Suncor Energy Inc T.SU

Seeds of Destruction

[Experienced]

Over the weekend we saw some large regional banks fail.  Some people here have been blaming this on the Fed in the US raising interest rates.  

Is this the probem?

Are there more ominous signs under the hood?

1....the sin that the Fed made is not increasing rates but keeping interest rates at zero for so long and thereby creating the inflation (along with Biden spending trillions) that needs to be stopped through high interest rates.  It is a well known fact that if something/anything is free it distorts asset allocation of things.  This leads to Point 2.

2....with interest rates so long for so long and lax Government oversight, the banks (and other people) sought to find ways to get a higher return and in doing so created a risky investment environment.  Sound like the precursor to the financial crisis of 2008?  YEP!!

3...as a case in point, SVB didn't even have a risk manager for the past year!!  No wonder they got into a situation where the bank collapsed.

4...the lines between banks trading with their own money as opposed to depositor money which was spelt out in Dodd Frank has not been enforced leading to the need for the US Government to start beginning bailouts.  The current bailouts themselves are sending/reinforcing a message that came out of 2008 - "banks you can take risks and make money and if your risks don't pay out then the Government has you covered"

I could go on - but here is the main message/warning

Right now we have many of the things that caused the financial crisis of 2008 taking place compounded by an environment of high inflation, rising interest rates and excessive Government debt and budgetary deficits....plus a much higher level of personal debt as percentage of disposible income.

Keep this in mind as you make investment decisions...

[treehill]

I don't disagree with anything you said, but would add another change in banking that took effect on March 26, 2020. The Fed on that date removed the requirement that banks maintain reserves on hand. Prior to that, a bank had to keep reserves in cash in the vault or at the Federal Reserve, and that money was available to deal with bank runs. Hard to see the logic in the 2020 change. One also

[Donwaan]

No to universal healthcare, too communist! But hey, another bank bale out for billionaires that's the true patriotic way. Pass the apple pie please! Burp...

[Experienced]

Good post. You actually touched on a point I had meant to make earlier.  One one hand, the Dems/Biden are going all-in saying that the rich aren't paying their "fair share" and proposing to tax those households making over $400K and yet on the otherhand, they are going to bailout rich people who have deposits over $250K at SVC and the other banks and setting a precedent for