{"id":67760,"date":"2024-04-30T13:37:57","date_gmt":"2024-04-30T18:37:57","guid":{"rendered":"https:\/\/olduvai.ca\/?p=67760"},"modified":"2024-04-30T13:37:57","modified_gmt":"2024-04-30T18:37:57","slug":"the-feds-game-of-make-believe-comes-to-an-end","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=67760","title":{"rendered":"The Fed\u2019s Game of \u201cMake Believe\u201d Comes to an End"},"content":{"rendered":"
\n
\n
\n
\n

The Fed\u2019s Game of \u201cMake Believe\u201d Comes to an End<\/a><\/h3>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n
\n
\n
\n
\"\"<\/div>\n<\/div>\n<\/div>\n<\/div>\n
\n
\n
\n
\n

It\u2019s barely been a year since the 2023 bank crisis in which several large banks, including Silicon Valley Bank and Signature Bank, failed.<\/p>\n

At the time, I wrote that the bank failures weren\u2019t over, and that there would be more<\/u><\/a>.<\/p>\n

But it\u2019s been quiet for most of the last year; the banking system has been pretty calm thanks in large part to an emergency program that the Federal Reserve created to bail out other troubled banks.<\/p>\n

They called it the Bank Term Funding Program (BTFP), and it essentially expired a few weeks ago. In other words, no more emergency lending to troubled banks.<\/p>\n

Barely a month later, we have already witnessed our first casualty: Pennsylvania-based Republic First (not to be confused with First Republic, which failed last year) was shut down by regulators on Friday afternoon.<\/p>\n

Republic First had the same issues as the others that failed last year \u2014 too many \u2018unrealized bond losses\u2019 on their balance sheet.<\/p>\n

Just like Silicon Valley Bank, Signature Bank, etc. last year, Republic First had used their customers\u2019 deposits to buy US Treasury bonds in 2021 and 2022, back when bond prices were at all-time highs.<\/p>\n

By early 2023, the situation had reversed. Bond prices had plummeted; even supposedly \u2018safe\u2019 and \u2018stable\u2019 US Treasury bonds had fallen substantially in price, and banks were sitting on huge losses.<\/p>\n

Remember that bond prices fall when interest rates rise. So when the Fed jacked up interest rates from 0% to 5% in an attempt to control inflation, they were simultaneously creating huge losses in the bond market\u2026 which also meant huge losses for banks.<\/p>\n

Silicon Valley Bank was just the tip of the iceberg. Plenty of other banks (including Bank of America) had racked up enormous bond losses. In fact the total unrealized losses in the banking sector last year amounted to a whopping $620 billion.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Fed\u2019s Game of \u201cMake Believe\u201d Comes to an End It\u2019s barely been a year since the 2023 bank crisis in which several large banks, including Silicon Valley Bank and Signature Bank, failed. At the time, I wrote that the bank failures weren\u2019t over, and that there would be more. But it\u2019s been quiet for […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[15380,34441,5038,34440,303,34439,34442,3650],"class_list":["post-67760","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-crisis","tag-bank-term-funding-program","tag-banking-industry","tag-btfp","tag-fed","tag-james-hickman","tag-schiff-sovereign","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/67760","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=67760"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/67760\/revisions"}],"predecessor-version":[{"id":67761,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/67760\/revisions\/67761"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=67760"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=67760"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=67760"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}