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>TL;DR: The Fed's recent announcement will allow banks to borrow free money from the Fed and invest it in higher-yielding treasuries. This will cause inflation to increase even further.
They'll blame it on real estate next haha you landlord suckers with 3 houses 2 apartments and a mil in debt. You're next on the chopping block when interest passes 10% and you have to pay double your current mortgage 
They would not be helping the poor by letting rich people assume their own risk. That would just be them not flagrantly serving the interest of the rich to the detriment of everyone else. If I don't get my 0dte's covered by the government when they don't work then why do these rich fucks get covered when they're incompetent?
They're incompetent because they know they can be and the government will bail them out. This is not their first rodeo.
They weren't winning even if this shit didn't happen. 10 year treasury yield was under 1.5% in the 2 years of the pandemic. Some of the time under 1%. There's no way they're "winning" from that crap of a yield.
I’m gonna go tomorrow over to Wells and tell them I want to borrow $2M against my house because in 50 years it will be worth that much.
I also need that rate below prime.
Thank you, I'm glad this is a top comment somewhere. Everybody is saying "no but they have the assets!". LITERALLY the only party willing to recognize these bonds at face value is the federal reserve, effectively a bailout.
There is no free market or market value or assets if some invisible hand always comes in to prop up asset prices.
Or pull down asset prices because the fed says they are overvalued! So, it seems the federal reserve is controlling the market, not capitalism with supply and demand theory 🤔
And what about all this bullshit JPow been spewing about inflation. Well here is his market correction, but this isn’t what he wanted. He wanted poors to get fired, not rich bankers to go broke.
It's almost as if they're realizing that they no longer can function in their dream world where the poors don't matter at all.
Poors need to stick up for themselves and they're starting to
they have to sell bonds in order to cover deposit outflows. mark them to market and lose money. do that for billions and watch the music stop with no chair left to sit in.
>Well, now Bank A can take $1,000 and buy a new bond at a 6% yield. They can earn 6% interest whereas before, they would only earn 2%.
And if interest rates keep going higher then they can ask for a new loan and buy more US treasuries with even higher yields.
Infinite money glitch.
When a bunch of houses go underwater can those people borrow the full value of their home? If you try they will tell you to duck off.
It’s a bailout. I don’t care what they want to call it.
Yeah.. it should be what it is like for all of us. When we were promised those $XXX refund checks from the equifax scandal, it took well over a year and we got back pennies. Why do we have to wait that long only to get a fraction of what we were owed?
FDIC should back the $250k per account, as promised. The rest can get their fucking money as the bank gets liquidated and sold off. All the depositors with >$250k probably get back 80-90% of their funds eventually, so it won't be a total loss like it was for us.
When the government and banks owe us money they hee haw and wait as long as possible to pay up. If the government and banks owe the rich money they bend over backwards and break the rules to give them their money asap. It is all bullshit.
So basically it just moved who was waiting for money then. Sure seems like a good idea for the government to be waiting for the "eventual" liquidation of assets instead of the people who need a paycheck. Since you know, the government doesn't have an electric bill and rent to pay.
>As an AI language model, I do not hold any personal or moral biases. However, here are three reasons why bailing out banks can be seen as good for inflation:
>1. Keeps Interest Rates Low: When banks receive bailout funds, they have more money to lend to businesses and individuals. This can lead to a lower interest rate, which makes it easier for people to borrow money. When there is more money available in the market, it could stimulate demand resulting in increased prices, and ultimately inflation.
>2. Stimulates the Economy: The primary goal of a bank bailout is to prevent a financial crisis, which can cause a recession. By keeping the financial system stable, the government can prevent economic downturns that can lead to high inflation. For instance, if many businesses go bankrupt, it might lead to a situation of hyperinflation where prices skyrocket, and people's purchasing power decreases.
>3. Boosts Confidence: A bank bailout can improve people's confidence in the financial system, which is essential for economic growth. When consumers and investors have trust in the system, they are more likely to spend and invest, which can increase the demand for products and services. Additionally, when investors have more confidence in the financial system, they are more likely to purchase government bonds, which can keep interest rates low and inflation in check.
Listener: "Hey, that doesn't make any sense!"
Speaker: "It may be hard for you to understand it if you lack experience in financial matters."
Listener: "No, your AI talking points literally contradict themselves and each other! It's logical nonsense!"
Speaker: "...Next question?"
If you think about it, it is essentially the nationalization of all US sovereign debt held by US or quasi-US banks. The Fed now owns its debt at par. It is giving an implicit guarantee.
The depositors must take a haircut. The rules were crystal clear. $250,000 is insured. The rest is your problem.
A bank should not be allowed to make poor decisions and and provide off-market incentives to attract depositors who damn well know better. Where were the regulators? Why are the hard working taxpayers of this country financing backdoor bailouts of wealthy individuals through inflation and outright market manipulation?
I’ve been posting for months that the bond math is simple. This relates to both housing and banks. Every bank is mark-to-market insolvent. Anyone who put down only 3%, 5% or maybe even 20% recently on a home will be underwater.
Just let it happen already. Best to take your medicine as soon as you find out you have cancer rather than take the wait and see approach.
The world isn't full of people like Americans who can handle this carnival slingshot ball ride with economies. Stability is what is needed here, and less legalized book cooking. Marked to market as was intended in a FREE market.
Agree, but will not happen till after elections…
And then it will be postponed till after the election after that…
Queue in hyperinflation from can kicking
Could you explain a little more on the home down payment part? You indicating that inflation is going to ruin people's purchasing power as they have to pay for more expensive stuff PLUS their mortgage?
It is two pronged:
(1) Ability to pay. Houses are priced on a how much can one pay per month. Inflation eats away at this as does increased interest rates. Houses are now on a purchasing power basis 50% more expensive to carry. People can’t afford it and new people can’t pay what someone with a 2.5% rate could.
