Why Is the Federal Reserve Provoking a Financial Crisis?

Timestamps

1:23 - Global risk posed by U.S. banking system
2:30 - Repo crisis preceded PANDEMIC!!!
3:32 - WEF’s tote board of risk narratives
4:05 - F.D.I.C. Quarterly Banking Profile (3Q2022): real risk of banking crisis
5:26 - Chart 7 of Quarterly Banking Profile - massive balance sheet losses
8:41 - Why debt-based securities dropped in value by $690 billion
11:40 - Composite balance sheet (entire industry) in Quarterly Banking Profile
14:33 - Why assets on banks’ balance sheet are vastly over-valued
17:12 - That entire banking industry is dead broke, evident from composite liabilities
20:10 - Banks’ counter-measures to their insolvency
21:32 - FHLB advances: panic borrowing
24:57 - Repo market: more panic borrowing
26:54 - FRED’s tale of three crises
35:23 - Role of FHLB advances in last three crises
39:52 - Panic borrowing now - Fed fanning flames of new crisis
41:25 - New era has dawned: Snake Eating Its Own Tail

This video builds on and extends the explosive (but largely overlooked AFAIK) analysis done by Chris Whalen, “Is JPMorgan Chase Insolvent?” While Whalen is imo the best independent bank analyst in the business, he doesn’t have a crystal ball. (At least I couldn’t find one when I ransacked his home many moons ago.) He put out that post, which is nominally about Dimon’s bank but covers the entire banking industry, on Monday, November 28, 2022. He thus didn’t have access to the F.D.I.C.’s Quarterly Banking Profile for the 3rd quarter of 2022, which came out three days later. Whalen’s analysis focused on the dubious valuations of bank assets, which is certainly germane as far as they go and are discussed in greater detail in this video.

The real action in the third quarter QBP, though, is on the liability side of the industry’s balance sheet. There we find evidence that aside from being broke, the banks know they’re broke and are panicking about it.

But here’s the real kicker: the Fed isn’t helping the banks this go-round. It’s a new ballgame, and it goes by the name ALL. BAD.

You can find more detailed written treatments of this video and others I’ve done at my substack: https://bestevidence.substack.com/

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Links

Chris Whalen’s November 2022 (in)solvency assessment of banking industry:
https://www.theinstitutionalriskanalyst.com/post/is-jpmorgan-chase-insolvent

World Economic Forum’s 98-page global risk assessment (2023 edition):
https://www3.weforum.org/docs/WEF_Global_Risks_Report_2023.pdf

F.D.I.C. Quarterly Banking Profile:
https://www.fdic.gov/analysis/quarterly-banking-profile/index.html

Basel III regulations - Definition of capital excludes goodwill:
https://www.bis.org/basel_framework/chapter/CAP/30.htm

New York Fed’s take on Federal Home Loan Board (FHLB) during GFC:
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr357.pdf

Uncle FREDdie:
https://fred.stlouisfed.org/

Mish Shedlock’s post on exploding interest payments on U.S. debt (Feb. 5, 2023):
https://mishtalk.com/economics/the-annual-interest-rate-payment-on-government-debt-is-850-billion-and-rising-fast