Summary Deep Diving the Fed's Killer Whale Crisis www.youtube.com
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One Line
The Federal Reserve's mismanagement of interest rates and focus on making too big to fail banks even bigger has led to a regional banking crisis, with whale bank accounts being a key red flag for potential failures, possibly motivated by a need for a control system enabled by a Central Bank Digital Currency (CBDC).
Key Points
- The Federal Reserve caused a liquidity crisis in the banking industry through its concentration of liquidity on the liability side of the balance sheet.
- The crisis was exacerbated by the pandemic and the printing of trillions of dollars, which led to inflation and a sudden departure of whales from certain banks.
- The Fed's motivation for making too big to fail banks even bigger is unclear, but it may be due to a need for a control system enabled by a Central Bank Digital Currency (CBDC).
- The crisis is primarily caused by whale accounts and panic borrowing to make loans at low interest rates.
- The top 0.1% of households have the most money in checking accounts, which poses a risk to the banking system.
Summaries
186 word summary
The Federal Reserve caused a regional banking crisis by inflating "whale accounts" held by the top 10% of households. Interest rate mismanagement is a key issue, and regulators should have called out the risk posed by these large deposits. The video encourages viewers to look for warning signs of potential bank failures and leverage that information to their advantage. The crisis is about the too big to fail banks at the top gobbling up the next run. Silicon Valley Bank, First Republic, and Signature Bank have more than 75% of their equity due to be eaten up by short-term FHLB loans. The biggest red flag test for troubled banks is whale bank accounts. The Federal Reserve's high concentration of liquidity on the liability side of the balance sheet has led to a liquidity crisis in the banking industry, exacerbated by the pandemic and the printing of trillions of dollars. The motivation behind the Fed's focus on making too big to fail banks even bigger is unclear, but it may be related to a need for a control system enabled by a Central Bank Digital Currency (CBDC).
426 word summary
The Federal Reserve's high concentration of liquidity on the liability side of the balance sheet has led to a liquidity crisis in the banking industry, exacerbated by the pandemic and the printing of trillions of dollars. The sudden departure of large accounts, or "whales," from certain banks has caused a crisis. The motivation behind the Fed's focus on making too big to fail banks even bigger is unclear, but it may be related to a need for a control system enabled by a Central Bank Digital Currency (CBDC).
Several banks, including Silicon Valley Bank, Signature Bank, and First Republic, have high percentages of deposits over $250,000, with some containing billions of dollars. The crisis is not about interest rates, but rather about whale accounts and panic borrowing to make loans at low interest rates.
Silicon Valley Bank, First Republic, and Signature Bank have more than 75% of their equity due to be eaten up by short-term FHLB loans. The top 34 banks in the US with more than $100 billion in assets show that three banks at the top, Silicon Valley Bank, First Republic, and Signature Bank, are in trouble with FHLB loans as a percentage of equity. The biggest red flag test for troubled banks is whale bank accounts.
The top four banks listed on the FDIC website are not the ones that have failed during the current crisis. There are 34 banks with assets over $100 billion, which are about the size of Greece. The crisis is about the too big to fail banks at the top gobbling up the next run. The first two pieces of data to collect on a bank are its certificate number and asset size. Industry-wide panic borrowing from the federal home loan board can be found on the FDIC website. The Federal Reserve caused a regional banking crisis by inflating "whale accounts" held by the top 10% of households through asset purchases, while the bottom 50% saw the smallest increase in their accounts. The crisis was caused by rational people keeping vast fortunes in bank accounts and accepting low or zero interest payments from accounts exposed to total loss. During the pandemic, the Fed expanded its quantitative easing program, which led to the creation of large bank deposits, or "whales," that pose a risk to the banking system. Interest rate mismanagement is a key issue, and regulators should have called out the risk posed by these large deposits. The video encourages viewers to look for warning signs of potential bank failures and leverage that information to their advantage.
713 word summary
This video discusses how the Federal Reserve caused the regional banking crisis, with three banks already failing due to a solvency crisis turning into a liquidity crisis. The Fed exacerbated the problem by raising interest rates. Jolly Jester Bank is used as an example, with its biggest liability being customer deposits. Banks need to be mindful of deposits as they are liabilities. During the pandemic, the Fed expanded its quantitative easing program, which led to the creation of large bank deposits, or “whales,” that pose a risk to the banking system. Interest rate mismanagement is a key issue, and regulators should have called out the risk posed by these large deposits. A run on Silicon Valley Bank (SVB) was caused by a few people with billions of dollars, who demanded their companies leave at once. The crisis was caused by rational people keeping vast fortunes in bank accounts and accepting low or zero interest payments from accounts exposed to total loss. The top 0.1% of households have the most money in checking accounts, and the average checking account of the top 0.1% household increased from $565,000 before the pandemic to $5 million after the pandemic. There is a correlation between Fed asset purchases and checking accounts of the top 0.1%. The Fed intentionally inflated “whale accounts” held by the top 10% of households through asset purchases, while the bottom 50% saw the smallest increase in their accounts. The Fed's official story was to stabilize prices and promote employment and price stability, but they lied about it. The Fed maintained these accounts for years, risking total loss and losing interest payments, with unclear motives. The video encourages viewers to look for warning signs of potential bank failures and leverage that information to their advantage. The top four banks listed on the FDIC website are JPMorgan Chase, Bank of America, Citibank, and Wells Fargo. However, the banks that have failed during the current crisis are further down the list, with odds of randomly selected banks failing being less than one in a million. There are 34 banks with assets over 100 billion dollars, which are about the size of Greece. The crisis is about the two big fail banks at the top gobbling up the next run. The first two pieces of data to collect on a bank are its certificate number and asset size. Industry-wide panic borrowing from the federal home loan board can be found on the FDIC website.
