BREAKING:
FDIC Chairman just admitted U.S. banks' unrealized losses would be MUCH WORSE if measured today due to rising yields. This is a massive risk to depositors. Here’s why https://x.com/taylorkenneyitm/status/1927734079597818008
1. After the 2020 money printing spree U.S. banks were flooded with deposits. With nowhere else to park the cash, they loaded up on “safe” long-term Treasuries and mortgage bonds when rates were near zero. But now? Not so "safe" anymore.
2. As foreign nations ditch the dollar and demand for Treasuries drop, yields rise. Meaning the massive amounts of "safe" assets these banks are holding are now worth significantly LESS. (To the tune of almost HALF A TRILLION dollars.)
3. These are U.S. banks’ unrealized losses. They only become real if banks are forced to sell... like during a liquidity crisis. And it doesn't take much to create one. Remember now failed SVB? They were forced to sell at a loss triggering a bank run and bailout.
4. The FDIC just confirmed the situation is even worse now due to higher yields. But how bad is it? We won't know for a couple of months. Meaning banks are sitting on a ticking time bomb. While we, the depositors are in the dark.
5. As demand for treasuries continues to drop, these losses GROW. If banks need to sell for liquidity, it could trigger SVB 2.0 (aka a BANK RUN). But don't worry - the people in power have a solution...
6. To reduce 2008 regulations and allow banks to take on MORE US Debt, MORE Treasuries, with LESS capital. Meaning MORE risk to us the depositors and the system itself. This time the fallout could be much worse.
Trump 2.0's deregulation is planned to help banks boost profits, assume more of US debts and Treasuries BUT at the expense of their balance sheet and prudence.