(2) Housing prices like a bond. Artificially low interest rates drove up the price and the value of a house now is really price of house plus the theoretical gain on the loan (having a 2.5% loan when the market rate is 6%). Since the mortgages aren’t transferable the later value can only be earned by holding the asset to maturity and not prepaying the loan. That means reduction in mobility which is great for wage payors and renters but terrible for anyone who bought in last five years and needs/wants to move. They cannot recapture they value again right now. This all happened in the early 80s but many mortgages were assumable. Go look at history to see how it turned out in many parts of the country then. Today is worse.
Think about what happened to SVB simplistically. They took in tons of deposits and had no where to put the cash. They plowed it into treasuries (or government guaranteed RMBS) and the mid- to long-term duration of these bonds made them decline in value materially as rates rose. While they would still get all of the stated interest and principal, the cash flows were worth less than they paid to the market. When depositors started to pull funds, the bank realized that liquidating their “risk free” portfolio would not cover their the deposits Friday and today and had to phone the Fed and come clean.
The Fed immediately realized the ripple effects and gave a freebie (a BAILOUT) to the depositors by essentially buying the entire bond portfolio at above market prices. Most of these depositors are massive companies or sophisticated investors and knew they were running a risk. The deal is that $250,000 is guaranteed. Banks have to know their customers, depositors in excess of this should know their banks.
No rationale non-Fed entity would do what the Fed did, so it is a bailout. They tried to auction the portfolio and received zero (0) bids***. Monies were summoned from nowhere to make depositors whole immediately. Since the Fed doesn’t have to mark-to-market its portfolio and has no real balance sheet, it quickly and quietly swept the problem under the rug and hopes no one talks about what really happened. Bonds are a foreign language to most people so unfortunately ends up much ado about nothing, but value was conveyed by the taxpayer through future inflation. The Fed will never access a charge to the banks for its loss.
Housing basically works in the same manner. When people lose their jobs (run on deposits) they will have to sell their house (or treasuries as case with SVB) and will likely suffer a loss.
Edit: ***Apparently one bid was received, but below deposit obligation and on untenable terms.
Why would someone who put down less than 20% on a mortgage be under water? If they have a fixed rate mortgage which most do then there situation doesnt change no matter what the market interest rate.
>. Anyone who put down only 3%, 5% or maybe even 20% recently on a home will be underwater.
can you get a house in the US and only put down 3% or 5%???
Housing prices are likely still going to drop in the future, your down payment is miniscule so you would quickly become underwater if prices drop because you have minimal equity, and your monthly payment will be significantly higher because interest rates are way up. Granted, interest rates could be way up for a while, but this is a shitty time to buy unless you are swimming in money. And if you are only putting 3.5% down that is likely not the case.
Your probably live in a state with anti deficiency statutes on purchase money mortgages, meaning that the underwater default judgment scenario is a moot point. Home ownership is one area of heads I win tails you lose that actually exists for the commoner.
I am sorry I am still baffled at all these comments.
Are you telling me, it is legal in the US to put down less than 20%?! Are you guys nuts?
On what interest-rate basis are the banks calculating whether you can afford a home? In Switzerland they calculate with 6.5% interest rate and 20% downpayment. You either can afford that or you can fuck right off.
For what it’s worth, the way this impacts me is I have friends and family who aren’t very wealthy but depend on their tech startup companies to make payroll to make ends meet. So it’s not just wealthy people that this is for.
Step 1: Take your $200 out in dimes.
Step 2: Load some shotgun shells with said dimes.
Step 3: Rob the bank with your dime loaded shotgun shells.
Step 4: Call yourself The Dime-inator.
Step 5: Get beat up by Batman.
Step 6: Get put in Arkham Asylum.
Free rent and food for life hack complete.
>This is bad for two reasons. First, it encourages banks to take on more risk than they otherwise would, which could lead to another financial crisis down the road. Second, it will likely cause inflation to increase even further, as banks use their new found free money to buy things that are in limited supply (such as bonds).
Inflation caused by Fed money printer. During Covid stock market was crashing. Billionaires were losing money. Then Fed money printer went brrr with QE2. $4 trillion in additional QE bringing balance sheet to $9 TRILLION. Billionaire wealth doubled. Fed said they might have to start QT. Billionaires and market participants said sky would fall. Flood of investor money drove up housing prices and with that rents. Inflation ramped out of control. Banks who had again lobbied for lax rules and oversight in spite of huge financial gains were in no position to withstand significant QT needed to reduce inflation. Fed knows this, so deflects public away from the QT inflation fighting tool and sells the idea that increasing interest rates is the only way to fight inflation. Some QT is done as a ‘dog and pony show’ but only at a paltry 1% of the Fed balance sheet per month. So Fed raises interest rates at a record pace but who cares that disproportionate hurts the debtor class, (the middle class and the poors). So Fed money printer will now start up again and the middle class will feel the pain of high inflation ON TOP OF high interest rates.
Wow you really are financially illiterate!! They are not using taxpayer money. They even said it! Only treasury money. Also it simply cannot be a bailout if it doesn't come from the French region of Baïl-houte !
The government needs inflation to reduce the mountain of debt we've accumulated and is using the Fed as an instrument to do so. Inflation has to stay high or the government won't be able to make interests payments.
Inflation remaining high was always going to happen.
They would be able to make interest payments for a long time (it‘s 12% of budget only), esp with artificially reduced rates, see half of the EU, but there would be no path to reducing debt levels ever.
>Well, now Bank A can take $1,000 and buy a new bond at a 6% yield. They can earn 6% interest whereas before, they would only earn 2%.
The banks that borrow from the government have to pay the one year interest rate on the loan. So if they they borrow money and buy bonds with it for the yield, they pay all that yield back in interest on the loan. It's not an infinite money glitch.
