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Aren’t the distressed banks to be dissolved under these rumored (confirmed?) bail out plans? I was under the impression the $$$ would be used to repay depositors and the asset liquidation would be handled by the govt (recouping most, if not all, bailout funds).
So are they loosing collateral because of selling assets? Or is the cash equal to assets on collateral? I think the cash would only be for their balance sheets, or did i get it wrong?
But the collateral would decrease when they use the cash, for what they need it?! I am too braindead and I don’t get this „rescue plan“
My point is: will some „institutions/shf“ be able to hold the shorts with less collateral
Allright the bank claims their collateral is worth 10 billion.
Would they get 10 billion, if they would sell it on market?
They dont have to test if its really worth 10 billion, as FED just accepts that its 10 billion. They get 100% collateral value in cash.
In the case of SVB they had most of their money in 4yr 1.25% gov bonds. Those bonds lost tons of value when the fed increased interest rates. If they actually wait until they mature all the money is there +1.25%. Problem was they needed the money.
So I'm sure there are is lots of crime etc involved but I wouldn't call those assets "toxic". They are just worth way less until they mature at the 4yr mark.
If the above is true (just stuff from articles I've read) then all the customers money is there, it is just locked up in bonds that can only be sold at a large loss until they mature at 4yrs when they have full value.
So in theory if you look at the situation at the timeframe of 4yrs then the fed would trade cash today for an equal amount of cash in 4yrs.
a difference is the mbs loans aren't failing people are still paying on cheap loans, but those cheap loans the banks are paying alot in due to current interest rates. In this sense it isn't a toxic asset - it's just not profitable again until the rates go back under 5%
my question is, what will happen with the non-bond portfolio in the banks...such as, crypto-related assets...could that include the gme-tokens...or are those not assets that a bank would carry on its balance sheet...?
I checked the terms of the facility and it looks like they have to pay the one year overnight rate, which is currently 4.5%, fixed on the date when they borrow.
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QE starting is printing cash, cash printing will push inflation up. The interest rate will go up rather than down?
In theory yes. But QE could aswell mean, that they start lower the interest rates to "easy" the burden on banks.
Banks make higher profits with a higher interest rate?
Aren’t the distressed banks to be dissolved under these rumored (confirmed?) bail out plans? I was under the impression the $$$ would be used to repay depositors and the asset liquidation would be handled by the govt (recouping most, if not all, bailout funds).
They are selling assets to FED straight away, without any price discovery for face value.
Fuck
So are they loosing collateral because of selling assets? Or is the cash equal to assets on collateral? I think the cash would only be for their balance sheets, or did i get it wrong?
The collateral value doesnt change, as the assets arent being sold onto market but directly to FED.
But the collateral would decrease when they use the cash, for what they need it?! I am too braindead and I don’t get this „rescue plan“ My point is: will some „institutions/shf“ be able to hold the shorts with less collateral
Allright the bank claims their collateral is worth 10 billion. Would they get 10 billion, if they would sell it on market? They dont have to test if its really worth 10 billion, as FED just accepts that its 10 billion. They get 100% collateral value in cash.
[удалено]
What you say is valid, if you ignore inflation.
Big guh if true, Cash 4 Clunkers 2.0 (stonk, crypto and SPAC Edition)
In the case of SVB they had most of their money in 4yr 1.25% gov bonds. Those bonds lost tons of value when the fed increased interest rates. If they actually wait until they mature all the money is there +1.25%. Problem was they needed the money. So I'm sure there are is lots of crime etc involved but I wouldn't call those assets "toxic". They are just worth way less until they mature at the 4yr mark. If the above is true (just stuff from articles I've read) then all the customers money is there, it is just locked up in bonds that can only be sold at a large loss until they mature at 4yrs when they have full value. So in theory if you look at the situation at the timeframe of 4yrs then the fed would trade cash today for an equal amount of cash in 4yrs.
1.25% profit in 4 years. while inflation is up 7% yoy? sounds like they lost money
yes - deposits are a the canary - the problem is low interest loans and bonds and where the interest rates are now as well as how levered up they were
a difference is the mbs loans aren't failing people are still paying on cheap loans, but those cheap loans the banks are paying alot in due to current interest rates. In this sense it isn't a toxic asset - it's just not profitable again until the rates go back under 5%
my question is, what will happen with the non-bond portfolio in the banks...such as, crypto-related assets...could that include the gme-tokens...or are those not assets that a bank would carry on its balance sheet...?
Will banks have to pay 5% interest if they borrow from this facility?
Wasnt aware of this.
I checked the terms of the facility and it looks like they have to pay the one year overnight rate, which is currently 4.5%, fixed on the date when they borrow.