For an example of some of the recent tremors I'm seeing, last week, on two separate occasions money that was wired from a bank after closing on financing agreements failed to reach it's destination. It's as if a train scheduled to make a stop at a certain time simply never shows up. It doesn't happen and, when/if it does, it's a big deal.
On one closing, the banker had a syndication partner (participant who agreed to partially fund the loan) under contract after the closing who backed out of funding their portion at the last minute leaving the borrower un-funded and ready to sue the bank. This is not a decision any bank would make unless they had no other choice. This is a tremor; it is a sign that many of the virtual pillars holding up our financial system is showing signs of weakening.
Wires not arriving after all signatures are down is a bad sign. There have been others that have also been ignored. In September of 2019, shortly before the entire world changed there was a massive tremor in the over-nite rate used by big banks, financial institutions and the Fed called the "REPO Market" when the rate for holding money for a single night went to 10%.
Because it didn't result in an "earthquake" then, it was quickly papered over by the creation of even more currency from thin air (more debt) and ignored. Covid and all it's knock-on effects gave plenty of cover to keep issuing more free money so the initial tremor(s) didn't cause any high profile bank failures until SVB. That was another tremor which is still reverberating through the system and causing many pillars to wobble. When things like financial pillars "wobble" that's not good. Kind of like when train tracks "wobble".
"Moody’s Investor Services on Friday issued downgrades for 11 regional investors after the credit agency signaled last month that it was conducting reviews of some banks following the collapse of tech-centric Silicon Valley Bank."
"Why are big banks losing more deposits than small banks?This graphic showing "too-big-too-fail" banks offering no yield has lost its appeal in a world of 120 million active mobile banking apps that can easily access money market funds averaging 4.70% and 5% T-Bills.
Why should any business keep their money at these banks when they can receive 4-5% on money-market funds who buy exclusively short term US Treasury Bonds??
This would be considered normal in a true capitalist system right? Interest rates went higher, now others are offering more and so customers go where they get more, that's life! Only, here's the "thing".
We haven't had anything even close to a normal working financial system in decades. What we actually have is a heavily manipulated, centrally controlled racket where one player at the table gets to make all the rules and print their own chips and any other player who doesn't like it will be excluded from the game entirely and regime-changed if they get uppity and try to start a fair game on their own. The things I'm seeing here inside the private lending industry tell a tale of dislocation and dysfunction at key hubs of financial infrastructure like wires and funding agreements. Fortunately, there is plenty of demand for short term working capital and the direct-lending members of our community are still able and willing to provide cash. The lenders who are dependent on bank lines or hedge fund capital are having some problems due to lines being pared back or cut entirely.
Some deals are getting hammered at closing where months of work and appraisals not to mention fees are at stake but they're still falling apart at the last minute causing huge problems for lenders and borrowers alike.
Many of you will see offers that seem too good to be true - they probably are. Unfortunately, many scam artists are making promises and even committing fraud just to make a commission. It happens, be aware or call me; I'll tell you if it's a good offer or not.
Stick to what you know and call me with any offers you think are either suspect or worthy of further consideration. I always return calls.
"Small businesses comprise 70% of GDP and must be protected at all costs. They must park large sums in the bank to cover payroll to pay their employees and operational costs. Small businesses would come to a standstill and banks would fall like dominoes. Unemployment would spike and the entire economy would plummet. We would see a massive banking crisis if all small businesses went under. More banks will go broke, it is only a matter of time, but it is crucial that deposits are covered."