Folks, we've got a lot to discuss: Number one, the Federate hike decision coming tomorrow, and the likely impact. number two: Why the FDIC is now suddenly exploring guaranteeing all 18 trillion in U.S Bank deposits and what that means for the general public and the moral hazard with that number three. Svbs lending to insiders apparently tripled before it failed in addition to bonuses and stock sales. Well, it turns out that Svb's insiders were cashing out like Bandits I'm sure they had no idea their bank would collapse though, right? Uh-huh.

And today's video is sponsored by our 50 off Patty 50 coupon code on zip Trader U which expires tonight. It will get you unlimited access to our step-by-step lessons, private chat, daily morning briefings, and other resources you can learn about. With that link down below. Again, the coupon code expires at midnight tonight.

Okay, so tomorrow Jerome Take your job, take your house, take your bank, and take your wife. Powell comes out with the next Fed rate hike decision Powell will have the momentumous choice of whether to risk further Bank collapses or risk a loss to What's Left of his credibility on this overall all fight on inflation and if you look at the previous six Fomc rate decisions, you can see every single one has resulted in large large moves. This one accelerated a downward move. This one accelerated an upward move.

This one accelerated a downward move. This one accelerated a downward move. This one accelerated a downward move. This one accelerated an upward move.

In other words, every single Fomc meeting has predated a period of outsized moves In the market, and usually it tends to accelerate the trend that the market is already on This time around should be a lot more momentous though, because of the fact that the financial system is breaking and the FED has a lot of opportunity to take note of that and markets are going to be looking at that press conference afterwards and saying okay, well, what is Papa Powell What does Jerome take your bank, Take your wife, kick your dog Powell Thinking and what is the next step And from where we sit right now, markets think this is going to be the last raid hike we're going to get. As of this moment, markets are factored in and 83.4 percent chance of a 25 basis point hike and a 16 chance of no hike at all. But here's where it gets interest stand more intrasante. You see, the current target range is in the 450 to 475 basis point region.

If we do 25 basis points, a 25 basis point hike this week? Well, that puts us in a range of 475 to 5 pundo. But here's the thing. markets are expecting a cut, a cut all the way back down to 425 450, which is even lower than we're at right now by year end. So regardless of what the FED does this week, markets essentially believe the FED is going to play a game of Charades and saving face that will ultimately result in Rapid cutting.

Anyways, in fact, there's a growing consensus that by year end 2024, we are going to be back down around 300 basis points. And honestly, that's probably a little bit too optimistically high of a number. But the fact of the matter is, markets are of nearly unanimous opinion right now that the hiking cycle is just about dead and the truth is, the Fed is already effectively easing. We were talking yesterday about how banks are going to their discount window at a record pace and pulling record liquidity.

The way this works is they give the fed their toxic assets usually bonds as collateral and then the FED gives them cash. This is coming at the same time, where the FED is telling the world its goal is to quantitatively tighten. Quantitatively, tighten means what it means: dump assets it bought during previous Cycles, right? But when the FED is going and taking all these assets from Banks, they're doing effectively the opposite. The fact that the FED is dumping assets on its broader balance sheet, but then having to take on new toxic assets at this discount window is a huge contradiction and shows markets that the FED is having its hands tied behind its back in its overall battle against inflation.

Now, will markets be happy when the FED pivots? well? Unfortunately, it's not that simple if you compare the leading probabilities of various raid hikes during the last month to where the market was trading. Well, we were trading the highest on the ninth when there was a 75 percent chance factored in of a 50 basis point hike, and when inflation was still expected to be very, very stubborn. And then when the banking drama happened, markets dumped and the odds flipped to a pause. and then over the last week or so, the odds switched upwards to about 25 basis points and markets have climbed up a little bit as well.

The conclusion: While markets seem to be more happy to accept a larger rate hike, if it means less banking uncertainty, that's why it was trading higher. even though a higher rate was expected, It seems to me we are in the situation where If the Fed decides to Pivot Now, while markets are going to freak out thinking the crisis may be a lot more bad than it seems If the Fed decides to not even go forward with the 25 basis points. It might just signal to markets that this contagion is so bad that the FED is being forced to lose their credibility on inflation. And why would they be willing to eat it? Why would they be willing to eat poo poo? Well, because, well, because the overall contagion is that bad.

So I don't know folks. it seems like actually a higher rate hike might freak markets out less, but might do a lot more damage in the coming months if they do a really high rate hike tomorrow, all of a sudden people are going to be like oh well I Guess the bacon crisis isn't that bad after all. But the banking crisis is indeed pretty damn bad. So it's very, very plausible that if the FED does go really, really high, it's going to do a lot more damage over the long term next.

So now that Americans are waking up to the fact that the U.S financial system is basically trillions of dollars worth of sloppily guarantee feed ious Well, Regulators are exploring increasing the FDIC limit to well Infinity They say this will just be a temporary or transitory measure, but you know how that goes. We pick up the story today from Zero Hedge U.S Officials are studying ways they might temporarily expand the FDIC coverage to all deposits, a move sought by a coalition of banks arguing that it's needed to heat off a potential financial crisis. Now let me go ahead and remind you that the FDIC Insurance Fund is very, very small. It's like a peanut ensuring a watermelon as is.