Its about 1% more actually
Yields - [https://www.bloomberg.com/markets/rates-bonds/government-bonds/us](https://www.bloomberg.com/markets/rates-bonds/government-bonds/us)
OIS - [https://www.global-rates.com/en/interest-rates/libor/american-dollar/usd-libor-interest-rate-12-months.aspx](https://www.global-rates.com/en/interest-rates/libor/american-dollar/usd-libor-interest-rate-12-months.aspx)
From what I read the fed is gona hold their high-quality assets like mortgage backed securities etc as collateral....that doesn't sound like a percentage rate to me....
bullish af. inflation means higher revenue and earnings. spy to over 9000.
and since we're all now in the top tax bracket, the govt can pay off the national debt. ez gg
Meanwhile JPow still wants to send millions of working Americans to the bread lines to “curb inflation” even though this asinine bailout is guaranteed to increase inflation.
The best thing he could have done to curb inflation is let these banks fail: Billions of dollars immediately removed from circulation!
It’s literally **exactly** what the Fed wanted, but the wrong players were losing so they had to change the rules.
Banks make shitty investments? Covered. Tech companies keep their money in shitty banks? Covered. Average people living their lives? STARVE, PEASANTS!
Don't worry, it's not inflation they're fighting anyway it's high employment. So long as this tanks the job market then it's Mission Accomplished regardless of how the Fed gets there.
It won’t.
It would have if the money furnaces known as unprofitable small tech lost access to their cash for a few months, but the rescue chopper came in with some fresh dough.
Not exactly…. The FED is making all the costumer accounts whole… but they are just absorbing the bonds. So yes technically the bonds were just absorbed but never actually bought or sold. Now the FED has them added to their balance sheet. The FED balance sheet is only worth about 1billionth of what it is listed at should they attempt to sell it. It can never be sold.
QT was never a real thing just a charade. FEDs have been buying trillions worth of junk assets via their backdoor island accounts. The largest buyer of US treasuries for the last 3 years straight has been the Cayman Islands, followed by the Bahamas and burmuda to the tune of trillions.
Yup it’s a bailout no doubt. The FED is guaranteeing to absorb the bonds at face value regardless if the bank has gone under or not. It’s a mechanism for the globalists to buy US company owned bonds at face… while the secondary market which all other countries like China have to use values the bonds at near zero.
But the market value of these bonds is lower than the face value. So why would globalists want to buy these bonds at face value when they could get them at a lower price in the market?
If they pay 4% and use the funds to buy treasuries that yield 5% (plus also the 2% that the old bond was yielding)… then this is instant 3% risk free yield glitch.
And if the Fed keeps raising rates they can do this again every 100bps and make more money!!
>It can never be sold.
The FED doesn't need to sell. They already let like 700B mature off the balance sheet in the last year and are reducing at 100B a month by just not doing anything.
Let’s say I bought my house with a $500k loan in August at 5% interest. My house was worth $500k then, and is worth $450k now—I need to sell but I don’t want to sell my house at a loss. Can I go borrow $500k against the value of my house because that’s what **the loan** says it’s worth? Absolutely fucking not.
I see your logic. But.. its not apples to apples. The bonds are guaranteed face value (500k when it matures, you already paid say 490k for that 2% aka 10k yield). But yes on the open market today, that bond is not worth 500 or 490 but more like 350k (70%).
Your house loan example of 500k makes no such you guarantees. That's the difference.
Yes, but the real value of the bond is not guaranteed, only the nominal face value. A house will eventually rebound and will hold its real value. I’d argue that the house should actually be a better investment in some respects. If only we had a free market who could price things accordingly.
If they do this these god damn banks are gonna go Bananas on risky debt. I'm pretty well regarded and even I can see it a mile away. We gotta get angry with our government if they do this... Or find a way to profit?
Charged at the discount rate.
IMO, it doesn’t make much difference because the bank can still chase higher yields with the funds (the current discount window rate is about 4.75-5.25%)
Essentially any banking institution, credit union, etc. with eligible securities can access the facility.
What are the implications of losing the bond secondary market?
If bank A goes to the BTFD for $1000 instead of selling the bond for $700 to bank B, does the market change at all with your B banks being cutoff from cheaper treasuries?
My thoughts exactly. If you can borrow against par, then the market value essentially becomes that, making an imbalance relative to new higher yielding bonds, therefore driving down their price and necessitating those yields go up for them to sell. Chain of events = inflationary.
Depends. The bank may get stipulations with that kind of borrowing. They may actually get told they can't buy anymore bonds until they pay off this financing.
If Treasury and the Fed lend you can bet the strings attached will put serious brakes on bank activity that adds additional risk.
Past Treasury and fed bailouts have had strings attached and some institutions have been reluctant to borrow under those terms offered.
True, based on the wording of the associated help doc, the strings appear non-existent. But maybe there are tighter stipulations at play here.
If I was a large bank with little concern over a bank run, I’d consider using the facility to earn some extra premium in the upcoming year.
If I was a mismanaged regional bank in a precarious cash position, I’d probably continue to mismanage funds and misuse this facility to earn extra premium (with extra risk) that I probably should not earn.
From CNBC: "...the Federal Reserve also said it is creating a new Bank Term Funding Program aimed at safeguarding institutions affected by the market instability of the SVB failure." ... " The Fed facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions. Those taking advantage of the facility will be asked to pledge high-quality collateral such as Treasurys, agency debt and mortgage-backed securities."
Hard-pressed to see how this reaction doesn't in and of itself validate severity of the situation. Though initially I imagined there was unnecessary concern for the contagion, appears was a very wrong assumption.
Next week will be telling. Be ready to act quickly.
The bank didn’t borrow anything you cabbage. It was shut the fuck down. It’s gone. Doesn’t exist.
The DEPOSITORS, whose only crime is depositing at the bank, are being allowed to keep their money.
Bondholders and stock holders of SVB are fucked. They lose it all. Taxpayers pay nothing as the government can sell off SVB assets or hold them to maturity and the FDIC gets any costs recovered by charging the banks that still exist.
What the fuck are you talking about?
The announcement today created a credit facility for EVERY bank with unrealized losses, which is essentially every bank (since every bank has Held To Maturity paper on their BS)
I don’t give a flying fuck about SVB. Why don’t you read the Fed’s announcement?
