lend money so people could buy a yacht or you know a fancy mortgage on a you know on some tech startup billionaires.

You know feds he mentioned should but there they really had way too much money so they invested it in bonds and and then you know in like Bank of America I think has 25 of its assets are in bonds but this bank had over 50 percent of its Assets in bonds and now the curve is inverted right and so they're losing money cost of money and the repo rate.

And the 500 is it's head for five we'll call it five percent it's four and three quarters and the ten years back under four oh yeah so there there there's a negative return they're inverted they're they're losing money and at the same time all these startups who are depositing so much money there are now withdrawing it in order to make because.

They they don't have access to free money anymore so they're withdrawing it just to pay their bills so you're having the withdraw you're having the deposits go down there they have to sell into a market where they are actually producing real losses not just Market losses and that is what sparked the Panic basically people said look earlier this week they.

Announced something like a two billion dollar loss on on their assets and people said I better get my money out quickly especially because these businesses if you're a business you you have a deposit with Silicon Valley Bank you don't want to risk not being able to get that on Monday morning so you pulled it out today yeah and that's why she.

Stepped in avoid an old-fashioned run on the bank absolutely uh what's the risk that this spreads I think there's a high risk that it spreads these things do not end when you know people are right now looking at every other bank that you know not the big Banks the you know the JP Morgan City groups Wells Fargo's they'll be fine which are pretty well.

Capitalized yes they're extremely well capitalized regionals the banking system is extremely well capitalized uh and so I don't think we're in the on the verge of a financial crisis but I do think we'll probably have a couple more bank failures ahead of us uh East Coast West Coast any sense of that real estate related or just technology real estate.

Is is in a lot of trouble I mean you think about all these all these loans into office buildings that now kept are not paying their rent because they're you know they're helpful so I think that there is going to be losses I think we're going to see a lot of the california-based financial institutions get into trouble because they were so.

Dependent on this you know very cheap money ecosystem that was feeding startup culture and is no longer there what happens to the startup culture now there's no cheap money or there's no cheap cheap money maybe historically cheap but doesn't matter they're gonna have trouble getting loans absolutely have trouble getting loans and have.

Trouble raising money because if you could get five percent on a treasury bond why are you trying to get 10 on a you know very risky startup you're not going to do that you might as well just double down on Leverage and get a treasury so I think that they're going to have a lot of trouble being able to continue to raise money we're going to.

See a lot of the startups you know start to tilt over tilt over layoffs are going to come so it's not the biggest part of the economy in terms of Manpower it's Capital intent but still it's a big problem and you are worried that it's going to spread I do think it's going to spend bread because look this Bank Silicon Valley Bank was very well.

Respected it was not it was the hottest bank right everybody oddest bank right and so if you can tip them over this quickly in just a matter of days I think people are going to start to look and say uh-oh you know maybe I shouldn't have my money in you I don't want to name the names of the other Banks because I don't want to start the panic.

But uh but you know I maybe I should put it into Wells Fargo instead and any Bank in a fractional Reserve System can be tipped over if the depositors start to panic we'll talk some more about this on the radio tomorrow absolutely yeah you got it John Carney of Breitbart great stuff

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2 thoughts on “John Carney: US will presumably beget more bank failures forward

  1. The bankers accountable also can merely smooth face court docket for failure to handle funding it no longer enough to bail them out they want detention center time for corrupt choices a slap on the wrist No longer Appropriate Satisfactory! Jail time for corrupt investing !

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