IS THE U.S. BANKING SYSTEM SAFE? – 15 YEARS LATER

 The Wall Street banks had been reporting huge profits because they were hiding the massive losses on their balance sheets.

While risk managers at banks across the world have been concentrating on diversity and pushing woke agendas about transgender rights, climate change and practicing ESG investing, they ignored the simple concept that bonds they acquired at 1% lose money when interest rates go to 4%. Just as the banks in 2008 were sitting on billions of unrealized losses from the toxic mortgages on their books, the same banks are now sitting on billions of unrealized losses from the newest toxic asset - U.S. Treasuries.

Silicon Valley Bank and Signature Bank were swimming naked and when depositors realized that fact a bank run ensued.

Holger Zschaepitz on Twitter: "This chart reveals why Fed, US Treasury & FDIC now bailing out the whole US banking system.

These are The narrative being spun is this is a regional banking crisis confined to smaller banks.

The truth is that the Wall Street banks have massive levels of unrealized losses and desperately need deposits to keep them from facing the same fate as Silicon Valley and Signature.

A banking crisis means banks will reduce lending dramatically.

If Powell does nothing or continues raising rates, the banking system will likely collapse.

"The U.S. banking system is essentially insolvent. The Treasury, Federal Reserve, FASB, and Congress are colluding to keep the American public in the dark for as long as possible. They are trying to buy time and prop up these banks so they can convince enough fools to give them more capital. They will continue to write off debt for many quarters to come. We are in danger of duplicating the mistakes of Japan in the 1990s by allowing them to pretend to be sound. We could have a zombie banking system for a decade." We never paid the piper and cleaned out the excesses of the previous banking crisis.

The financial condition of the banking system is far worse than it was in 2008.

We could have taken the pain in 2008 and let the system reset after purging all the bad debt and bad banks, but we chose the wrong path and will now suffer the consequences described by Ludwig von Mises a century ago.

https://www.theburningplatform.com/2023/03/15/is-the-u-s-banking-system-safe-15-years-later/