Silicon Valley Bank, First Republic, and Signature Bank had more than 75% of their equity due to be eaten up by short-term fhlb loans. The spreadsheet of the top 34 banks in the US with more than 100 billion dollars of assets shows that three banks at the top, Silicon Valley Bank, First Republic, and Signature Bank, are in trouble with fhlb loans as a percentage of equity. The biggest red flag test for troubled banks is whale bank accounts, and publicly available call reports can be used to test for them.
Silicon Valley Bank has over $175 billion in total deposits, with the vast majority being whale accounts over $250,000. Red flag test number two shows that the percentage of deposits over $250,000 is high for several banks, including Signature Bank, Silicon Valley Bank, and First Republic. These banks have tens of thousands of these large accounts, with some containing billions of dollars. The crisis is not about interest rates, as only 35% of Silicon Valley Bank's assets were loans. The number one problem is whale accounts, and the number two problem is panic borrowing to make loans at low interest rates.
The Federal Reserve is responsible for the liquidity crisis in the banking industry due to its high concentration of liquidity on the liability side of the balance sheet. The pandemic led to the printing of trillions of dollars of reserves and bank deposits, which caused inflation and the sudden departure of whales from certain banks, leading to a crisis. The Fed's motivation for making too big to fail banks even bigger is unclear, but it may be due to a need for a control system where a central entity like the Fed can delete money out of accounts, which a Central Bank Digital Currency (CBDC) would enable. However, the CBDC system
1640 word summary
The Federal Reserve is responsible for the liquidity crisis in the banking industry due to its high concentration of liquidity on the liability side of the balance sheet. The pandemic led to the printing of trillions of dollars of reserves and bank deposits, which caused inflation and the sudden departure of whales from certain banks, leading to a crisis. The Fed's motivation for making too big to fail banks even bigger is unclear, but it may be due to a need for a control system where a central entity like the Fed can delete money out of accounts, which a Central Bank Digital Currency (CBDC) would enable. However, the CBDC system contemplates a one-tier financial system, which is problematic in a two-tiered system like the US. The Fed's asset purchases work through primary dealers, making it difficult to FOIA for the names of entities they bought assets from. It is unclear if there is an entity that can get to the bottom of the crisis. Silicon Valley Bank has over $175 billion in total deposits, with the vast majority being whale accounts over $250,000. The average account size for these accounts is over $4 million. Red flag test number two shows that the percentage of deposits over $250,000 is high for several banks, including Signature Bank, Silicon Valley Bank, and First Republic. These banks have tens of thousands of these large accounts, with some containing billions of dollars. The crisis is not about interest rates, as only 35% of Silicon Valley Bank's assets were loans. The number one problem is whale accounts, and the number two problem is panic borrowing to make loans at low interest rates. The video discusses the crisis faced by banks due to the maturity and repricing of borrowed funds, specifically fhlb loans. Silicon Valley Bank, First Republic, and Signature Bank had more than 75% of their equity due to be eaten up by short-term fhlb loans. The spreadsheet of the top 34 banks in the US with more than 100 billion dollars of assets shows that three banks at the top, Silicon Valley Bank, First Republic, and Signature Bank, are in trouble with fhlb loans as a percentage of equity. The biggest red flag test for troubled banks is whale bank accounts, and publicly available call reports can be used to test for them. The video discusses the FDIC website, which lists banks in descending order of their certificate number. The top four banks are JPMorgan Chase, Bank of America, Citibank, and Wells Fargo. However, the banks that have failed during the current crisis are further down the list, with odds of randomly selected banks failing being less than one in a million. There are 34 banks with assets over 100 billion dollars, which are about the size of Greece. The crisis is about the two big fail banks at the top gobbling up the next run. The first two pieces of data to collect on a bank are its certificate number and asset size. The video also discusses industry-wide panic borrowing from the federal home loan board and how to find FHLB borrowing information on the FDIC website. The video discusses the "killer whale crisis" and challenges the mainstream explanation. The speaker questions why anyone would keep billions of dollars in a checking account and provides two historical examples of large accounts: Bernie Madoff and a self-published book from 1912. The speaker suggests that these accounts were created for criminal purposes or to take over a bank. The video encourages viewers to look for warning signs of potential bank failures and leverage that information to their advantage. The Fed intentionally inflated "whale accounts" held by the top 10% of households through asset purchases, while the bottom 50% saw the smallest increase in their accounts. The Fed's official story was to stabilize prices and promote employment and price stability, but they lied about it. The Fed knew who the wealthy account holders were and bought assets from their businesses, but now those whales are swimming away from certain banks because of rate increases. The