But it's much much worse if they try to ensure all deposits. there's roughly 125 billion dollars in the Fdic's deposit Insurance Fund And there's roughly 18 trillion in total deposits, all of which would theoretically need to be insured if they extend out the limits to Infinity, right? So how will 125 billion dollars potentially guarantee 18 trillion dollars? And if you have to boost that? FDIC Insurance Fund Well, where does that money come from? Well, a potential hint from this might be if you read any sort of FDIC sticker at any Bank It says that very very clearly. What backs the FDIC It says the full faith and credit of the US Government, which is fancy language for saying you, you, the taxpayer, you're the one that backs this if everything goes to Scheid who ends up picking up the tab? Yep, Yep, Yep, that's right you. According to Bloomberg One legal framework under discussion for expanding FDIC Insurance would use the Treasury Department's authority to take emergency action and lean on the Exchange Stabilization Fund the same magical exchange stabilization fund which the treasury is already using to backstop its latest Bank bailout facility, the bank term funding program, or Btfp.

So who backstops the FDIC when the FDIC fails? Well, of course, the treasury, the Fed so on, and so forth. Who backstops the treasury? Well, you the taxpayer, or the money printer which again, is still backed off by you, the taxpayer since it's your currency getting destroyed. Meanwhile, in keeping with the tradition of saying the polar opposite of what it is doing, a Treasury spokeswoman said in a statement that quote, due to decisive recent actions, the situation has stabilized, deposit flows are improving, and Americans can have confidence in the safety of their deposits. Oh, they've stabilized, huh? Oh, the people are confident.

they're confident in their deposits. huh? Well, why are they still running on Banks And why is First Republic Banks still hanging on the edge and searching rapidly for a rescue team as I film this video? Well, because guess what people, they aren't so confident in the system. Madame Yellen Angry Bingo Grandma Who said that? We're not going to have a financial crisis ever again in our lifetimes? Well, I Hate to tell you. You know what.

You may be wrong on this one too. This is like the third financial crisis we've had since she said this and it's only Tuesday. Now of course you can make an argument and I would even make an argument that says the FDIC limit should be increased a decent amount just to keep up with inflation, just to keep up with the fact that a lot of companies have huge payrolls that they need those deposits insured so they can pay them out. But there's a huge problem if you haven't unlimited an unlimited FDIC limit.

You see, the thing is limits and uninsured deposits are a source of Market discipline for banks. It means they can't get away with taking insane risks without thinking about the downside without thinking about their customers because at the end of the day, the customers won't be bailed out to raise the limits. then it doesn't matter what they do with the customer deposits, if they lose them all of a sudden, well, the world doesn't matter because the FED is going to bail them out, the FDIC is going to bail them out. The treasury is going to bail them out.

as the Chicago Fed wrote in a paper in 1986. while such proposals might reduce the likelihood of Bank runs, they would at the same time reduce Banks incentives to control risk. And as the House Freedom caucus said this week, any universal guarantee on all Bank deposits, whether implicit or explicit, enshrines A Dangerous precedent that simply encourages future irresponsible Behavior to be paid for by those not involved to follow the rules. The House Freedom Caucus said in a statement, and we are confident that most of the progressive Wing will not be too excited about bailing out billionaires and corporations with orders of magnitude more in the bank than the FDIC limit.

exactly. If the FDIC limits are raised, it's going to create the situation where banks will be encouraged to take on as much risk as possible and if they they fail. While they've always got that insurance backstop which has always got that taxpayer backstop, which means all of us will be paying for risks gone wrong heads I Win when things go right. tails, you lose when things go wrong.

So will Regulators decide to increase the limit to Infinity Let us know your thoughts down below. Next, turns out, in addition to stock sales and bonuses, Svb also gave huge loans to Insiders around 219 million dollars worth before it failed. Bloomberg reports as Silicon Valley Bank deteriorated last year and Regulators began internally flagging flaws in its risk management. The lender opened up the credit spigot to one group.

Insiders loans to officers, directors, and principal shareholders and their related interests more than tripled from the third quarter last year to 219 million dollars in the final three months of 2022. According to government data, that's a record dollar amount of loans issued to insiders going back at least two decades, and this is what that looks like on a chart. So was it a coincidence that the year before a collapse, you saw the bank give more and more loans to insiders? Let us know your thoughts down below: I Don't think it was a mistake I Don't think think it was a coincidence I Think that this was intentional, but hey, just allegedly supposedly right In its most recent proxy statement, Svb Financial Group the parent company of Silicon Valley Bank before its collapse said it made loans last year to related parties, including companies in which certain of our directors or their Affiliated Venture funds are beneficial owners of 10 or more of the equity Securities of such companies. So Svb was essentially lending record loans out to themselves and or companies of which they or Affiliates owned large stakes in.

So think about what that means. Now that Svb has collapsed and all these things have played out, it means they use their customers deposits to fund rescue loans for themselves and then asked for a bailout when things went wrong. Folks, this is why you should know that the best way to rob a bank in 2023 is to own one. And let's not forget the stock sales and bonuses.

The owning a bank and then robbing the bank business has never been so easy. Anyways, folks that caps off today's video very very rough out there, but we're going to keep working through it and we're going to find all the opportunities as they appear and that caps off today's video. Make sure to hit that ravishing like button and subscribe and we will see you in the next one. Make sure to take advantage of that 50 off coupon code on Zipu before it expires tonight and we will see you tomorrow.