/biz/ - Business & Finance

[Anonymous No.54054061]

>banks are failing
I'm financially illiterate. What does this mean?

Will the banks not have enough cash on hand to give everybody the physical equivalent of the amount of money they have in their accounts?

Why are banks "failing"?
What does this mean?

[Anonymous No.54054361]

>be bank
>customer gives you deposit
>you "hold on" to that money for them
>in actuality, you go out and invest/loan out that money, since the depositor isn't using it, and maybe share some of the interest with them
>since you're a bank, you know you can't go into risky or long-term positions in case the customer wants their money back, so you stick with relatively short term loans, particularly those to the federal government
>early last year
>interest rates get up to around 2.5%
>think this is an excellent deal that isn't going to be topped anytime soon, so excellent in fact that you will dump all of your money into assets yielding this amount
>interest rates keep rising all the way to 5%
>no biggie, you can just wait for the bonds you bought to mature and you won't have lost anything
>while you're waiting, customer demands to withdraw his money
>now you have to sell some of your bonds
>nobody wants to buy them because they can just take their money elsewhere and get a 5% return instead
>bank has to sell bonds at a discount/loss to raise funds to pay withdrawal
>bank reports in its SEC filings that it lost a fair bit of money from having to do this
>everyone who has deposits in the bank sees this, gets scared, and demands their money back at the same time
>bank can't pay them out because they can't liquidate their assets fast enough, nor would they have enough money leftover even if they could due to having to sell them at a loss
>bank has failed and the Feds take it over, led by FDIC
>FDIC lets accounts below $250k access their money, but everyone above that is not going to be able to immediately access all of their money and will probably permanently lose some portion of it in the long run
>most of the accounts above $250k are businesses, which could easily fail as a result
>these businesses failing, along with consumers worried about their funds, cause increased demand for withdrawals at other banks
>big bank run starts

[Anonymous No.54054391]

>>54054061
unironically watch The Plain Bagel. He just did a video on it today. Not that I really super get it either, I kinda half-listened. But he's a great resource.

[Anonymous No.54054446]

>>54054361
Great summary, anon.

[Anonymous No.54054461]

>>54054061
The banks aren't failing, they have incredibly healthy portfolios.
>>54054361
>Bro, they have no cash bro
>Ignore the fact the failing banks had Oligarchs try to withdraw hundreds of billions, same day, with no notice ahead of time to the bank. Preventing the bank from properly preparing massive withdrawals.
Absolute state of the posting here

[Anonymous No.54054767]

>>54054461
>Oligarchs try to withdraw hundreds of billions
>all on the same day
anon, plz

[Anonymous No.54054933]

Banks are failed from the minute they loan out deposits instead of just holding onto them like they're supposed to