This worries me, but I also feel that I don’t have the personal knowledge to really understand how big of a threat this is.<p>I feel more confident in my belief that Wall Street (as opposed to good banks, like local credit unions who stimulate local economies) are corrupt, and the individuals involved care 100% about their own power and status, and close to 0% about the working public.<p>I expect that Wall Street banks would love to discredit the safety of local banks, but for my money I choose to do business with a few local credit unions whose board of directors are local and relatively transparent.<p>The other elephant in the room is the astronomical amount of money in derivatives, and their lack of transparency.
Here is my uninformed, emotionally loaded take: so the mortgage industry not only makes houses unaffordable to so many people, but also is about to bring down the financial system with it, again?
<i>The yield premium, or spread, over U.S. Treasury yields that investors demand to own an index of agency MBS bonds jumped as much as 27%, or 0.20 percentage point, after the run began on SVB, according to data from FactSet.</i><p>This is a nothingburger of a story.
Cue the "this time is different" comments around housing supply and how high housing prices and low unemployment are here to stay. This is typically pure cognitive dissonance from people with a ton of equity in their homes.<p>Housing is at record low levels of affordability.[0]<p>The last time we saw something like this wasn't too long ago. And we can recall that it ended with affordability eventually reverting back to the mean after some nasty price action.<p>Even if we don't yet know the trigger, it is very likely that housing prices will fall and defaults will rise.<p>[0] <a href="https://nationalmortgageprofessional.com/news/goldman-sachs-housing-affordability-biggest-challenge-market" rel="nofollow">https://nationalmortgageprofessional.com/news/goldman-sachs-...</a>
What’s quickly unraveling shows how little has changed, primarily from a regulatory standpoint. Credit Suisse was deemed an internationally structural bank, one which could threaten global markets. The regulations to avoid further moral hazard called banks of this scale to easily separate their investment business from their retail bank. The theory was a “too big to fail” bank would be broken into the toxic casino side (which would be allowed to go bankrupt) and a healthy deposits business. Did this happen? Of course not!<p>Banks have taken the past 10 years and found even more novel ways to gamble with money. And a decade of zero or near-zero interest rates led to a bubble in even dumber assets, once deemed safer than cash. Now we will live through yet another massive global wealth transfer upward, giving even more power to the banks who cannot lose.
> Now that the Federal Deposit Insurance Corp. has taken over SVB, investors expect the bonds to be sold off in coming months, adding supply to the weakened market and pushing prices lower.<p>Do the rules say that FDIC has to sell these right away? I imagine they have discretion on timing the sales so that it doesn't dislocate the market. The FDIC is all about stability, after all...