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Old 05-08-2023, 12:36 PM
 
18,802 posts, read 8,469,715 times
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Quote:
Originally Posted by TimAZ View Post
“or the Fed steps in”

They’ve already stepped in it.

Yes, the banks that for years offered loans at 3% now can’t pay depositors 4% — they are fooked. That problem (along with CRE) might be fixable with targeted bailouts. But what about the 20% of Americans currently using credit to buy food? Do you think the Fed can paper that over?
A different subject and another problem outside of banking and the Fed's bailiwick.
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Old 05-08-2023, 01:16 PM
 
26,191 posts, read 21,583,182 times
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Quote:
Originally Posted by TimAZ View Post
“or the Fed steps in”

They’ve already stepped in it.

Yes, the banks that for years offered loans at 3% now can’t pay depositors 4% — they are fooked. That problem (along with CRE) might be fixable with targeted bailouts. But what about the 20% of Americans currently using credit to buy food? Do you think the Fed can paper that over?
Actually most banks who loaned dollars at 3% can pay 4% on deposits and they are. For a multitude of reason of either selling off the 3% debt, leveraging 4% deposits or hedging interest rate risk. It’s actually just math and most banks are handling it just fine
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Old 05-08-2023, 01:24 PM
 
106,668 posts, read 108,833,673 times
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i posted this in another thread …it was a very interesting study on bank hedging


Quote:
Originally Posted by mathjak107 View Post
banks are very limited in what they can use to hedge .

the most popular is using credit default swaps .

a major study by the Office of the Chief Economist Commodity Futures Trading Commission looked in to banks hedging and found that hedging adds very little value simply because of how it works.

it’s easy for amateurs to draw conclusions about what should or shouldn’t have been done but there are ramifications and issues that they are not aware of being amateur arm chair economist wanna bees .

summary

We ask whether banks use interest rate swaps to hedge the interest rate risk of their assets, primarily loans and securities. To this end, we use regulatory data on individual swap positions for the largest 250 U.S. banks.

We find that the average bank has a large notional amount of $434 billion. But after accounting for the significant extent to which swap positions offset each other, the average bank has essentially no net interest rate risk from swaps: a 100-basis-point increase in rates increases the value of its swaps by 0.1% of equity.

There is variation across banks, with some bank swap positions decreasing and some increasing with rates, but aggregating swap positions at the level of the banking system reveals that most swap exposures are offsetting. Therefore, as a description of prevailing practice, we conclude that swap positions are not economically significant in hedging the interest rate risk of bank assets.



https://www.cftc.gov/sites/default/f...102023_ada.pdf
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Old 05-08-2023, 02:27 PM
 
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It really depends on the product line, swaps vs mortgages aren’t common but swaps vs securities based lines, especially fixed rate ones are very common
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Old 05-08-2023, 02:38 PM
 
106,668 posts, read 108,833,673 times
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Quote:
Originally Posted by Lowexpectations View Post
It really depends on the product line, swaps vs mortgages aren’t common but swaps vs securities based lines, especially fixed rate ones are very common
most mortgages are sold off so they aren’t hedged a lot by banks
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Old 05-08-2023, 03:00 PM
 
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Quote:
Originally Posted by mathjak107 View Post
most mortgages are sold off so they aren’t hedged a lot by banks
I’m aware
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Old 05-09-2023, 08:40 AM
 
4,948 posts, read 3,053,228 times
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Quote:
Originally Posted by Hoonose View Post
This is not the end of times.

I certainly hope not, only the number of banks is double that of 08'; and the asset value of the failed banks thus far in 23' has exceeded the value of ALL the banks that became insolvent in 08'.
And gold keeps rising, when I thought rising interest rates are supposed to do the opposite.
This seems like yet another bad signal, unless you own gold.
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Old 05-09-2023, 10:57 AM
 
Location: Flyover part of Virginia
4,218 posts, read 2,457,532 times
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Quote:
Originally Posted by Hoonose View Post
One of two things may happen. Either rates come down soon enough and this problem disappears, or the Fed steps in. This is not the end of times.
No such thing as "end of times." That is a Judeo-Christian fallacy, one born from an incorrect 'linear' conception of time and history, rather than a circular or cyclical conception of time/history. The world will always and forever "just go on." But it may not always do so in any recognizable fashion.
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Old 05-09-2023, 12:18 PM
 
Location: A coal patch in Pennsyltucky
10,379 posts, read 10,661,869 times
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Quote:
Originally Posted by Taggerung View Post
No such thing as "end of times." That is a Judeo-Christian fallacy, one born from an incorrect 'linear' conception of time and history, rather than a circular or cyclical conception of time/history. The world will always and forever "just go on." But it may not always do so in any recognizable fashion.
According to whom? What "expert" knows if there will or will not be an end of times?
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Old 05-09-2023, 03:22 PM
 
4,948 posts, read 3,053,228 times
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For those with normalcy bias, here is the daily dose of doom and gloom>>>

"Almost half of America’s 4,800 banks are already burning through their capital buffers. They may not have to mark all losses to market under US accounting rules but that does not make them solvent. Somebody will take those losses.
“It’s spooky. Thousands of banks are underwater,” said Professor Amit Seru, a banking expert at Stanford University. “Let’s not pretend that this is just about Silicon Valley Bank and First Republic. A lot of the US banking system is potentially insolvent.”
https://www.telegraph.co.uk/business...credit-crunch/

wow, just wow; look at the chart comparisons to 08', and the M2 supply.
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