Submitted by megaultraman t3_126ac40 in wallstreetbets
megaultraman OP t1_jea64j6 wrote
Reply to comment by dwinps in Subprime is back on the menu boys! by megaultraman
Yeah where'd they get that $70 billion that was withdrawn? They just had it lying around? Or they borrowed it at 5% from the Fed against their underwater treasuries?
dwinps t1_jea7mx7 wrote
Supposedly $70B
$30B from new deposits, they also had cash and other assets
They earn interest on their $160B loan portfolio as well
megaultraman OP t1_jeaelmd wrote
That $30 billion was just a token vote of confidence and only has a lifespan of 3 months. But maybe JPM et al will loan them $30 billion at rock bottom rates indefinitely, but I doubt it. Then it's back to the discount window for them.
So they are going to blow through all their cash and sell their loans at a loss when they can just borrow the damn money and use that to make money instead? I don't hear about anybody liquidating assets to pay back the Fed, do you?
dwinps t1_jeaxxxq wrote
Who knows if FRB is going to make it, not me, but asserting that they need to be able to loan at 5% over what they are paying depositors is nonsensical
As for hearing about them liquidating, no they definitely don't give me a call and tell me if they do.
Simkinn1 t1_jeac1mx wrote
The fed borrow rate is a yearly rate. It’s not an upfront rate. If they hold it for a month or two they don’t owe the fed 5%. You need to learn how interest on loans work.
megaultraman OP t1_jeadp7y wrote
My man, in order to not pay interest they need to pay back the principal. So where are they getting this $70 billion to pay back those loans in two months?! Sell their treasuries at a loss that is a lot greater than 5%? You need to learn how balance sheets work.
Simkinn1 t1_jeag7r8 wrote
You need to know that banks don’t only hold bonds, they also hold loans that are paid back monthly etc. seems like you read a few headlines and think you gonna be able to run a bank now. No pun intended.
megaultraman OP t1_jeaik93 wrote
Yes and that amount, less liabilities, is their profit margin. In total last year, that amount was $5 billion. But they now have $70 billion less in assets! That is what deposits are to a bank: liabilities. Otherwise, where do they get the money to give them their deposits back?
And instead of selling those assets for a massive loss, they borrowed against them! From the Fed. At 5%. So now they have 40% less assets to pay an extra $5 billion dollars in interest payments.
The question then, and the point of this post, is WHERE ARE THEY GETTING THAT MONEY?
Simkinn1 t1_jeb1ndo wrote
My dude you are an alabaster regard.
alphabetasoupa9 t1_jeb5ug2 wrote
Then please explain, because it seems like a valid question to me:
How will banks survive when they're losing depositors, can't offer high enough interest rates to attract and retain depositors, and are having to take loans out against their underwater assets at the Fed funds rate to pay out the depositors who are leaving?
megaultraman OP t1_jeb7hkj wrote
That's all I'm asking.
Optimistbott t1_jeb36nm wrote
But some are paying higher than the rate they get on safe assets including reserves which pay 4.9% (IORB).
Even if it's like credit card debt or safe mortgages or car loans or student loans, the fed's hiking, default risk increases, and that's priced in, but regardless, banks seem to be getting into the weeds a bit.
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