BIDEN CRISIS: Moody’s Downgrades Banking Segment to “Negative”, Assets in US Banks Are $2 Trillion LESS than Their Balances

gateway pundit ^ | 3/14/2023 | joe hoft

[bitt]

Biden couldn’t have done a better job destroying the US economy if he tried.

Earlier today, Moody’s dropped its rating for the Banking SEGMENT from stable to negative. This was a huge event that those in the banking and finance areas know is a very big deal.

Moody’s doesn’t downgrade entire segments without much thought and discussion on the matter.

CNBC reported:

“We have changed to negative from stable our outlook on the US banking system to reflect the rapid deterioration in the operating environment following deposit runs at Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank (SNY) and the failures of SVB and SNY,” Moody’s said in a report.

Moody’s rating was reported this morning on the War Room where Steve Cortes reported that Moody’s downgraded the banking segment due to a “rapidly deteriorating operating environment”:

video

This evening it was reported that US Banks currently have asset balances reported that are $2 Trillion less than their actual values. This is due to the manner in which companies report on their unrealized losses. The Daily Mail reports:

Assets held by America’s banks are worth a staggering $2 trillion less than stated in their accounts because of ‘unrealized losses’ like those which triggered the collapse of Silicon Valley Bank, a study suggests.

And a run on the banks would leave customers at nearly 200 institutions facing losses of up to $300 billion, according to the paper by leading finance academics.

The paper said the value of assets across the U.S. banking system is ‘$2 trillion lower than suggested by their book value’. Those assets include Treasury bonds whose value has decreased significantly across the past 12 months because of an aggressive campaign of interest hikes by the Federal Reserve.

[bitt]

p

[Paladin2]

So?

Drop the price.

[joshua c]

i still dont get it

the fed has raised interest rates before

dont recall banks tanking because of it

[NautiNurse]

Why didn't Moody's offer this banking industry analysis before now?

[gibsonguy]

I wonder if this is when Rush would have said it’s time to panic.

[Brian Griffin]

I have been cheated for years by low interest rates that are far less the the annualized percentage prices increases at Walmart.

[Brian Griffin]

A banker at my local SunTrust was asked about ten years ago why interest rates were so low.

He said there was too much money floating around.

[DoodleBob]

The Paper in question has a pretty stunning assumption:

we do not account for possible interest rate hedges that banks could have entered, potentially offsetting decline in value due to interest rate change.

They also mark long term real estate loans to market along with bonds.

Marking assets to market that will pay off at maturity, or that are hedged against interest rate moves, is absurd.

Or sensational, and will get the author's some airtime...

[LegendHasIt]

"Biden couldn’t have done a better job destroying the US economy if he tried. "

When are these pundits going to grasp the fact that Biden (His puppetmasters) have been, and ARE trying to destroy the US (and world ) economy.

[Organic Panic]

Trump’s fault. Putin’s fault. White supremacy fault. Systemic racism fault.

[DownInFlames]

Interest rates under Carter were 20% at the peak. Banks did just fine handing out high interest rates. The problem is mismanaging the banks and a woke government.

[avital2]

my that’s timely. they had an A for SVB last week. Moody’s has a leftie bias which obviously blinded them to the obvious and now they have to distract from their inattention.

[avital2]

i believe a lot of the newer bank types haven’t been through a real Fed tightening so don’t know how to deal in bills notes bonds. no one in their right mind would have been long long Tsy’s once inflation started up. but then i was a broker during the Carter and Reagan years - so got a trial by fire and learned very valuable lessons.

[TigerClaws]

But at least they know their gender-neutral pronouns!

https://www.dailymail.co.uk/news/article-11860445/Signature-Bank-boss-hosted-company-seminar-gender-neutral-pronouns-prior-bank-failure.html

This is by design. Destroy the banks. Take them over.

Soon you’ll need a high social credit score to use your ATM card.

[Chad C. Mulligan]

Some high profile banks have been destroying themselves for going on 20 years.

My banker SIL says they’ve been loaning out borrowed money, and making a profit on the spread. But they’ve been loaning long term while borrowing short term, and as the Fed has raised rates, they’re underwater just as soon as their older short term notes come due and the`debt has to be rolled over.

This had to happen. If SVB had had risk officers who were actually bankers, they would have planned for this, but apparently their risk management team were all woke social justice types who probably thought simple arithmetic was too racist.

[oblomov]

They did, long ago, to their institutional clients.

[DCBryan1]

i still dont get it

So a bank has bonds as collateral against its loans.

A 100mm bank that has a 50mm muni bond/treasury bond/agency/cmo/corporate bond portfolio has had its price drop.

As rates rise, prices fall. It is an inverse relationship

10mm in 2 year treasuries bought in 2018 at 2% at 100.
10mm in LONG tax free munis bought in 2018 at 3% at 100.
10mm in Government Agencies at par bought in 2018 at 3% at 100.
10mm In various dividend paying corporate debt, at 4% at 100.
10mm in Colateralized Mortgage Obligations (CMOs) from GNMA/FNMA, FHLMC, etc....same thing....2-3% at 100 (par).

Fast forward 5 years and the FED is HIKING rates like crazy to stop Cofid/Biden inflation. As the rate rise, the price goes lower because debt issuer coupons have jumped from 2-3% to 4-6%!!!.

Now you bond portfolio is not worth 50mm, its worth 40mm (or less)....not enough to be collateral against the loans. Remember, though, those assets are still VERY HIGH grade...some guaranteed to be paid by the government.

Banks should have been giving out lower number of loans and doing tax swaps or taking losses on their bonds IOT buy higher coupon bonds.

Right now you can by AA2 or higher bonds 4-5% at a discount-low 105 price range.

Buy buy buy!

"Municipal bonds, Ted. I'm talking double-A rating. ...

[OKSooner]

Last call folks, if it isn’t too late already.

It’s time for Zhao to go. MTG has articles already written up. Better move on it.