Glenview Trust

Mar 26, 2023

I write about investing, markets and Berkshire Hathaway. Got it! Depositers gather outside the closed doors of the American Union Bank in New York City, Aug. 5, ... [+] 1931. It is one of the smaller city banks which experienced a depreciation of their assets and were closed by order of the state superintendent of banks. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Silicon Valley Bank’s (SIVB ) sudden collapse and seizure by the FDIC on March 10 sent shockwaves through the financial markets and eroded confidence in other banks. While a thorough analysis shows U.S. banks to be solvent overall, the concern about banks has spread globally. The challenge of analyzing bank safety is that a severe loss of confidence can actually cause an otherwise functioning financial institution to collapse. Thus, it is crucial to monitor the health of the banks with as high-frequency data as possible. The most accessible and frequent data is bank stock prices. Bank stocks have been particularly hard hit, with the KBW Bank index down about 22% year-to-date. The relatively good news is that bank prices have remained around the crisis lows and have not plunged further. In addition, the broad market has rebounded, which signals less concern about a financial crisis infecting other sectors. Unfortunately, stock prices are very fickle and can reflect emotion rather than facts in the short term. Aside from the government money market mutual funds asset flows, all the following bank data come from the Federal Reserve’s H.4.1 and H.8 weekly reports, released on Thursday and Friday, respectively. Bank Stocks Glenview Trust, Bloomberg A straightforward way to see the severe stress in the U.S. banking system is the magnitude of bank borrowings from the Federal Reserve via the discount window . Borrowing from the discount window is generally avoided by banks, but the facility can provide emergency liquidity. While the amount borrowed from the discount window has declined from the highs, it remains only slightly below the highest level registered during the Global Financial Crisis. U.S. Banks: Discount Window Borrowings Glenview Trust, Bloomberg, Federal Reserve MORE FOR YOU However, just looking at the discount window understates the support currently provided to the U.S. banking system. Following the collapse of Silicon Valley Bank, the Federal Reserve announced a new facility to help banks meet withdrawal requests from depositors and restore confidence. The Bank Term Funding Program (BTFP) allows banks to borrow up the face value of any government bonds held in the bank’s portfolio at a very reasonable rate. The Paycheck Protection Program (PPP) facility was created in 2020 to provide support during the pandemic. The other credit is the support of the bridge banks , operated by the Federal Deposit Insurance Corporation (FDIC) until they can be sold or liquidated. Total Federal Reserve Bank Lending Facilities Glenview Trust, Bloomberg, Federal Reserve With the seizure of Silicon Valley Bank and Signature Bank, discount window and bridge bank credit usage soared. Last week, the use of the Fed bank facilities was driven by the bridge banks. The decline in discount window borrowing was likely a shift in borrowing to the BTFP. Overall, this relatively modest increase in Fed bank lending bodes well that the severe impact of the banking crisis has not spread far beyond the banks already on our radar, including First Republic Bank