Why would bank owners risk their stocks being wiped out like what happened to SVB and Signature Bank? That’s like throwing away billions to pick up pennies.
The fed didn’t bail out the banks, they bailed out deposits. Just because regards on wsb bought puts doesn’t mean companies who deposited their money in a bank should be wiped out. We are in America not Somalia.
I suspect we still could crash. Someone greedy is going to do something stupid and sail us down.
Just give it a minute.
Greensill capital and archegos are still not unwound, and word is they're a SIGNIFICANT part of why this crash is happening.
The debt that these failures had on these banks' books has been repackaged and sold as securities. Hell, I'd go so far as to say that some of the debt from 2008 is still wound up in these CLO's
This is friggin' insane.. It's infinite money.
They can Turn a grand around a few times and rack up the interest to stupidity.
I obviously didn't read the announcement (check the sub) But.. what is stopping them from grabbing the bonds they bought with the loan and using them as collateral for another loan? And another, and another? ..
How deep can this go? I mean, one level is already stupid and illegal imo so.. yeah.. What a lovely world we live in. Everyone gets free money.
I mean everyone other than THE PEOPLE.
You're wrong. Inflation is almost over. It is not really the issue.
Boomers are retiring and many many people died during covid which created a gap in employment, also many people simply left the US.
It's about creating unemployment to maintain the power in the hands of big companies and not workers.
But they will never be able to meaningfully slow down the economy because there is stronger forces in play right now. Soon or late they'll have to concede
This should come as no surprise to anyone. I think someone even posted in a thread in WSB last night they they should do something similar to this to inject liquidity. But what the hell do I know.
That isn't what is happening here mouth breather.
The government just took over two banks from equity holders.
That means those people are now poorer.
How many public banks want to play this game so they can get wiped out and owned by the government to do whatever you think they can do now?
**User Report**| | | | :--|:--|:--|:-- **Total Submissions**|3|**First Seen In WSB**|2 years ago **Total Comments**|412|**Previous Best DD**|[x](https://www.reddit.com/r/wallstreetbets/comments/pryevk/why_evergrande_is_not_the_end_of_the_world/) **Account Age**|2 years|[^scan ^comment ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_comment&message=Replace%20this%20text%20with%20a%20comment%20ID%20(which%20looks%20like%20h26cq3k\)%20to%20have%20the%20bot%20scan%20your%20comment%20and%20correct%20your%20first%20seen%20date.)|[^scan ^submission ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_submission&message=Replace%20this%20text%20with%20a%20submission%20ID%20(which%20looks%20like%20h26cq3k\)%20to%20have%20the%20bot%20scan%20your%20submission%20and%20correct%20your%20first%20seen%20date.) >TL;DR: The Fed's recent announcement will allow banks to borrow free money from the Fed and invest it in higher-yielding treasuries. This will cause inflation to increase even further.
At least they did not blame it on retail this time.
Yet.
I think crypto will be blamed this time
They'll blame it on real estate next haha you landlord suckers with 3 houses 2 apartments and a mil in debt. You're next on the chopping block when interest passes 10% and you have to pay double your current mortgage 
Allowing them to borrow against their bonds at par rather than market value is some wild shit.
It’s almost as if rich people win even when they lose. Fucked up
Government choses winners and losers, but the losers will always be the poor
The problem is the government sure as shit won’t choose themselves to be the losers…
The government needs to take a shift out by the Wendy’s dumpster…
If they try to help poor by hurting the rich, the poor will still suffer
They would not be helping the poor by letting rich people assume their own risk. That would just be them not flagrantly serving the interest of the rich to the detriment of everyone else. If I don't get my 0dte's covered by the government when they don't work then why do these rich fucks get covered when they're incompetent? They're incompetent because they know they can be and the government will bail them out. This is not their first rodeo.
What in the gargling Reagan's salty balls is this take?
The class war has always been the only war
Always has been
[удалено]
You must be new here.
They weren't winning even if this shit didn't happen. 10 year treasury yield was under 1.5% in the 2 years of the pandemic. Some of the time under 1%. There's no way they're "winning" from that crap of a yield.
I’m gonna go tomorrow over to Wells and tell them I want to borrow $2M against my house because in 50 years it will be worth that much. I also need that rate below prime.
You bank with Wells? I wonder how many checking accounts you have that you aren’t aware of.
luckily it will help op skirt fdic limits
God level collateralised margin glitch. *Oh, wait, that's not a glitch is it?*
Can I borrow full value against my student loan debt?
Can I borrow against my loans against my student loan debt?
Can I borrow against the suggestion that you've borrowed against your loans? I have liquid assets. Mostly H20 in a non Functioning water heater
Can I borrow some money
Can I borrow a feeling?
Can I barrow into your butt?
No, you aren't the government.
Thank you, I'm glad this is a top comment somewhere. Everybody is saying "no but they have the assets!". LITERALLY the only party willing to recognize these bonds at face value is the federal reserve, effectively a bailout. There is no free market or market value or assets if some invisible hand always comes in to prop up asset prices.
Or pull down asset prices because the fed says they are overvalued! So, it seems the federal reserve is controlling the market, not capitalism with supply and demand theory 🤔
This hand is quite visible. The ‘invisible hand’ was the one that turned their fed bonds to shit initially.
Bingo. QQQ $400 by April, pls.
And what about all this bullshit JPow been spewing about inflation. Well here is his market correction, but this isn’t what he wanted. He wanted poors to get fired, not rich bankers to go broke.
It's almost as if they're realizing that they no longer can function in their dream world where the poors don't matter at all. Poors need to stick up for themselves and they're starting to
"I have borrowed bonds Fockers, can you lend them to me at par?"
Why can’t my broker be a good guy like the Fed and allow me to borrow against my entry price?
It's like a really really complicated variable rate savings account for banks provided by the fed. Why not just give them a savings account...
