FDIC Insurance, Credit Suisse and the Day the Fed Killed Europe, by Tom Luongo

A contrary prediction from Tom Luongo: the Fed will keep raising rates. From Luongo at tomluongo.me:

So, Credit Suisse is no more. Good riddance? I think this is an open question given the very complicated landscape of the global banking system today. By the time I’m done here I think you’ll have an answer that no one, including me, was expecting.

There’s a lot to cover, so let’s start at the beginning.

In the wake of the “three-fer” take out of Silvergate, Silicon Valley and Signature banks by the ‘market’ I think we have a pretty clear picture of what’s really going on.

This wasn’t a ‘market’ operation. It was a Fed/NY Boys operation and a very successful one.

The Fed (and only the Fed through its proxies) had the motive, means and opportunity to perform the hit job. I wrote a big post for my patrons on March 11th (now made public) going over this.

These Three S’s were all operating as offshore Shadow banks. As Phil Gibson pointed out on his most recent Substack article:

SVB ultimately runs its funding the way Startup funding does:  

  • A person with $1b comes in and puts $1b into SVB. They go out to a startup and sign a term sheet. This sheet says that the startup will deposit its money in SVB.
  • Then SVB goes out and loans that $1b out to another VC. Who ‘invests’ it in another startup, who’s term sheet says they will keep their deposits in SVB.
  • So now SVB has take $1b dollars and made it $2b dollars. Without any fed regulation or intervention.

To which I would add the deposits coming back in were then invested in long-dated US Treasuries and marked as ‘hold to maturity.’ This meant they couldn’t be sold. This was a good deal as long as the short-end of the yield curve stayed at the zero-bound, or at least below that of the long-end.

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