"The banks are very, very sound!"

This week has been a doozy with the 2nd largest bank failure in US history (First Republic) and just the most recent example in a cascading series of high profile bank failures that started in early March. As I have said many times, the mess were seeing on the surface indicates there are much more severe problems that aren't visible inside the banking system.

Perhaps that is why we're all seeing very high profile members of the banking industry and politics screaming into microphones: 'The banking system is very, very sound!" - really!

"Treasury Secretary Janet Yellen keeps insisting that the banking system is “sound.” Is it though? Because it doesn’t look particularly sound.
In fact, we just witnessed the second-largest US bank failure ever.
Government regulators seized control of First Republic Bank over the weekend and sold the majority of the bank’s operations to JP Morgan Chase. It was the third major bank failure this year and the biggest bank to collapse since the 2008 financial crisis. It was the second-largest bank by assets to fail in US history.
First Republic went under after it revealed $100 billion in deposit losses in the first quarter."

Remember that the ones saying this aren't the most reliable sources; Janet Yellen is infamous for saying this is in 2017:

Now she says "the banks are sound"

Jamie Dimon, the CEO of JP Morgan is the biggest beneficiary of the 1st Republic Bank's dismemberment. He said this week "The system is very, very sound". This is the guy who just got handed all of First Republic's good assets for free and the government (US Taxpayers) got stuck with all the toxic crap as is sits on the balance sheets of Federal agencies. He also said this: "This part of the crisis is over".

Wait, what? "This part"?? Exactly how many parts does this crisis have Jamie??

The fact is that, with interest rates at 5% none of the banks are "sound" because they all have low interest, long term bonds which are all at a loss if sold on the market. The Government is playing favorites here by selectively bailing out whichever bank happens to be in distress this week. Then, they cut them up into pieces and give the good assets to their "preferred" banks like JP Morgan- CHASE leaving shareholders and taxpayers twisting in the wind.

They are allowing regional banks to fail and giving their vital organs to already large banks - this is a subsidy for large banks. CHASE can avoid paying interest on deposits (their checking accounts pay 00.1 percent annual interest) because the government has implicitly given them the mantle of "too big to fail" allowing depositors to believe their money is more secure at CHASE than at their regional bank.

Meanwhile, regional banks have to compete against the perception they aren't "as safe" as larger, "TBTF" banks are and also, they have to pay more for their deposits to compete with money market funds that are paying over 4.5%.

If Chase was required to compete and pay depositors a fair rate on the Trillions they now have in deposits it would cost them $90 Billion. That is $90 Billion that the government is subsidizing them with by giving depositors the impression CHASE is somehow "safer" than smaller ones. That is, they are being granted "preferred" status that most other banks don't have. See how that works?

The facts are easy to see: No banks are solvent right now because if even a small percentage of deposits decide to leave, they're toast. They won't be able to cover even 10 percent of their obligations meaning, deposits.

Pretty much, yea!

What I personally believe is happening at the banks is this: Government is desperately trying to introduce digital currency which they perceive as the solution to a rapidly degrading fiat-dollar dominated system. What we're seeing in the banking industry now is only the tip of the iceberg in terms of systems failures which is resulting in an accelerating destruction of purchasing power for most people who are now enduring a perfect storm of higher costs, stagnating incomes and economic uncertainty.

Since introducing the digital currency has met strong resistance from the public, the easiest way to force compliance is to "herd" as many deposits into large banks and, once a large enough percentage has been accumulated there make the transition when most depositors are at the mercy of the big banks they all fled to for "safety".

Small business owners are the biggest victims of this aggressive power grab. Small, regional banks are natural allies of small business owners and they also provide most of their banking services. Small business makes up the fabric of the American economic middle-class which is exactly why all the policies coming from government right now are meant to destroy them. Governments both Federal and local are attacking from all points right now: ESG, DEI, Carbon footprints are all weapons meant to handicap small business and benefit larger ones.

"59.9 million Americans work at small businesses across the nation. An estimated 47% of Americans shop at small businesses at least twice a week, generating about 45% of the nation's economic activity. According to the most recent available numbers from the U.S. Census, approximately 47% of U.S. employees work for small businesses, compared to 54.5% in 1988."

The end game as I see it is to leave no more choices. It's our way or the highway, or worse.

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I welcome questions, call me to discuss your project and I'll give you accurate, actionable information about what options you have in private lending industry.

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