BANKING CRISIS COMING

righteous » 29 Aug 2024, 7:57 pm » wrote: ↑
29 Aug 2024, 7:57 pm
@LowIQTrash
YOU BROUGHT IT UP IN AN EARLIER THREAD

BREAKING: After Dumping 55% of His Apple Stock, Warren Buffett Sells 5 Billion in Bank of America Stock, Signaling Coming Banking Crisis (infowars.com)

Yes, let me find that thread…

https://liberalforum.net/viewtopic.php?f=3&t=86678

1) I don’t think it will happen by January 2025. I think it may even be delayed until 2029, but the longer the delay = the worse the fallout.

One thing I am highly cognizant of is the fact that there will be some kind of “crisis,” - almost inevitably manufactured - where the banks in trouble will come out and say that they are underwater and cannot meet their liabilities with existing assets. Either because those assets are too illiquid or those assets are actually worthless even though accounting gimmicks pretend they are good enough to pass Fed stress tests.

Then they will blame the manufactured crisis rather than their own malfeasance / greed.

2) The causes of this coming banking crisis are multiple:

a) Massive amounts of consumer debts that cannot be paid back during the next recession as MILLIONS lose their jobs. Consumers’ savings are approaching levels seen in 2007

https://fred.stlouisfed.org/series/PSAVERT

If someone loses their job they will unlikely pay back their CC debt, their mortgage, and any outstanding car payments. Those will have to be written down or discharged entirely.

The amount of “shadow lending” for consumers in the form of Affirm, Klarna, and Upstart (“Pay in 4 installments”) is NOT reflected in consumer credit reports so consumer debt is UNDERstated.

b) Underwater CRE loans that still remain on the books. Many banks like OZK (Bank of the Ozarks)
went all in with commercial real estate lending. The problem is that demand for CRE cratered and is unlikely to make a revival this decade. As more and more companies find way to cut costs, CRE will stay muted.

For now, banks have extended the lifetimes of these loans, waiting for those rate cuts to keep borrowers from defaulting.

c) Uninsured deposit risk (UDR) is very high.

This is UDR in a nutshell: wealthy people (who have all the money in the US, as the poor and middle class have nothing) are much more likely to store their liquid cash in excess of $250K in regional banks for the higher APY.

The problem is that once those banks begin to fail, these wealthy people will panic and withdraw their money causing a bank run. These banks will be forced to further liquidate existing assets to cover ST liabilities or close down.

And there is one more thing: there won’t be a “bailout” next time. Govt debt is accumulating at warp speed and the public is growing - justifiably - more angry and spiteful of the wealthy and corporations as time goes on. The federal govt is unlikely to muster the political will for another round of 2008-2009 bailouts.

(Retarded conservatives still believe if you put your nose to the grindstone you will “become rich.”)

What will happen is a bail-in. If you have any deposits remaining in these banks that are about to become insolvent, those deposits are seized and turned into bank equity. The actual cash is used to cover those liabilities so the bank can survive another quarter.

You essentially become a stockholder in that bank, whether you like it or not.

And you may have difficulty finding someone who is willing to trade their cash for your bank shares. Or, at least the amount of cash you THINK you deserve.

@Majik
@Cannonpointer

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