The Blubber

Per Andrew Lokenauth on Twitter

It was recently reported that in the third quarter of 2022, 722 banks had amassed massive unrealized losses over 50% of their capital, per Bitcoin.com. This could result in a hindrance to the bank's ability to meet potential unexpected liquidity needs.

Lokenauth, a reporter with 15 years in finance who had his words published in Forbes, Nasdaq, and TIME, shared the reason behind why banks had amassed this high of unrealized losses. It was explained that when interest rates were near zero, the financial institutions sought to purchase many bonds and Treasuries.

Because of this, the banks were affected, and the value of those bonds declined as the Federal Reserve raised rates in an attempt to fight against inflation. Lokenauth explained that older bonds with lower rates lose value as rising interest rates attract more newly issued bonds.

Lokenauth: "FDIC Chairman Martin Gruenberg has said that the current interest rate environment has had significant effects on banks' profitability and risk profiles."

The Fed also added that 31 of the banks out of the 722 listed were at a point of "negative tangible equity," which prevents them from being able to use the Federal Home Loan Banks to borrow money. They are also at risk of no longer being capable of selling loans to "Government Sponsored Enterprises."

Recently, Powell finally acknowledged that it was possible that a "mild recession" could happen. This comes after the Fed hiked rates by another 25 BPS.

The Fed had also repeated that the US banking system remained sound and resilient.

Powell: "A decision on a pause was not made today."

Senator John Kennedy recently called banks "sophisticated ponzi schemes." Some examples of this include First Citizen Bank, the buyer of Silicon Valley Bank's assets, was run by a billionaire North Carolina family that has already bought over 20 failed banks since 2008.

See flow at unusualwhales.com/flow.

Other News:

• "It's possible we'll have what I hope will be a mild recession," Powell said
• Senator John Kennedy: "Banks are just ... sophisticated ponzi schemes

Resources:

@FluentInFrance on Twitter

Bitcoin.com