Written by Bryan Lutz, Editor at Dollarcollapse.com:
Powell increased rates by .25% setting the stage for three more banks to shatter. Rate hikes were expected by many traders based on projections set by the FOMC in January. Yet, traders are weary because three more banks, mainly PacWest Bancorp, are looking just as weak as SVB. Powell doesn’t seem to notice.
For one, Powell and the White House are saying the opposite of what’s actually happening. Three US Banks have collapsed this year. The New York Post notes:
The three US banks that collapsed this year — First Republic, Silicon Valley Bank and Signature Bank of New York — had more combined assets under management than all 25 federally insured lenders that failed in 2008 at the onset of the Great Recession.
When Powell and the FOMC take notice they say, “…conditions in that sector have broadly improved since early March. And the US banking system is sound and resilient.”
Perception can only be managed so much by short term intervention and a podium.
It’s clear that PacWest needs capital. In its First Quarter Earnings call management made their plan clear. They need to sell off $2.7 Billion Lender Financing to keep themselves in the game. In other words, they got to sell to pay their debts. They’ll be paying more than debt though. The FDIC recently announced its plan to shore up their reserves by slapping fees on Big Banks. With $20 Billion in outflow to save the now collapsed SVB, the FDIC wants to extract that money from those it’s suppose to be protecting.
The U.S. Federal Deposit Insurance Corporation is planning to exempt smaller lenders from kicking in extra money to replenish the government’s bedrock deposit insurance fund, and instead saddle the biggest banks with much of the bill.
According to the FDIC, banks with under $10 Billion in assets won’t be hit. That’s too bad since PacWest is carrying $28 Billion in assets. Maybe I’m wrong and the fees will pound the banks with minimal damage. And maybe the now 5.25% federal fund rate fees won’t effect them that much. After all, Cramer says Western Alliance bank #2 is “back and stronger than ever!!”
Western Alliance is back and it's stronger than ever!! that's the big takeaway so far!
— Jim Cramer (@jimcramer) April 19, 2023
There’s another Cramer call for you. On May 3, Western Alliance Bank fell another 25%…
According to the FT report earlier this year, Western Alliance Bank was cited to have “hired advisers to explore its options, the people said, adding that the bank’s deliberations were at an early stage and might not come to anything.” The conclusion was that they were looking to sell.
Metropolitan Bank also plunged 24% yesterday. The bank’s CEO took out a $7.5 Million dollar loan, which the bank’s now taking back. Yet the company doesn’t seem to be recovering.
People are watching these banks and the stones aren’t coming from “bad optics” or “poor perception”. They’re coming from the banks themselves. They threw the stones a long time ago when they decided to take advantage of forever free fiat money. According to a recent study, over 180 banks are looking fragile, and even more are silently insolvent. I’ll leave you with a recent video from Bob Moriarty on the cascade of banks set to shatter…