The banks have piles of unrealized losses on treasury debt that they are not required to mark to market. So, we only find out how bad a bank’s balance sheet is after it blows up. From Charts and Parts substack at zerohedge.com:
Intro
Spoiler alert: we have another red flag in the treasury market.
The latest talk is to eliminate treasury holdings from the SLR (Supplemental Liquidity Ratio) calculation, which is used to determine how much banks need to set-aside to help “manage risk”.
The Covid crisis brought about market chaos. To manage the steep and fast decline, The Fed jumped into action and cut rates to zero and birthed QE infinity. They also eliminated the banks’ reserve requirements. The rule sounds just like it reads: banks no longer had to hold any reserves against deposit liabilities. We already know there is nothing more permanent than a temporary government program, so this reckless policy still exists today.
We’ll remind our readers that we try to over-simply to make a point. The system and web of rules are extremely complex, especially when it comes to the plumbing of the treasury market.
Another handout occurred last year when we witnessed more bank failures than the 2008 GFC (Great Financial Crisis). The big accommodative move to save the system was to allow banks to mark their (treasury) bond portfolio at “par” (100%), to avoid taking portfolio losses. This was timely and convenient, as the TLT (Treasury Bond ETF) lost roughly 30% in 2022. As a result of the 2022 bond market route (worst ever), the system is stuck with a pile of losses on the books.
When the enemedia was on about comrade commissar Mayorkas of Das Heimat Schutze getting the peach mints it said something about a bad day on Wall Street.
I’m sure the feckless loser poser quislings of the Grand Old Politburo will snatch defeat from the jaws of victory.
But, but, but, Brandon’s lasers fixed comony?
Can’t the mean young Ratched yass kween statue staring down the bull make it you go gurl?
Printing press go brrr also burns it all down better and you don’t vote your way out of coop de tattoo (/s) as the esteemed capital police comrade said under oath.
Some are a little more equal in the coop.
Two legs baaaad!