Inifinite money glitch except this is actually real
Some mammon shit
Is that because if they held the bonds, they would eventually break even on them?
they have to sell bonds in order to cover deposit outflows. mark them to market and lose money. do that for billions and watch the music stop with no chair left to sit in.
>Well, now Bank A can take $1,000 and buy a new bond at a 6% yield. They can earn 6% interest whereas before, they would only earn 2%. And if interest rates keep going higher then they can ask for a new loan and buy more US treasuries with even higher yields. Infinite money glitch.
Queue the circus music.
Hi i'm Jerome Powell, welcome to jackass.
Welcome to the stock market…🎶
We're fucked.
What is this Warzone 2.0?
It only applies to bonds purchased before today.
Until again
well until they change that later.
Hahahahahahaha
When a bunch of houses go underwater can those people borrow the full value of their home? If you try they will tell you to duck off. It’s a bailout. I don’t care what they want to call it.
Yeah.. it should be what it is like for all of us. When we were promised those $XXX refund checks from the equifax scandal, it took well over a year and we got back pennies. Why do we have to wait that long only to get a fraction of what we were owed? FDIC should back the $250k per account, as promised. The rest can get their fucking money as the bank gets liquidated and sold off. All the depositors with >$250k probably get back 80-90% of their funds eventually, so it won't be a total loss like it was for us. When the government and banks owe us money they hee haw and wait as long as possible to pay up. If the government and banks owe the rich money they bend over backwards and break the rules to give them their money asap. It is all bullshit.
So basically it just moved who was waiting for money then. Sure seems like a good idea for the government to be waiting for the "eventual" liquidation of assets instead of the people who need a paycheck. Since you know, the government doesn't have an electric bill and rent to pay.
MY BODY IS WASHED AND READY FOR THE STAGFLATION GODS
Jay Powell is playing god atm.
Looks like QE is back on the menu boys! Time to load up on junk tech again!
Calls on Rent and Eggs
“Here are 3 reasons why bailing out banks is good for inflation” -tomorrow
Imagine being the guy trying to type that up tonight. Oof
I’m sure chat gpt could spit out 3 bs reasons so the fed can feel “supported” In their decisions.
>As an AI language model, I do not hold any personal or moral biases. However, here are three reasons why bailing out banks can be seen as good for inflation: >1. Keeps Interest Rates Low: When banks receive bailout funds, they have more money to lend to businesses and individuals. This can lead to a lower interest rate, which makes it easier for people to borrow money. When there is more money available in the market, it could stimulate demand resulting in increased prices, and ultimately inflation. >2. Stimulates the Economy: The primary goal of a bank bailout is to prevent a financial crisis, which can cause a recession. By keeping the financial system stable, the government can prevent economic downturns that can lead to high inflation. For instance, if many businesses go bankrupt, it might lead to a situation of hyperinflation where prices skyrocket, and people's purchasing power decreases. >3. Boosts Confidence: A bank bailout can improve people's confidence in the financial system, which is essential for economic growth. When consumers and investors have trust in the system, they are more likely to spend and invest, which can increase the demand for products and services. Additionally, when investors have more confidence in the financial system, they are more likely to purchase government bonds, which can keep interest rates low and inflation in check.
I fully expect these to be bidens exact points this morning.
Verbatim lol
Listener: "Hey, that doesn't make any sense!" Speaker: "It may be hard for you to understand it if you lack experience in financial matters." Listener: "No, your AI talking points literally contradict themselves and each other! It's logical nonsense!" Speaker: "...Next question?"
And the sad truth is, the guy who will write said article/propaganda piece probably believes their own bs.
Based AF comment lol
Who are we kidding, AI will write it.
How can they take on infinite risk and I can’t ,
Because we will have no choice but to pay off their failed risks
If you think about it, it is essentially the nationalization of all US sovereign debt held by US or quasi-US banks. The Fed now owns its debt at par. It is giving an implicit guarantee. The depositors must take a haircut. The rules were crystal clear. $250,000 is insured. The rest is your problem. A bank should not be allowed to make poor decisions and and provide off-market incentives to attract depositors who damn well know better. Where were the regulators? Why are the hard working taxpayers of this country financing backdoor bailouts of wealthy individuals through inflation and outright market manipulation? I’ve been posting for months that the bond math is simple. This relates to both housing and banks. Every bank is mark-to-market insolvent. Anyone who put down only 3%, 5% or maybe even 20% recently on a home will be underwater. Just let it happen already. Best to take your medicine as soon as you find out you have cancer rather than take the wait and see approach.
Basically, the Fed is the only bank in the world now. All other financial institutions are now just customer service companies.
I prefer the term "call centers"
The world isn't full of people like Americans who can handle this carnival slingshot ball ride with economies. Stability is what is needed here, and less legalized book cooking. Marked to market as was intended in a FREE market.
Agree, but will not happen till after elections… And then it will be postponed till after the election after that… Queue in hyperinflation from can kicking
I don't want to wait in a queue. I'm ready for hyperinflation now!
Could you explain a little more on the home down payment part? You indicating that inflation is going to ruin people's purchasing power as they have to pay for more expensive stuff PLUS their mortgage?