Fed maintained these accounts for years, risking total loss and losing interest payments, with unclear motives. The Federal Reserve tracks checkable deposits from households and legal entities separately on a quarterly basis. To understand the impact of pandemic QE on boosting bank accounts, it is important to compare the green line (including household accounts) to the blue line (all checking accounts). By subtracting households from the green line, it is possible to see how much of pandemic QE was about boosting the bank accounts of legal entities like BlackRock. The Fed bought assets from institutions like BlackRock as a pass-through to get asset purchases into households, increasing commercial bank deposits which were then passed on to households. The Paycheck Protection Program fails to fully explain the jump in household checking accounts. The conclusion is that pandemic QE was 100% about inflating. The average checking account of the top 0.1% household increased from $565,000 before the pandemic to $5 million after the pandemic. There is a correlation between Fed asset purchases and checking accounts of the top 0.1%. The Fed's asset purchases go right into commercial banks and into the top 0.1% commercial bank accounts. The Fed admits that its purchases of assets created new bank deposits. The Fed starts buying assets and it shows up in the green line General Commercial Bank deposits right away. However, there is a delay with the top 0.1% for a long time until the Fed started buying assets in red. Households are one sector of several in the economy. A crisis occurred at Silicon Valley Bank (SVB) due to a run on the bank by a handful of VCs who demanded all of their companies leave at once. This collapse was ordered by a few people with billions of dollars. The difference between 2008 and now is not apps, but the number of people who have millions and billions of dollars in their bank accounts. The crisis was caused by rational people keeping vast fortunes in bank accounts and accepting low or zero interest payments from accounts exposed to total loss. The crisis goes unquestioned, and it is unclear why people kept vast fortunes in bank accounts and where those accounts came from in the first place. The top 0.1% of households have the most money in checking accounts, and it is valuable information because it allows for the average account to be displayed directly. During the pandemic, the Federal Reserve (Fed) expanded its quantitative easing (QE) program, which involved purchasing assets from non-banks. This led to the creation of large bank deposits, or "whales," that did not exist before. These whales, held by a small number of depositors, pose a risk to the banking system. One example is Silicon Valley Bank, whose 10 largest depositors had $13 billion on deposit, far exceeding the FDIC insurance limit. These depositors earned less interest than they would have with U.S. treasuries and were exposed to total loss. The asymmetry in risk between bank accounts and U.S. bonds is glaring. Interest rate mismanagement is a key issue, and regulators should have called out the risk posed by these large deposits. Banks need to be mindful of deposits as they are liabilities. Deposits are created through loans and asset purchases. The traditional way of expanding bank deposits is through loans, where a customer's account deposit is credited with the amount of the loan. Asset purchases from non-banks, such as what the Fed did during the pandemic, also create new bank deposits. The Fed creates reserves out of thin air and uses commercial banks like the Jolly Jester as intermediaries in transactions with non-banks. The bank customer's deposit account is credited by the Jolly Jester, and the Fed credits the Jolly Jester with more reserves. Both traditional lending and asset purchases from non-banks create new bank deposits, but there is a difference between the two. The Jolly Jester Bank, headquartered in Modesto, California, has left and right liabilities, investments, and a digital account of reserves held with the San Francisco Federal Reserve. It also has commercial bank accounts at other banks, including claims. The bank owes debt, including loans from customers promising to pay back a stream of payments. The bank's biggest liability is customer deposits, which are demand deposit accounts that customers can demand cash for. When deposits leave the bank, they have to be matched with assets of equal value. In the case of Jolly Jester, the assets that would have to be sent over to Cool Cat Bank would probably be an account at the FED and its bank account at Wells Fargo. The Jester invested in Gallo Winery, which is privately held, so it will have to turn to loans with lower interest rates. When deposits leave the bank, equity gets totally wiped out. This video discusses the regional banking crisis and how the Federal Reserve caused it. The banks that failed were all in the 99th percentile by size and were the banks of choice for wealthy people. The media has dubbed it the most twisted financial meltdown ever, but John Titus believes this misrepresents the situation. He explains that the Fed caused the crisis and provides tests to check if your bank is in trouble. Three banks have already failed due to a solvency crisis turning into a liquidity crisis. A solvency crisis is a spreadsheet problem where the asset column adds up to less than the liability column, while a liquidity crisis is when creditors start to pull out their money. Banks can float in a state of insolvency for years without regulators shutting them down. The Fed exacerbated the solvency problem by raising interest rates. In this episode, Titus goes into granular detail about the liquidity problem and talks about it visually.