Bank heads warn of looming liquidity crisis

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Re: Bank heads warn of looming liquidity crisis

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I noticed the Inverted Yield Curve (2 year to 5 year) went back to normal after the Fed began buying 2 year treasury notes. Prior to the Fed's move, economists were pointing to the inverted curve as a sign of a recession. So, the inverted curve is back to normal thanks to the Fed. Recession averted? I don't think so. 

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Trump supporters will blame Obama, AOC, Hillary, Pelosi ..........

 

I keep putting this stuff out because we can't depend on the bankers to tell us the truth.  2008 didn't actually happen in 2008, it started in 2007, it took the bankers a full year to admit they had a problem.

 

The same thing could be happening now.

 

Apparently people in positions of power and authority didn't learn from the last finical crisis or they just don't care.

 

Hope for the best, but prepare for the worst. 

 

 

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@gruffstuff wrote:

https://www.axios.com/bank-heads-warn-of-looming-liquidity-crisis-2558aa1c-4494-47d5-940f-a8696bde0c... 

 

Bank heads warn of looming liquidity crisis

 

 

A growing number of market analysts are voicing concerns that the repo market shock in September may have been the first signal of a wide-ranging liquidity shortage, and now those warnings are being echoed by the heads of major banks.

 

The state of play: "Despite the fact that bank balance sheets are quite strong, I think you’ll see more moments like this going forward," Ron O'Hanley, president and CEO of State Street, said during the Institute of International Finance's annual membership meeting on Saturday.

 

What's happening: Even with the Fed's commitment to pump $60 billion a month into financial markets, there still may not be enough funding because of regulations, changes to market structure, and banks' desire to keep their reserve levels high.

 

  • Strategist from JPMorgan, Goldman Sachs and Bank of America sent recent notes also warning of the funding issues.
  •  
  • Additionally, the increase of passive investments and major flows from pension funds and large asset managers into private equity funds is drying out typical sources of liquidity to the stock market and could mean major outflows in the face of bad news.
  •  

What they're saying: Brian Porter, president and CEO of Scotiabank, said he also is worried about the health of the so-called shadow banking sector — firms that are not banks but lend money to consumers for things like auto loans or home mortgages and aren't subject to the same regulations.

 

The shadow banking sector is largely private and little is known about how much money the insurance companies, hedge funds, private equity funds and payday lenders that make up the industry actually have.

 

  • "Regulators have been very successful in distributing risk," O'Hanley said. "It’s now been very much deconcentrated. But it hasn’t gone away; it’s been moved."
  •  

Don't sleep: IIF president and CEO Tim Adams likened it to the market for mortgage-backed securities before the housing bubble burst in 2007, triggering the global financial crisis.

 

  • "We used to make the same case on securitization of mortgages — that we could slice them and dice them and we distribute risk globally and it was a safer system because it was distributed," Adams said.
  •  
  • "We found out that wasn’t necessarily the case."

 

https://fortune.com/2019/09/26/the-feds-repo-market-bailout-is-a-sign-of-deeper-problems-that-are-ge... 

 

The Fed’s Repo Market Bailout Is a Sign of Deeper Problems—That Are Getting Worse Over Time

 

The repurchase, or repo, market is the grease gun that keeps financial markets lubricated, by banks and companies temporarily trading bonds for cash and then redeeming them, usually overnight. And it once worked smoothly.

 

Last week it hit a liquidity pothole, with a big cash shortage. The Federal Reserve swooped in with an immediate temporary $75 billion liquidity injection. According to Bank of America estimates, the Fed will need to undertake a further $400 billion bailout by purchasing bonds from the banks over the next year. The term for the latter action is quantitative easing (QE) and it looked like a minor replay of the global financial crisis. The irony? Banks together had more than $1.3 trillion in extra cash sitting with the Fed and earning interest—far more than the roughly $75 billion the Fed immediately pushed into the markets or even the entire $400 billion the rescue is estimated to run in its first year.

 

According to experts who spoke with Fortune, the bailout is a sign of something seriously wrong.

 

There are issues with big banks, the Fed, and regulatory oversight. Until addressed, future liquidity crises seem increasingly likely, which could slow or even shut down lending, undercutting the economy.

 

https://www.wsj.com/articles/fed-adds-87-7-billion-to-financial-system-in-latest-repo-transactions-1... 

 

Fed Adds $87.7 Billion To Financial System in Latest Repo Transactions

 

https://www.cnbc.com/2019/10/22/fed-repo-worries-continue-over-the-efforts-to-fix-funding-issues.htm... 

 

Worries grow over the Fed’s efforts to fix funding issues: ‘This is all likely to get much worse’

Trump supporters will blame Obama, AOC, Hillary, Pelosi ..........


"The only thing man learns from history is man learns nothing from history"
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Shadow banking is a blanket term to describe financial activities that take place among non-bank financial institutions outside the scope of federal regulators. ... Non-bank lenders, such as Quicken Loans, account for an increasing share of mortgages in the United States.

 

I point this out because I know a couple of people who took out mortgages through Quicken Loans. Neither seemed qualified to take out a mortgage that size. It's just a thought.

 

But as far as The Fed Pumping $60 - $75 billion to save the Repo Market - I posted a video here. It was by Kim Iverson. Since then, she posted another video on this topic. She thinks the Repo Market is something to be concerned about.