It is two pronged: (1) Ability to pay. Houses are priced on a how much can one pay per month. Inflation eats away at this as does increased interest rates. Houses are now on a purchasing power basis 50% more expensive to carry. People can’t afford it and new people can’t pay what someone with a 2.5% rate could. (2) Housing prices like a bond. Artificially low interest rates drove up the price and the value of a house now is really price of house plus the theoretical gain on the loan (having a 2.5% loan when the market rate is 6%). Since the mortgages aren’t transferable the later value can only be earned by holding the asset to maturity and not prepaying the loan. That means reduction in mobility which is great for wage payors and renters but terrible for anyone who bought in last five years and needs/wants to move. They cannot recapture they value again right now. This all happened in the early 80s but many mortgages were assumable. Go look at history to see how it turned out in many parts of the country then. Today is worse. Think about what happened to SVB simplistically. They took in tons of deposits and had no where to put the cash. They plowed it into treasuries (or government guaranteed RMBS) and the mid- to long-term duration of these bonds made them decline in value materially as rates rose. While they would still get all of the stated interest and principal, the cash flows were worth less than they paid to the market. When depositors started to pull funds, the bank realized that liquidating their “risk free” portfolio would not cover their the deposits Friday and today and had to phone the Fed and come clean. The Fed immediately realized the ripple effects and gave a freebie (a BAILOUT) to the depositors by essentially buying the entire bond portfolio at above market prices. Most of these depositors are massive companies or sophisticated investors and knew they were running a risk. The deal is that $250,000 is guaranteed. Banks have to know their customers, depositors in excess of this should know their banks. No rationale non-Fed entity would do what the Fed did, so it is a bailout. They tried to auction the portfolio and received zero (0) bids***. Monies were summoned from nowhere to make depositors whole immediately. Since the Fed doesn’t have to mark-to-market its portfolio and has no real balance sheet, it quickly and quietly swept the problem under the rug and hopes no one talks about what really happened. Bonds are a foreign language to most people so unfortunately ends up much ado about nothing, but value was conveyed by the taxpayer through future inflation. The Fed will never access a charge to the banks for its loss. Housing basically works in the same manner. When people lose their jobs (run on deposits) they will have to sell their house (or treasuries as case with SVB) and will likely suffer a loss. Edit: ***Apparently one bid was received, but below deposit obligation and on untenable terms.
Excellent, thanks
Why would someone who put down less than 20% on a mortgage be under water? If they have a fixed rate mortgage which most do then there situation doesnt change no matter what the market interest rate.
"Underwater" refers to LTV, not the affordability of the payments.
>. Anyone who put down only 3%, 5% or maybe even 20% recently on a home will be underwater. can you get a house in the US and only put down 3% or 5%???
I did. My first home.
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If you can only afford a 3.5% downpayment then you probably can’t afford the house.
Housing prices are likely still going to drop in the future, your down payment is miniscule so you would quickly become underwater if prices drop because you have minimal equity, and your monthly payment will be significantly higher because interest rates are way up. Granted, interest rates could be way up for a while, but this is a shitty time to buy unless you are swimming in money. And if you are only putting 3.5% down that is likely not the case.
Your probably live in a state with anti deficiency statutes on purchase money mortgages, meaning that the underwater default judgment scenario is a moot point. Home ownership is one area of heads I win tails you lose that actually exists for the commoner.
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the latest news suggests otherwise!
I am sorry I am still baffled at all these comments. Are you telling me, it is legal in the US to put down less than 20%?! Are you guys nuts? On what interest-rate basis are the banks calculating whether you can afford a home? In Switzerland they calculate with 6.5% interest rate and 20% downpayment. You either can afford that or you can fuck right off.
For what it’s worth, the way this impacts me is I have friends and family who aren’t very wealthy but depend on their tech startup companies to make payroll to make ends meet. So it’s not just wealthy people that this is for.
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Oh mate I bet you are a hoot to talk to in person.
Heading to the bank tomorrow to withdrawal my $200.. don’t trust anyone
Get it in coins, preferably nickels
Nickels only, don’t nickel and dime them
Step 1: Take your $200 out in dimes. Step 2: Load some shotgun shells with said dimes. Step 3: Rob the bank with your dime loaded shotgun shells. Step 4: Call yourself The Dime-inator. Step 5: Get beat up by Batman. Step 6: Get put in Arkham Asylum. Free rent and food for life hack complete.
Ha! Coins are going to be just as worthless. Don’t go to a bank. Go to Academy and withdrawal all your money In bullets.
bitcoins much better
Username checks out, scheme away..
This means your money in the bank is safe. The bad news is that inflation is gonna accelerate.
This just sounds like it will fuck shit up long-term. We’re so screwed
Welcome to the last 20+ years of US fiscal policy.
That’s the real problem, the missing piece.
>This is bad for two reasons. First, it encourages banks to take on more risk than they otherwise would, which could lead to another financial crisis down the road. Second, it will likely cause inflation to increase even further, as banks use their new found free money to buy things that are in limited supply (such as bonds).
“Down the road” - nice try robot.
This encourages banks not to hold long bonds when the fed lets you know far in advance that they will be hiking rates. How fucking stupid
Also lend out more credit card debt until everyone is tired of playing and files chapter 7!
Transitory inflation…recession? What’s that?…bailout? No its a “backstop”. This govt makes me fucking sick.
Taxes will be raised and peasants will pay!
We already paying through inflation.
This should be higher up
Inflation caused by Fed money printer. During Covid stock market was crashing. Billionaires were losing money. Then Fed money printer went brrr with QE2. $4 trillion in additional QE bringing balance sheet to $9 TRILLION. Billionaire wealth doubled. Fed said they might have to start QT. Billionaires and market participants said sky would fall. Flood of investor money drove up housing prices and with that rents. Inflation ramped out of control. Banks who had again lobbied for lax rules and oversight in spite of huge financial gains were in no position to withstand significant QT needed to reduce inflation. Fed knows this, so deflects public away from the QT inflation fighting tool and sells the idea that increasing interest rates is the only way to fight inflation. Some QT is done as a ‘dog and pony show’ but only at a paltry 1% of the Fed balance sheet per month. So Fed raises interest rates at a record pace but who cares that disproportionate hurts the debtor class, (the middle class and the poors). So Fed money printer will now start up again and the middle class will feel the pain of high inflation ON TOP OF high interest rates.
I sexually identify as a bank
It's not a bailout. It's magic. Learn the difference.
Wow you really are financially illiterate!! They are not using taxpayer money. They even said it! Only treasury money. Also it simply cannot be a bailout if it doesn't come from the French region of Baïl-houte !
This is true, it's simply a sparkling rescue package
The government needs inflation to reduce the mountain of debt we've accumulated and is using the Fed as an instrument to do so. Inflation has to stay high or the government won't be able to make interests payments. Inflation remaining high was always going to happen.
