When a small bank fails the FDIC goes in OVERNIGHT and fires everyone, brings in new people and opens it the next day with fedbois. They arrange for another bank to take over, the speed in which that happens can vary. Often times they can prevent anyone losing deposits but this situation is different. There are people who didn't even know their bank failed or changed hands when it happened, and this is done by design to prevent a banking run.

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Posted by KillTheGophers

Member since Jan 2016

6748 posts

Posted on 3/12/23 at 1:19 pm to armsdealer

The problem today is technology.

The non financial warrior can move $100,000 out of a standard bank account and purchase short term treasuries.

With the mismatch of rates between those two and now potential bank stability risk, why should the average Joe not move to short term treasuries or short term treasury fund?

The root problem is all the money printing and a Fed that failed to keep up with inflation. Banks went too long on bond duration and in essence had no put position on 20 year treasures - and they are getting blistered.

This post was edited on 3/12/23 at 1:22 pm

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Posted by baldona

Florida

Member since Feb 2016

23428 posts

Posted on 3/12/23 at 1:23 pm to UltimaParadox

quote:
SVB and Silvergate banks that have failed are special circumstances that led to this failures. Mostly due to them not diversifying their risk.

My understanding is the SVB issue is two fold, both easily foreseeable and correctable and they completely failed in both aspects.

1.) over exposure/ lack of better diversity with their Treasury bonds

2.) communication to their customers about their process to get out of #1

If they had just communicated their plan and that everything would be fine, which it would have been, the bank run never happens. I’m sure some withdrawal, but not to the magnitude it did.

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