If the U.S. was to experience a widespread bank run, that would be the time for the Federal Reserve to expand the money supply, thereby providing liquidity to commercial banks such that they may meet depositor withdrawals. Thus far SVIB and SBNY have been closed by the FDIC. Apparently that was too much for Fed Chair Powell to stomach.

• New Fed Facility (i.e. “Bail Out). “Eligible” banks may now borrow from a new Fed facility should they require additional liquidity to meet depositor withdrawals. Read about the Fed’s new lending facility HERE. Read the joint statement by the Fed, the Treasury and the FDIC HERE.
• So much for Management accountability. I would prefer that more banks be forced to generate liquidity by selling assets (typically fixed income securities), even if at steep losses. Our guess is that the Fed is being over-cautious. As a result, banks who could survive on their own won’t have to suffer the humility of dumping under-water bonds to generate liquidity. It reminds me of when the Fed lended capital to Apple (AAPL), during the pandemic. What a joke. No wonder America’s C-Suites have been corrupted by moral hazard when the Fed is so quick to lend a cheap, helping hand.
• Shame on SVIB and SBNY for not managing balance sheets with more liquidity. These banks and many others push our fractional reserve banking system to the limit in an effort to maximize growth while not paying attention to portfolio risk. Allow these banks to pay the consequences in the market. Instead, the Fed is back in the money printing game.
• This Fed and this Treasury and this Congress and this President are not serious about getting inflation or public debt under control. It will never happen. Not until the U.S. Dollar is worth zero. Until then, this corporate / fiscal / monetary socialism will continue to plague markets, our economy and our social fabric at large.

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