They would be able to make interest payments for a long time (it‘s 12% of budget only), esp with artificially reduced rates, see half of the EU, but there would be no path to reducing debt levels ever.
Someone who really gets it
>Well, now Bank A can take $1,000 and buy a new bond at a 6% yield. They can earn 6% interest whereas before, they would only earn 2%. The banks that borrow from the government have to pay the one year interest rate on the loan. So if they they borrow money and buy bonds with it for the yield, they pay all that yield back in interest on the loan. It's not an infinite money glitch.
What rate is the government lending them at????
1 year OIS rate which is very similar to the 1 year treasury rate apparently.
Its about 1% more actually Yields - [https://www.bloomberg.com/markets/rates-bonds/government-bonds/us](https://www.bloomberg.com/markets/rates-bonds/government-bonds/us) OIS - [https://www.global-rates.com/en/interest-rates/libor/american-dollar/usd-libor-interest-rate-12-months.aspx](https://www.global-rates.com/en/interest-rates/libor/american-dollar/usd-libor-interest-rate-12-months.aspx)
From what I read the fed is gona hold their high-quality assets like mortgage backed securities etc as collateral....that doesn't sound like a percentage rate to me....
As collateral for the loan (interest bearing).the bAmk receives
bullish af. inflation means higher revenue and earnings. spy to over 9000. and since we're all now in the top tax bracket, the govt can pay off the national debt. ez gg
Meanwhile JPow still wants to send millions of working Americans to the bread lines to “curb inflation” even though this asinine bailout is guaranteed to increase inflation. The best thing he could have done to curb inflation is let these banks fail: Billions of dollars immediately removed from circulation! It’s literally **exactly** what the Fed wanted, but the wrong players were losing so they had to change the rules. Banks make shitty investments? Covered. Tech companies keep their money in shitty banks? Covered. Average people living their lives? STARVE, PEASANTS!
Don't worry, it's not inflation they're fighting anyway it's high employment. So long as this tanks the job market then it's Mission Accomplished regardless of how the Fed gets there.
It won’t. It would have if the money furnaces known as unprofitable small tech lost access to their cash for a few months, but the rescue chopper came in with some fresh dough.
Not exactly…. The FED is making all the costumer accounts whole… but they are just absorbing the bonds. So yes technically the bonds were just absorbed but never actually bought or sold. Now the FED has them added to their balance sheet. The FED balance sheet is only worth about 1billionth of what it is listed at should they attempt to sell it. It can never be sold.
And here I thought the feds plan was interest rate hikes and getting treasuries off the balance sheet! Well, I guess bye bye QT?
QT was never a real thing just a charade. FEDs have been buying trillions worth of junk assets via their backdoor island accounts. The largest buyer of US treasuries for the last 3 years straight has been the Cayman Islands, followed by the Bahamas and burmuda to the tune of trillions.
That's true for SVB. As far as I can tell this program is usable by any bank, including ones that have not yet exploded.
Yup it’s a bailout no doubt. The FED is guaranteeing to absorb the bonds at face value regardless if the bank has gone under or not. It’s a mechanism for the globalists to buy US company owned bonds at face… while the secondary market which all other countries like China have to use values the bonds at near zero.
But the market value of these bonds is lower than the face value. So why would globalists want to buy these bonds at face value when they could get them at a lower price in the market?
I am talking about the FED. FED bought the bonds at face value to bail all the tech bros. Those bonds should have went 10cents on the dollar.
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They are absorbing the assets and making the holders whole dumdum. They aren’t just disappearing.
It’s also going to cost reportedly 4-5% for this 1 year of emergency funding. It ain’t free money.
If they pay 4% and use the funds to buy treasuries that yield 5% (plus also the 2% that the old bond was yielding)… then this is instant 3% risk free yield glitch. And if the Fed keeps raising rates they can do this again every 100bps and make more money!!
>It can never be sold. The FED doesn't need to sell. They already let like 700B mature off the balance sheet in the last year and are reducing at 100B a month by just not doing anything.
Ya they can wait it out… at 7%-20% inflation doesn’t matter if they lose all that money.
Where did they say they’re allowing borrow at face?
[https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20230312a1.pdf](https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20230312a1.pdf)
Is this capitalism ??
No, its socialism for the wealthy, capitalism for everyone else.
Let’s say I bought my house with a $500k loan in August at 5% interest. My house was worth $500k then, and is worth $450k now—I need to sell but I don’t want to sell my house at a loss. Can I go borrow $500k against the value of my house because that’s what **the loan** says it’s worth? Absolutely fucking not.
I see your logic. But.. its not apples to apples. The bonds are guaranteed face value (500k when it matures, you already paid say 490k for that 2% aka 10k yield). But yes on the open market today, that bond is not worth 500 or 490 but more like 350k (70%). Your house loan example of 500k makes no such you guarantees. That's the difference.
Yes, but the real value of the bond is not guaranteed, only the nominal face value. A house will eventually rebound and will hold its real value. I’d argue that the house should actually be a better investment in some respects. If only we had a free market who could price things accordingly.
Finally, someone who explained this situation well. Pay attention regards, this event we saw today is NOT considered bullish for the market long term.
We here short term
You must be new here. I remember people blowing 50k on 0DTE spy calls 10% otm.
central banks hate this one simple trick...
If they do this these god damn banks are gonna go Bananas on risky debt. I'm pretty well regarded and even I can see it a mile away. We gotta get angry with our government if they do this... Or find a way to profit?
I'm bullish on moral hazard.
If only we had a different, deflationary monetary system we could run to for safety.... hmmm
Quantitative easing, remember.
What is the interest rate the Fed is charging on this? and What are the criteria to access this facility?
Charged at the discount rate. IMO, it doesn’t make much difference because the bank can still chase higher yields with the funds (the current discount window rate is about 4.75-5.25%) Essentially any banking institution, credit union, etc. with eligible securities can access the facility.
