The Growing Crisis: Unrealized Losses on Securities at FDIC-Insured Banks Rise
It seems that the regional banking crisis in the US is far from over. The balance of unrealized losses on securities at FDIC-insured commercial banks increased by $43 billion, or 8%, reaching a total of $558 billion in the second quarter. These losses primarily involve Treasury securities and government-guaranteed mortgage-backed securities.
During periods of falling yields and rising bond prices, banks experienced unrealized gains. However, when yields rose and prices fell, they faced unrealized losses. This trend has contributed to the worsening financial situation for many banks.
Usage of Emergency Bank Funding Facility Surges
The Kobeissi Letter reported a significant increase of $328 million in the usage of the Federal Reserve’s emergency bank funding facility just last week. This facility was established as part of a bailout fund to provide additional funding for struggling depository institutions.
Moody’s Downgrades and Warnings
In August, Moody’s downgraded several banks and issued warnings about potential future downgrades for others. This further highlights the precarious state of the banking industry.
Hot Take: A Deepening Crisis with Uncertain Prospects
The growing balance of unrealized losses on securities and increased usage of emergency funding facilities indicate that the regional banking crisis in the US is far from resolved. As more evidence surfaces, it becomes evident that this crisis is only getting worse. The uncertain prospects for these banks raise concerns about their ability to weather future economic challenges.
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