A bank failure occurs when a financial institution becomes unable to meet its obligations to depositors and creditors, leading to its closure and liquidation. It signifies that the bank’s assets are insufficient to cover its liabilities, resulting in a loss of confidence and stability in the institution. Bank failures can happen because of insolvency, poor management and governance, and an economic downturn. Fallout in the banking sector has now eclipsed the Global Financial Crisis of 2008 in terms of assets wiped out.
When a bank fails, it can have significant implications for depositors, creditors, and the broader financial system. A recent survey showed that 186 more banks are at risk of failure even if only half of their uninsured depositors decide to withdraw their funds. Future banking regulation will need to address the
withdrawing of their funds.
The banking sector inherently involves risks due to its role in intermediating funds, managing financial transactions, and providing credit to individuals, businesses, and governments. However, the degree of risk can vary depending on factors such as the stability of the economy, regulatory frameworks, and the risk management practices of individual banks. Some common risks of the banking system are credit risk, market risk, liquidity risk, operational risk, and regulatory and compliance risk. Seems like a lot of risk for customers for such a little interest rate return. Bank accounts are for really for the convenience to pay our bills and the convenience to move our money around.
Nearly Half of Americans Are Worried About Safety of Bank Deposits
A new survey by Gallup reveals that nearly half of Americans are anxious about the safety of their bank deposits as instability within the industry develops. According to the results, 48% of those surveyed said they are worried about the funds they keep in banks or other financial institutions. The level of worry or confidence in the safety of bank deposits can vary among individuals and can be influenced by factors such as economic conditions, recent financial crises, and media coverage of bank failures.
However, it’s important to note that the banking sector in many countries, including the United States, is generally considered to be highly regulated and supervised to ensure stability and protect depositors. The safety of the banking system always leans on the FDIC, the Federal Deposit Insurance Corporation. I’m sorry but trying to insure 12 trillion in deposits with $128 billion in assets seems to be quite a stretch.
Fed says more than 700 American banks are facing
significant safety and soundness risk
Newly released data from the Federal Reserve shows more than 700 American banks are facing
significant safety and soundness risk due to massive unrealized losses on their balance sheets. According to the Fed, more than 700 banks have self-reported unrealized losses that exceed 50% of their capital. The Fed points to this year’s rate rises as the catalyst for the losses. This is all from the horse’s mouth.
So the Fed kept interest rates abnormally low for decades, increased the money supply dramatically with fake money, caused inflation, devalued money, and is now raising rates at a historical pace and is now deflating the same bubble it inflated. The only answer we get from the Fed is they have this under control and can make depositors whole by printing more money. Our government says they will just print more and spend more and keep this machine rolling. I am going to get into my car right now and pull some of my money out of this circus show called our financial system. New banking regulations will have to go into place soon because many more of you out there may feel the exact same way about withdrawing significant funds. We are seeing now what happens to our financial system when money is pulled out in large numbers. Yes, folks, all our deposits at the bank are not there for all of us. New regulations will have to do something about this and the ability for depositors to withdraw or transfer their funds quickly.
Bank Depositors have moved significant money since May 2022
The old saying is to follow the money. According to stats compiled by the Federal Reserve Economic Data (FRED) system, American banks have witnessed a whopping $910 billion in deposit flight since May of 2022. We mentioned something above. Besides paying bills or convenience, what benefit do we have to leaving all of our money at the bank for no interest? The new spin from advisors is to move bank deposits into higher-yielding Treasuries and money market accounts. But other countries like the BRICS are moving away from US debt. Interesting that the US public is now being encouraged to purchase the higher-yielding debt now. I guess someone must buy it besides the Fed itself.
19 States accusing JPMorgan of account freezing
Republican attorneys general from 19 states have accused JPMorgan Chase of persistently discriminating against its clients and closing bank accounts without warning. According to the recent letter, JPMorgan has allegedly, and repeatedly, discriminated against customers based on their religious or political beliefs. Kentucky Attorney General Daniel Cameron reported
“It is clear that JPMorgan has persistently discriminated against certain customers due to their religious or political affiliation. This discrimination is unacceptable. Chase must stop such behavior and align its business practices with the [anti-discrimination] policies that Chase proclaims.”
How does this behavior from a major bank make it convincing that these banking entities can be trusted? Are we supposed to believe this is the only banking entity doing this?
Banks are sitting on huge unrealized losses
Recently we received some banking news on unrealized bank losses.
Unrealized losses on securities, mostly Treasury securities and government-guaranteed mortgage-backed securities, held by all FDIC-insured commercial banks, now stands at $516 billion. Recall that the bank collapses recently all involved quick bank runs with the ability to transfer money electronically. As customers demand their money, financial institutions must realize losses to regain deposits. The Fed is also sitting on close to $1 trillion of losses on their balance sheet. This situation is far from over and will get worse if interest rates go up more.
Although blanket limits on bank withdrawals are unknown in the US, such restrictions were implemented in Greece and Cyprus during the debt crisis of the mid-2010s. Iceland and Argentina also have experienced periods of financial instability and imposed restrictions on bank withdrawals to prevent capital flight and stabilize the economy. Last year Lebanon bank customers regained access to up to $800 a month from their locked-up accounts. It was $400 a month since 2019. Cash withdrawal limits are in place in Nigeria, where individuals are allowed to withdraw 500,000 nairas, worth about $1,000 per week.
The point is when the banking system or financial system is experiencing another bank run or a depositor exodus, what will be done here in the major countries like the US to avoid the inevitable collapse of these financial institutions? The banking industry will have to limit the amount of money that we can take out of the bank or financial system at any one time. This can be instituted at any time. What about our brokerage accounts or our IRAs? Why would retirement accounts or trading accounts be treated any differently?
A bank run today is much different than the bank run lines we saw in the 1930s. Everyone today has a bank app or internet bank account and billions of dollars can move daily. This is what we saw with the banking situation this year concerning Silver Gate, SVB, Signature, First Republic, and even Credit Suisse.
These all can’t be because of a special situation or isolated bad management. Maybe it is because the system and our money are rotten. Maybe the system is so bloated and rancid due to corruption and greed. Maybe it is because our politicians will say anything and spend on everything to get elected. Maybe the New World Order and One World Currency dream will have a better chance of happening if the US is on its knees and out of the way.
Maybe it is a combination of all of these things. Maybe it is as simple as spending too much in relation to what you take in as a country for decades. Now we are at a point of no return and the whole system is addicted to debt and money printing. That is bad news for the banks and bad news for the buying power of our money. The financial system is on its last leg and our dollars are dwindling in value. You should get some of your sick money out of the sick system and get some gold while you still can. Inevitable banking regulation to limit our withdrawals is only a matter of time. This is all written in our humble opinion of course.