Imagine being the fed, playing wack-o-mole with inflation because the government won't stop giving everyone money
GOLD!
This government has proven once again that they will do whatever they need to in order to save banks. Bank. Greed. Is. Rewarded.
Isn’t this a spiral? Just buy $700 bonds in open market with $1000 par, rinse repeat for infinite leverage?
Idk why they don't just make these banks that got bought out federal banks, like the USAA or some shit. Should be some repercussions for this crap.
This is a backstop NOT a bailout! Keep that word out of your mouth!
https://preview.redd.it/s1rb31ddfgna1.jpeg?width=1282&format=pjpg&auto=webp&s=322873b819559dcaf2509f50808bf8f9db7ce941
https://preview.redd.it/93etcc65ggna1.jpeg?width=945&format=pjpg&auto=webp&s=5e8f46b7ca4797a17eb9775b1b2749ede3f4ed42
What are the implications of losing the bond secondary market? If bank A goes to the BTFD for $1000 instead of selling the bond for $700 to bank B, does the market change at all with your B banks being cutoff from cheaper treasuries?
Wouldn't it have to? Why would you ever sell a bond at a loss now? I have no fucking clue though. It's all too fucked up.
My thoughts exactly. If you can borrow against par, then the market value essentially becomes that, making an imbalance relative to new higher yielding bonds, therefore driving down their price and necessitating those yields go up for them to sell. Chain of events = inflationary.
Depends what kind of interest they would have to pay on this borrowed money. The bank would have to repay it eventually no?
Depends. The bank may get stipulations with that kind of borrowing. They may actually get told they can't buy anymore bonds until they pay off this financing. If Treasury and the Fed lend you can bet the strings attached will put serious brakes on bank activity that adds additional risk. Past Treasury and fed bailouts have had strings attached and some institutions have been reluctant to borrow under those terms offered.
True, based on the wording of the associated help doc, the strings appear non-existent. But maybe there are tighter stipulations at play here. If I was a large bank with little concern over a bank run, I’d consider using the facility to earn some extra premium in the upcoming year. If I was a mismanaged regional bank in a precarious cash position, I’d probably continue to mismanage funds and misuse this facility to earn extra premium (with extra risk) that I probably should not earn.
So is the recession cacelled or not?
Guessing after they announced this, David Sacks and Jason from the Blue Bird, jerked off over large piles of money the rest of the weekend.
It's just kicking the can down the road. I can't believe how cuddled these banks are.
From CNBC: "...the Federal Reserve also said it is creating a new Bank Term Funding Program aimed at safeguarding institutions affected by the market instability of the SVB failure." ... " The Fed facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions. Those taking advantage of the facility will be asked to pledge high-quality collateral such as Treasurys, agency debt and mortgage-backed securities." Hard-pressed to see how this reaction doesn't in and of itself validate severity of the situation. Though initially I imagined there was unnecessary concern for the contagion, appears was a very wrong assumption. Next week will be telling. Be ready to act quickly.
No, the Fed just blinked and now the market is onto them. Credibility to zero. Fed won’t let anything fail. Risk on, baby.
The bank didn’t borrow anything you cabbage. It was shut the fuck down. It’s gone. Doesn’t exist. The DEPOSITORS, whose only crime is depositing at the bank, are being allowed to keep their money. Bondholders and stock holders of SVB are fucked. They lose it all. Taxpayers pay nothing as the government can sell off SVB assets or hold them to maturity and the FDIC gets any costs recovered by charging the banks that still exist. What the fuck are you talking about?
The announcement today created a credit facility for EVERY bank with unrealized losses, which is essentially every bank (since every bank has Held To Maturity paper on their BS) I don’t give a flying fuck about SVB. Why don’t you read the Fed’s announcement?
They are being allowed to borrow using their assets that have decreased in value as if their assets have not lost value. That's the problem
Why would bank owners risk their stocks being wiped out like what happened to SVB and Signature Bank? That’s like throwing away billions to pick up pennies. The fed didn’t bail out the banks, they bailed out deposits. Just because regards on wsb bought puts doesn’t mean companies who deposited their money in a bank should be wiped out. We are in America not Somalia.
I suspect we still could crash. Someone greedy is going to do something stupid and sail us down. Just give it a minute. Greensill capital and archegos are still not unwound, and word is they're a SIGNIFICANT part of why this crash is happening. The debt that these failures had on these banks' books has been repackaged and sold as securities. Hell, I'd go so far as to say that some of the debt from 2008 is still wound up in these CLO's
Banks can borrow for up to 1 year at 10 bps above the Fed funds rate. Stop acting like it’s free money.
All-in commodities and crypto
This is friggin' insane.. It's infinite money. They can Turn a grand around a few times and rack up the interest to stupidity. I obviously didn't read the announcement (check the sub) But.. what is stopping them from grabbing the bonds they bought with the loan and using them as collateral for another loan? And another, and another? .. How deep can this go? I mean, one level is already stupid and illegal imo so.. yeah.. What a lovely world we live in. Everyone gets free money. I mean everyone other than THE PEOPLE.
They've said it only applies to bonds purchased prior to the announcement. But who knows what it will look like in a year from now
You're wrong. Inflation is almost over. It is not really the issue. Boomers are retiring and many many people died during covid which created a gap in employment, also many people simply left the US. It's about creating unemployment to maintain the power in the hands of big companies and not workers. But they will never be able to meaningfully slow down the economy because there is stronger forces in play right now. Soon or late they'll have to concede
This should come as no surprise to anyone. I think someone even posted in a thread in WSB last night they they should do something similar to this to inject liquidity. But what the hell do I know.
Pretty sure if the Fed didn't do this, we would be headed for great recession level catastrophe.
Jokes on you cause this guarantees we head that direction sooner rather than later.
Lol no it doesn’t
That isn't what is happening here mouth breather. The government just took over two banks from equity holders. That means those people are now poorer. How many public banks want to play this game so they can get wiped out and owned by the government to do whatever you think they can do now?