Currently there are 3 banks* which have been seized in the US; all small-ish. Rumblings of Credit Suisse (which is not small-ish) also being on the ropes are starting to emerge.
Is the banking crisis contained?
If a larger banking contagion becomes evident in 2023 with two or more big failures or five or more (more) regional failures or some equivalent combination thereof (1 and 3, say) then this question will resolve "no". If January 1st 2024 comes around without a cascade of failures then "yes".
I'll be refraining from betting in here, since this is a slightly fuzzy resolution.
*: SVB, Silvergate, Signature
A bailout counts as half of a failure/seizure for these purposes, so we currently have 1/2 of a major failure from the CS bailout
Reuters is reporting that First Republic Bank also got bailed out over the weekend, which was before the question was formed and thus doesn't contribute to the totals if accurate.
https://www.reuters.com/business/finance/first-republic-spoke-private-equity-before-securing-financing-sources-2023-03-15/
My news feed is mostly doom & gloom. I'm curious: do "yes" votes have any pieces they'd like to share?
@NickAllen The Fed is stepping in to ensure that even the non-FDIC insured deposits held in SVB are being made whole. The whole reason they're doing that is to quell bank collapse fears.
Banks collapse because people pull their money out en mass. They only do this if they think bankruptcy is both a near term possibility, and that bankruptcy means they won't get their money back.
@jonsimon the 'bank run' contagion is one mechanism and the Fed's hitting it hard, although overseas banks are included in this question. Other mechanisms include liquidity crises (also something the Fed can address nationally) and the lowered value of bank assets due to rising rates (addressable with YCC but I haven't seen any signs of that).
The question isn't whether the Fed has the tools to handle the crisis if they choose to use them, it's if the crisis is contained, and I've been surprised to see the equilibrium level, so I was wondering if there are arguments out there for why these banks are the only ones with bad balance sheets/risk management.
Some number of widespread bailouts will also indicate that the banking contagion is not contained; Credit Suisse counts as one major bailout; I'll need to think a bit about how bailouts should compare to actual failures. My initial thought is that a bailout is around 50% of a failure, since it's not really clear whether the failure would have occurred. Anyone who cares to can weigh in and I'll clarify shortly.
Bailout count:
1 major out of ??
Failure/Seizure count:
0 since the question was formulated.
https://www.zerohedge.com/markets/credit-suisse-sparks-global-de-risking-after-top-investor-bails
Does the regional bank failure count include the failures that have already happened? So is that failure count already at 3? i.e. only 2 more failures required to get to 5?
@jonsimon No, not including the 3 listed in the text. Looking for 5 more regional, 2 major, or 3 regional and a major.
Correction: Silvergate is shutting down/liquidating without a seizure, as far as I can tell.
https://www.cnbc.com/2023/03/08/silvergate-shutting-down-operations-and-liquidating-bank.html
Shutdowns/liquidations will count towards the crisis totals.