 

Here's her 2nd video on this topic which she posted on Youtube about a month ago...

 


 

 

 

 

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Elect those that will put regulations back in place for our banks, financial institutions and Wall Street. Almost none of them are Republicans. Bernie and Elizabeth Warren.


"The only thing man learns from history is man learns nothing from history"
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Terrifying article to anyone who thinks we should avoid ANOTHER Republican created and caused financial market meltdown like we had in 2007-2008.

 

To summarize: There are hundreds of lending "institutions" the Republicans prevented from being regulated.

 

These institutions have continued to make the predatory loans that caused the jrbush financial disaster. The victims of these loans are the bottom 80% who cannot qualify for a loan from a REGULATED lender.

 

The borrowers cannot get reasonable loans because Republican Corporate Oligarchs and unscrupulous bosses have not raised their workers real pay since 1970.

 

The predatory lenders do not hold the loans, but sell them as "derivatives" and clones of the Mortgage Backed Securities, both of which Republicans prevented from being regulated and which destroyed the financial markets in 2007.

 

The value(sic) of these derivatives and MBS is totally dependant on the borrowers ability to repay the loan. Because the loans carry much higher interest (Payday Loans charge 400%, legal thanks entirely to GOPer legislation) and the item being purchased (used cars, homes) are sold to the lender at hugely inflated prices, the default rate is already beginning to climb towd the levels that destroyed the WORLD financial system just a decade ago.

 

Yet ANOTHER reason Republicans can no longer be allowed to hold elected office. they will gleefully destroy our Nation for their personal profit.

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Bank heads warn of looming liquidity crisis

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https://www.axios.com/bank-heads-warn-of-looming-liquidity-crisis-2558aa1c-4494-47d5-940f-a8696bde0c... 

 

Bank heads warn of looming liquidity crisis

 

 

A growing number of market analysts are voicing concerns that the repo market shock in September may have been the first signal of a wide-ranging liquidity shortage, and now those warnings are being echoed by the heads of major banks.

 

The state of play: "Despite the fact that bank balance sheets are quite strong, I think you’ll see more moments like this going forward," Ron O'Hanley, president and CEO of State Street, said during the Institute of International Finance's annual membership meeting on Saturday.

 

What's happening: Even with the Fed's commitment to pump $60 billion a month into financial markets, there still may not be enough funding because of regulations, changes to market structure, and banks' desire to keep their reserve levels high.

 

  • Strategist from JPMorgan, Goldman Sachs and Bank of America sent recent notes also warning of the funding issues.
  •  
  • Additionally, the increase of passive investments and major flows from pension funds and large asset managers into private equity funds is drying out typical sources of liquidity to the stock market and could mean major outflows in the face of bad news.
  •  

What they're saying: Brian Porter, president and CEO of Scotiabank, said he also is worried about the health of the so-called shadow banking sector — firms that are not banks but lend money to consumers for things like auto loans or home mortgages and aren't subject to the same regulations.

 

The shadow banking sector is largely private and little is known about how much money the insurance companies, hedge funds, private equity funds and payday lenders that make up the industry actually have.

 

  • "Regulators have been very successful in distributing risk," O'Hanley said. "It’s now been very much deconcentrated. But it hasn’t gone away; it’s been moved."
  •  

Don't sleep: IIF president and CEO Tim Adams likened it to the market for mortgage-backed securities before the housing bubble burst in 2007, triggering the global financial crisis.

 

  • "We used to make the same case on securitization of mortgages — that we could slice them and dice them and we distribute risk globally and it was a safer system because it was distributed," Adams said.
  •  
  • "We found out that wasn’t necessarily the case."

 

https://fortune.com/2019/09/26/the-feds-repo-market-bailout-is-a-sign-of-deeper-problems-that-are-ge... 

 

The Fed’s Repo Market Bailout Is a Sign of Deeper Problems—That Are Getting Worse Over Time

 

The repurchase, or repo, market is the grease gun that keeps financial markets lubricated, by banks and companies temporarily trading bonds for cash and then redeeming them, usually overnight. And it once worked smoothly.

 

Last week it hit a liquidity pothole, with a big cash shortage. The Federal Reserve swooped in with an immediate temporary $75 billion liquidity injection. According to Bank of America estimates, the Fed will need to undertake a further $400 billion bailout by purchasing bonds from the banks over the next year. The term for the latter action is quantitative easing (QE) and it looked like a minor replay of the global financial crisis. The irony? Banks together had more than $1.3 trillion in extra cash sitting with the Fed and earning interest—far more than the roughly $75 billion the Fed immediately pushed into the markets or even the entire $400 billion the rescue is estimated to run in its first year.

 

According to experts who spoke with Fortune, the bailout is a sign of something seriously wrong.

 

There are issues with big banks, the Fed, and regulatory oversight. Until addressed, future liquidity crises seem increasingly likely, which could slow or even shut down lending, undercutting the economy.

 

https://www.wsj.com/articles/fed-adds-87-7-billion-to-financial-system-in-latest-repo-transactions-1... 

 

Fed Adds $87.7 Billion To Financial System in Latest Repo Transactions

 

https://www.cnbc.com/2019/10/22/fed-repo-worries-continue-over-the-efforts-to-fix-funding-issues.htm... 

 

Worries grow over the Fed’s efforts to fix funding issues: ‘This is all likely to get much worse’
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