"Magic Money" for SVB Bailout Comes From You, Of Course

The Federal Reserve, Treasury, and FDIC made a joint announcement yesterday; they will backstop all the deposits at SVB (and Signature Bank, a bitcoin outfit they shut down yesterday.)

How?

Magic Money!

Who benefits?  NOT YOU!

Here's the operative text:

 

   ...The financing will be made available through the creation of a new Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral.  These assets will be valued at par.  The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress....

Two items to note, both highlighted in red:

1)  Valued at par.  In other words, the Government (that's YOU, sucker) will be paying the banks more than the bond is worth today, although it's 'even money' after several-to-thirty years.  Also interesting:  only a one-year loan?  What about the rest of the term of the underlying bond?

2)  Mortgage-backed securities (MBS).  Mortgages of near-empty retail-laden shopping centers?  Mostly-vacant office buildings?  Or good old-fashioned home loans?  There's a big difference in credit quality.

Now, then.  Why are YOU going to pay?  Because Biden, the Federal Reserve, and FDIC are throwing more "magic money" into the breach.  Can you spell I-N-F-L-A-T-I-O-N?  The announcement also yammers about 'additional assessments on banks' to fund FDIC's donation.  Who pays for those?  Not the bankers, pal.

They're spreading a lot of foo-foo dust into the air here.  Why?

Because the real beneficiaries here are the big-money venture capitalists in California and New York such as Bill Ackman and Peter Thiel (who actually lit the fuse on the dynamite that blew up SVB), and Mark Cuban.  They're telling you that they're worried about the little guys who won't get paid (true) and the suppliers to the ventures they're funding who won't get paid (true.)

Do you see any of them stepping up with a billion or two of their own money for those 'little guys'?

I didn't think so.

Some traders are saying that it's greed and avarice which caused the SVB problem.

Can't say that they're wrong.

Ticker has more to say.  He's kinda hot under the collar.