Conversation

Notices

1. cjd (cjd@pkteerium.xyz)'s status on Sunday, 15-Oct-2023 17:47:28 JST cjd
   Bankers starting to call for a "TARP 2.0" trillion dollar bailout of banks who were screwed over by rapidly rising interest rates.
   
   https://www.americanbanker.com/opinion/u-s-banks-need-tarp-2-0-a-trapped-asset-relief-program
   
   Unsurprisingly, the cryptosphere is cheering.
   • cjd (cjd@pkteerium.xyz)'s status on Sunday, 15-Oct-2023 17:47:22 JST cjd

     in reply to

     • DrFell (Disgruntled Citizen)
     It gets worse when you realize that a lot of banks hold government bonds as a "cash equivalent" because it's assumed that the government will ALWAYS pay it's debts.
     
     Bonds from 2010-2020 were 0% interest, so basically the government just promised to pay you back, in 10 years, or 30 years, or whatever.
     
     Now the government is issuing new debt at 5% so these 5% bonds are in high demand, but who wants the old 0% bonds?
     
     So if you need to turn a bond into cash, typically what you do is you sell it on the open market, but you're trying to sell 0 interest bonds which are competing with 5% interest bonds the govt is selling right now. When nobody wants the bond you're holding, you're forced to lower the price...
     
     5% APR compounded annually over 10 years is total interest of 21% of principle, so you see these 0% bonds are only selling for about 20% less under their face value. And when you're a bank, losing 20% on your "safest" asset is a big deal.
   • DrFell (Disgruntled Citizen) (drfell@freeatlantis.com)'s status on Sunday, 15-Oct-2023 17:47:23 JST DrFell (Disgruntled Citizen)

     in reply to

     @cjd
     Oh no not back then. recently now they are making their money back. I don't think they need a bail out, but that doesn't mean they wont get one.

   • cjd (cjd@pkteerium.xyz)'s status on Sunday, 15-Oct-2023 17:47:23 JST cjd

     in reply to

     • DrFell (Disgruntled Citizen)
     Here's the problem, between 2010 and 2020, interest was 0 and so they wrote 30 year fixed rate loans at like 3%.
     
     Now interest is 5% and they have all of these loans that are not paying the interest that the market expects.
   • cjd (cjd@pkteerium.xyz)'s status on Sunday, 15-Oct-2023 17:47:24 JST cjd

     in reply to

     • DrFell (Disgruntled Citizen)
     They were charging that back in 2019 ? That seems really high.
   • DrFell (Disgruntled Citizen) (drfell@freeatlantis.com)'s status on Sunday, 15-Oct-2023 17:47:25 JST DrFell (Disgruntled Citizen)

     in reply to

     @cjd
     What about car loans and mortgages they charge 7%

   • cjd (cjd@pkteerium.xyz)'s status on Sunday, 15-Oct-2023 17:47:26 JST cjd

     in reply to

     • DrFell (Disgruntled Citizen)
     1. People deposited money in the banks
     2. Banks lent it out at 3% (back during 0% interest era)
     3. Interest suddenly went to 5%
     4. Everyone withdrew their money and put it into govt debt because it pays 5% and banks pay near 0%
     5. Effective run on all banks at the same time
   • DrFell (Disgruntled Citizen) (drfell@freeatlantis.com)'s status on Sunday, 15-Oct-2023 17:47:27 JST DrFell (Disgruntled Citizen)

     in reply to

     @cjd They got screwed? that's a new one

   • cjd (cjd@pkteerium.xyz)'s status on Sunday, 15-Oct-2023 17:47:48 JST cjd

     in reply to

     • DrFell (Disgruntled Citizen)
     Then we can talk about commercial real estate. All of those big glass buildings, shopping centers, etc. Those places are bought up by guys whose only business is to rent them out. Then you have businesses paying rent. Well what happens when the businesses fold and stop paying? The owner can't make mortgage but the banks is not really incentivized to repossess the place because ... who they gonna sell it to? Some other guy who also offers it for rent to the same businesses that don't exist?
     
     The bank has essentially 2 options:
     1. Stick with the current owner, let him skip mortgage payments, lend him more money to stay afloat and hope for a better future
     2. Repossess the place and put it up for auction, and recoup 50% of your loan.
     
     Right now, banks are choosing #1 "extend and pretend", but these properties are NOT worth what is owed on them.
   • cjd (cjd@pkteerium.xyz)'s status on Sunday, 15-Oct-2023 19:01:56 JST cjd

     in reply to

     • DrFell (Disgruntled Citizen)
     The only reason why shorting banks is not a guaranteed trade is because everyone expects them to get bailed out - which is another fuckery... The market doesn't work anymore because every trade is a bet on what the government is going to do next.
     LS likes this.
   • cjd (cjd@pkteerium.xyz)'s status on Sunday, 15-Oct-2023 19:01:58 JST cjd

     in reply to

     • DrFell (Disgruntled Citizen)
     And bank balance sheets are super fucked, they have all of these "assets" which are marked as being worth something, but if they were put up to market tomorrow, they wouldn't be worth half of that.
   • DrFell (Disgruntled Citizen) (drfell@freeatlantis.com)'s status on Sunday, 15-Oct-2023 19:01:59 JST DrFell (Disgruntled Citizen)

     in reply to

     @cjd
     Oh man now that is definitely a collapsing, hunk of rubble there. The Commercial real estate, companies, looting, shutting down.. thats a disaster