O’Leary describes the potentially explosive problems of “Biden” kneejerk policy having created a “no-risk banking” environment.

Pretty brutal stuff.

And this is what appears to be happening, with “better deals” meaning “merely trying not to see the money disappear” and “elsewhere” translating as the biggest banks on the block (IOW, “too big to fail”).
And so, MORE “magic”:
“Too-Big-To-Fail Banks Flooded With Deposits As Bank Run Drains Small Bank Of Cash”—
https://www.zerohedge.com/markets/too-big-fail-banks-flooded-deposits-bank-run-drains-small-bank-cash
Indeed, as the massive bank run “drains small banks of cash”.
(Fortunately, one can always blame Trump, etc.—and the grotesque media will gleefully parrot 24/7 his responsibility for this catastrophe.)

It would appear then that the battle royale is now shifting to the smaller banks, which according to this report, are hemorrhaging cash…or are about to.
So will “Biden” bail them out too? (Is that even possible?)

In the meantime, voices of calm must tamp down the panic. We don’t want a national panic over bank deposits. Too many people are trying to foment that result. Mostly for political purposes. But imagine how much the Chinese might get involved in such an activity.

Here’s a little different take on the reason for the failure of SVB.

“Everybody knows rising interest rates benefit banks…

Well, almost everybody.

You see, when it comes to banks, the idea of interest can get complicated. That’s because the word itself does double duty for these institutions…

When banks loan out money, interest is an important revenue source. And when banks pay depositors, interest is an important expense.

In the end, “net interest income” is all about profits. It’s just revenue minus expenses.

Like all other companies, a bank’s income and margins expand when its revenue rises faster than its expenses. And the opposite occurs if a bank’s revenue comes in below its expenses.

When interest rates rise, interest revenue goes up. But of course, interest expenses go up as well.

So far, so good. That’s basic logic. But here’s where things can get complicated…

When interest rates rise, interest revenue rises faster than interest expenses.

That last sentence isn’t basic logic. It’s a custom that has developed over time.

But depositors at the now-infamous and now-failed SVB Financial (SIVB) – which did business as Silicon Valley Bank – didn’t honor that custom. They didn’t play by the rules.

As a result, interest income and margins for banks might never be the same again. And the same thing goes for the supposed “bullish” case for banks when interest rates rise…

In a legal sense, SVB was just another bank. But as its trade name of Silicon Valley Bank suggests, it was much different in reality…

SVB had an unusually wealthy, sophisticated, and demanding client base.

These folks didn’t just sit back, watch interest rates rise, and continue to settle for lowball deposit rates. They knew how to find better deals with just a click of the mouse.

So as rates rose, they pulled a lot of money away from SVB to chase better deals. And naturally, SVB had to come up with the cash to meet the influx of withdrawal demands…

SVB had a large portion of its assets invested in U.S. Treasurys. And as we all know, these securities’ market values plummeted as the Federal Reserve raised interest rates.

Now, a pullback like that can be tolerable. Many institutional holders of fixed-income portfolios can hold these securities until they eventually mature at 100 cents to the dollar.

SVB was different. Its yield-seeking clients requested so many withdrawals so fast that the bank had no choice. It had to immediately sell a lot of its depressed U.S. Treasurys.

Paper losses guaranteed to vanish at maturity are one thing. Immediate real-money losses are a whole new ballgame.

This sort of liquidity crunch can cause failure. That’s exactly what happened to SVB.

Now, almost everyone with any type of platform is talking about SVB’s failure. And that’s critical for the future of consumer banking…

All this news coverage about SVB’s clients refusing to play the old ballgame of just letting banks benefit from rising loan rates while leaving depositors behind could create a snowball effect. It could inspire John and Jane Average to start taking their money elsewhere.

We’re no longer living in the 20th century, when banks were often legally restricted to operating within a single state. We’re not even living at the turn of the 21st century, when many folks still cherished the convenience and occasional need to go to a physical branch.

Today, we can use mobile devices to shop for better rates wherever we can find them…

Free web portals like NerdWallet (NRDS) and Bankrate help everyday folks get better rates. It’s similar to how Expedia (EXPE) and other websites help folks shop for flights and hotels.

Banks are eager to offer easy online account setup and transfer in order to poach clients from other banks. (Others poach from them, too. But that’s life – and just business.)

Consumer banking won’t change overnight. Nothing does. After all, it took years or even decades for many people to get comfortable buying stocks or shopping online.

More people need to get comfortable with the idea of mobile check deposits, looking at account fees in addition to rates, and more. Until then, the custom won’t change.

But as we’ve seen over and over, the world evolves. Once change is set in motion, it doesn’t stop.

So the custom of “everybody knows rising interest rates benefit banks” looks to be on a very short leash.
Marc Gerstein”

So, in Gerstein’s scenario, SVB’s depositors took their money out to get better rates elsewhere – something he believes is relatively new. Obviously, new regulations and practices for banks will be needed to deal with this yield shopping by depositors. If that’s what really happened.

The problem, as I understand it, is that these banks look good on paper, with assets exceeding liabilities (including, esp, deposits) by a comfortable margin. EXCEPT that a lot of their reserves are in bonds, and esp in super safe Treasury bonds. Held to maturity, the bonds will pay face value. Except that with a bank run, they don’t have that long, and the market for bonds crashes with high inflation (since the value of the bonds to the market is essentially the discounted (by the current interest rate, which includes the inflation rate) face value of the bonds). Marked to market (valued at what they would bring at sale), the reserves disappear, and for some banks go negative.

The big driver here is the inflation caused by the Democrats, in the previous Congress, controlling both houses of Congress and the WH, spending like drunken sailors on shore leave. $Trillions$ shipped to conmen in Nigeria and Ukraine, to every possible Dem constituency, etc. They spent the money because they had the power to do so. Much of it was flushed down the toilet, with the grifters taking their cut along the way. And, the Fed had to (essentially) print money to pay for their spending, and as expected, inflation exploded.

So, sure,the government will buy their reserves, in order to pay everyone off. And if the government holds the bonds until maturity, they will get their money back. Except they really won’t be, because of inflation. They have to borrow the money to buy the assets from the banks, and that is in today’s dollars, not the much less valuable dollars they will receive when they redeem the bonds at maturity.