Bank Failure Fears Return as the FED accelerates Repos !!

A bank failure occurs when a bank is unable to meet its obligations to its depositors or other creditors because it has become insolvent or too illiquid to meet its liabilities.More specifically, a bank usually fails economically when the market value of its assets declines to a value that is less than the market value of its liabilities. The insolvent bank either borrows from other solvent banks or sells its assets at a lower price than its market value to generate liquid money to pay its depositors on demand. The inability of the solvent banks to lend liquid money to the insolvent bank creates a bank panic among the depositors as more depositors try to take out cash deposits from the bank. As such, the bank is unable to fulfill the demands of all of its depositors on time. Also, a bank may be taken over by the regulating government agency if Shareholders Equity (i.e capital ratios) are below the regulatory minimum. The failure of a bank is generally considered to be of more importance than the failure of other types of business firms because of the interconnectedness and fragility of banking institutions. Research has shown that the market value of customers of the failed banks is adversely affected at the date of the failure announcements. It is often feared that the spill over effects of a failure of one bank can quickly spread throughout the economy and possibly result in the failure of other banks, whether or not those banks were solvent at the time as the marginal depositors try to take out cash deposits from these banks to avoid from suffering losses. Thereby, the spill over effect of bank panic or systemic risk has a multiplier effect on all banks and financial institutions leading to a greater effect of bank failure in the economy. Welcome to The Atlantis Report . Last week’s failure in the US repo market might have had something to do with Deutsche Bank’s disposal of its prime brokerage to BNP, bringing an unwelcome spotlight to the troubled bank and other foreign banks with prime brokerages in America. There are also worrying similarities between Germany’s Deutsche Bank today and Austria’s Credit-Anstalt in 1931, only the scale is far larger and additionally includes derivatives with a gross value of $50 trillion. If the repo problem spreads, it could also raise questions over the synthetic ETF industry, whose cash and deposits may face escalating counter party risks in some of the large banks and their prime brokerages. Managers of synthetic ETFs should be urgently re-evaluating their contractual relationships. Whoever the repo failure involved, it is likely to prove a watershed moment, causing US bankers to more widely consider their exposure to counterparty risk and risky loans, particularly leveraged loans and their collateralised form in CLOs. The deterioration in global trade prospects, as well as the US economic outlook and the likelihood that reducing dollar interest rates to the zero bound will prove insufficient to reverse a decline, will take on a new relevance to their decisions. It would be far better to merge Commerz Bank and Deutsche Bank or Wells and JP Morgan before another Lehman moment . because it is coming not because I say so but because of internal pressures within these organizations. If they are merged all the bad paper can be rationalized as we say based on a far stronger profits picture. These banking companies are almost entirely personnel and real estate expenses with vast service duplication. As automation eliminated about 98% of all farm direct labor it is now moving through manufacturing and services as you well know. Until about 2000 the story was : everyone will get a great professional service job especially if you had a degree. This was very much focused on Banking and Finance, Education K-PhD, Healthcare manager, and similar. Being largely dependent on the real economy the Banks simply cannot pay their expenses, pensions, new hires at inflation indexed wages while held to razor thin margins. Wells Fargo should be merged with JP Morgan and Wells obliterated over the next 3 years with most of their locations closed and, perhaps, 80 % of their employees released. These small companies are used as "Jobs Projects" for unemployable spoiled children with worthless degrees and these enormous inventories of heads are breaking the companies on costs. student loan and car defaults don't seem to matter much, and neither do business closings and rising unemployment so if it's not America then it must be Europe and probably Deutsche Bank . So they can keep this up for nearly forever, China trade deal on, off, on, off, on, off. rates up, down. Quantitative Easing coming back, not coming back, coming back, not coming back. You get the idea. Every scenario is accounted for then the wheel is spun bets are laid down, NO MORE BETS is called and then they go to work knowing in advance due to the computers and the magnets and other tech stuff exactly where to stop the wheel at max pain and max fleecing. They can predict what the best outcome is both for maximum mark extraction and psychology so much so the marks start screaming for the Quantitative Easing that's slowly eating the flesh off the real economy. Rinse and repeat until all real value is gone, everyone is broke except an anointed few and then bail and leave the plebes to the commies with AI.










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