Possible banking collapse in progress

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Credit Suisse to borrow up to nearly $54 billion from Swiss National Bank

https://www.unz.com/mhudson/why-the-ban ... -not-over/

Michael Hudson explains what's going on in reasonably simple terms and says the crisis is not quite over.

No risks of loan default existed for the investments in government securities or packaged long-term mortgages that SVB and other banks have bought. The problem is that the market valuation of these mortgages has fallen as a result of interest rates being jacked up. The interest yield on bonds and mortgages bought a few years ago is much lower than is available on new mortgages and new Treasury notes and bonds. When interest rates rise, these “old securities” fall in price so as to bring their yield to new buyers in line with the Fed’s rising interest rates.

A market valuation problem is not a fraud problem this time around

...

This was not a “run on the banks” resulting from fears of insolvency. It was because banks were strong enough monopolies to avoid sharing their rising earnings with their depositors. They were making soaring profits on the rates they charge borrowers, and the rates yielded by their investments, but continued to pay depositors only about 0.2%.

The U.S. Treasury was paying much more, and on Thursday, March 11, the 2-year Treasury note was yielding almost 5 percent. The widening gap between what investors can earn by buying risk-free Treasury securities and the pittance that banks were paying their depositors led the more well-to-do depositors withdraw their money to earn a fairer market return elsewhere.

It would be wrong to think of this as a “bank run” much less as a panic. The depositors were not irrational or falling subject to “the madness of crowds” in withdrawing their money. The banks simply were too selfish. And as they withdrew their deposits, banks had to sell off their portfolio of securities – including the long-term securities held by SVB.

All this is part of the unwinding of the Obama bank bailouts and Quantitative Easing. The result of trying to return to more normal historic interest-rate levels is that on March 14, Moody’s rating agency cut the outlook for the U.S. banking system from stable to negative, citing the “rapidly changing operating environment.” What they are referring to is the plunge in the ability of bank reserves to cover what they owed to their depositors, who were withdrawing their money and forcing the banks to sell securities at a loss.

https://www.bloomberg.com/news/articles ... -liquidity

The Federal Reserve’s emergency loan program may inject as much as $2 trillion of funds into the US banking system and ease the liquidity crunch, according to JPMorgan Chase & Co.

“The usage of the Fed’s Bank Term Funding Program is likely to be big,” strategists led by Nikolaos Panigirtzoglou in London wrote in a client note Wednesday. While the largest banks are unlikely to tap the program, the maximum usage envisaged for the facility is close to $2 trillion, which is the par amount of bonds held by US banks outside the five biggest, they said.

Show Spoiler

Wall Street rides to the rescue as 11 banks pledge $30 billion to First Republic Bank

A video version of recent events.

https://www.standard.co.uk/news/world/u ... 68395.html

UBS will take over its smaller rival Credit Suisse, the Swiss central bank has confirmed in an effort to avoid further market-shaking turmoil.

The Financial Times reported on Sunday that UBS offered to pay $2bn (£1.2bn) for the embattled bank.

Swiss President Alain Berset, who did not specify a value of the deal, called Sunday night’s announcement “one of great breadth for the stability of international finance.

“An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.”

"This is another fine mess you have gotten us into Ollie" Our wonderful Congress has to okay all these things . And Presidents get their names attached to it . This older article written by PBS On April 26th 2016 .Was kinda phophetic
(Column: Reaganomics,deregulation and bailouts led to the rise of Trump) . This stuff strarted long ago with our politicians getting into Politics for the Wrong Reason . And todays situation seems to be a repeat or possibly just a obvious cause and effect of a lesson not learned . Pretty interesting Article . .IMHO
Seems they even defrosted Old Janet Yellen out from the deep freeze to come out to reassure people .
And seems even Aussies dont seem to be exempt from this stuff.

https://www.sharecast.com/news/news-and ... 25880.html

Oof.

Holders of $17bn in Credit Suisse bonds wiped out in UBS deal

UBS shares tumbled on Monday after it agreed to buy rival Credit Suisse for 3 billion Swiss francs ($3.25bn), in a deal that wipes out $17bn of bonds.

At a press conference in Bern on Sunday evening, Swiss president Alain Berset said: "On Friday the liquidity outflows and market volatility showed it was no longer possible to restore market confidence, and a swift and stabilising solution was absolutely necessary.

"This solution was the takeover of Credit Suisse by UBS."

Under the terms of the deal, UBS will pay around CHF0.76 per share in its own shares, after an earlier bid of CHF0.25 was rejected by Credit Suisse. On Friday, Credit Suisse shares closed at CHF1.86.

The Swiss National Bank will make available a CHF100bn Swiss franc liquidity line to UBS. Should UBS incur more than CHF5bn in losses from Credit Suisse's assets, the Swiss government would shoulder the next CHF9bn in red ink, with UBS taking any losses above that amount.

Also as part of the deal, around CHF16bn of Credit Suisse’s Additional Tier 1 (AT1) capital bonds will be wiped out. AT1 bonds are high-yield securities that typically have loss-absorbing features, meaning they can be written off if a lender's capital falls below a crucial level.

Regarding the above Post about Credit Suisee and their bond situation .... This does not look good for the entire international Picture . Lots of older people rely heavily on bonds to support them in their older years .
This is a crappy situation ! . The wealthy get wealthier and anyone who isn't a ogliarch is gonna feel this .
People that are old don't have a way to rebuild those savings and assets .