Silicon Valley Bank

oh my gosh

What is the Federal Reserve going to do?

The Fed overtightened and did so way too fast. And now it's becoming obvious. The Fed Funds rates needs to be somewhere closer to 3-4% but they painted themselves into a corner so now they have to own the policy mistake.
The Fed faces one of its toughest calls in years: whether to raise rates again to fight stubbornly high inflation or take a timeout amid the most intense banking crisis since 2008.
Spread between short and long-dated rates vol shows traders are now more uncertain about near term Fed policy path than they've ever been
Very good piece by Jérôme Legras of Axiom on Credit Suisse mess. It is extraordinary to have a bank collapse because of... sentiment? CS had plenty of capital, plenty of liquidity, no huge blowup. But ultimately, the bank's culture made it uninvestable.
bailout capitalism & its unwitting work on the radical imagination.
One of the big questions for the Federal Reserve this week: just how much will the banking crisis tighten financial conditions, which has been a principle objective of the effort to raise interest rates to combat high inflation
Economists think Fed will keep raising rates despite bank turmoil
‘What were the last 15 years for?’: How Fed bank regulation failed
- “Either the Fed and the Treasury have dramatically overreacted and in the process put public money and public credibility behind very wealthy individuals and companies, which were not legally entitled to that support,” he said. “On the other hand, if they did exactly what we need financial regulators to do, that tells us that our banking system is so woefully fragile that a single medium-sized bank will throw us into a Fed-declared financial crisis.”
- There are many lessons to be drawn from this crisis, but my hope is that ultimately the one that will prevail is this: a bank’s culture is too important to treat it lightly. A bout of market volatility after internal failings or even a banker gone rogue can jeopardise the work of tens of thousands of hard-working people who will feel both betrayed and frowned upon just because they worked in the wrong company. Regulators and investors have done a lot of work on this, but evidently there is still much to do.

What we’ve been looking at isn’t real lol

The labor market is a lie
- Not all job ads are attached to actual jobs, it turns out. The labor market remains robust, with 10.8 million job openings in January, according to the Labor Department. At the same time, companies are feeling budgetary strains and some are pulling back on hiring. Though businesses are keeping job postings up, many roles aren’t being filled, recruiters say.
- 27% reported having job postings up for more than four months. Among those who said they advertised job postings that they weren’t actively trying to fill, close to half said they kept the ads up to give the impression the company was growing, according to Clarify Capital, a small-business-loan provider behind the study. One-third of the managers who said they advertised jobs they weren’t trying to fill said they kept the listings up to placate overworked employees.

They opened up swaps

Coordinated central bank action to enhance the provision of US dollar liquidity
- But the swaps are very low risk to the Fed, as it effectively lends to counterpart central banks to then lend dollars to their own banks (v collateral of their choice).
- The central banks are trying to make sure that foreign central banks (and thus the banks they work with in their jurisdictions) can maintain easy access to dollar funding.
- The Fed's network of standing swap lines is the way the world provides a dollar lender of last resort to global banks at minimal risk to the US taxpayer -- nothing more (and nothing less).