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| There is a lot of danger. Marking to Market applies to the Security Portfolio, not the loan portfolio for most banks except the very large ones. Loans usually make up much more of the asset allocation than Securities to make a larger profit. Charlie Munger said there are a lot of losses not realized especially in regards to commercial real estate. I believe him.
When depositors start leaving a bank it can turn into a herd effect quickly. The banks will then have to look at other borrowing options such as the FED or FHLB which are both limited in volume and come with much higher in borrowing costs. That exasperates the issue.
Short sellers are looking for banks with a combination of relatively higher volumes of commercial loans and relatively longer maturities in the banks’ overall assets allocation. There are plenty of those.
https://www.gsb.stanford.edu/faculty-research/working-papers/monetar...
Edited by Iowegian 5/3/2023 00:01
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Regional Bank Stocks Getting Hammered
