The Next Phase Of The Banking Crisis | Joseph Wang & Randy Woodward

Woodward argues that Silicon Valley Bank’s (SVB) fall was not due to its interest rate risk management and that the Federal Reserve is to blame. Wang vehemently (but very politely) disagrees and what ensues is a masterclass on the most salient issues facing the U.S. banking industry. Filmed on Thursday, March 23, 2023, a day after the Fed raised interest rates by 25 basis points to 5.00% at the March Federal Open Market Committee (FOMC) meeting.
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Timestamps:
00:00 Intro
00:59 Joseph's Take On March Federal Reserve Meeting (FOMC)
04:59 Is The Fed To Blame For The Fall Of Silicon Valley Bank (SVB)?
12:35 Available-For-Sale (AFS) vs. Held-To-Maturity (HTM) Accounting Treatment
27:20 Was Silicon Valley Bank's Lack of Interest Rate Hedges Negligent?
34:30 There's No Way To Hedge Perfectly"
41:10 Uninsured Deposit Base As A New Vulnerability For U.S. Banks
53:01 The Psychological Aspect of Bank Runs
57:07 Bernanke on The Great Depression: Bad Visuals Are Self-Fulfilling Prophecies
01:00:06 Should The FDIC Deposit Guarantee Be Raised?
01:02:39 Will Bank Turmoil Cause Banks To Curb Lending?
01:06:41 How Many More Times Will The Fed Hike (If At All)?
01:08:39 BTFP is NOT Quantitative Easing, Says Joseph Wang
01:10:13 Central Banking 101
01:14:22 Closing Thoughts
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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.

[togoni]

Jack, where do you find such a good guests?? Please bring Randy Woodward again. Thanks

[michaeljanewhite]

I am 82 yrs old and I bank at a community bank and agree we need to stay with the in-state small banks and fight the big banks. We are the people, the Royal 'WE' in 'WE THE PEOPLE' in the Declaration of Independence!!!

[jonusjonus]

I wasn't sure about Joseph when I first saw him, guess I had a bias against anyone previously employed at the fed haha. I have grown to really like him. His input has been very helpful for me, especially lately with the failure of svb. Thanks Joseph, I really appreciate you.

[ellisboys]

Awesome point-counterpoint. Please continue doing similar podcasts to the extent you can. Also, I have always loved Joseph, but Randy is an awesome guest as well. Please have him back more often to the extent he has the time and interest.

[JamesMullarneyIsAFraud]

Youre killing it Jack. The best financial podcasts anywhere. Well done young man. I work in IT at an IB and I push as many of the analysts on desks your way as I can.

[TurboSol]

This is an incredibly good conversation, Randy and Joseph are a perfect combo and Jacks questions set everything up very well.

[JC-dgvh]

I have to say Blockworks Macro has been the most informative (not fear mongering like so many others) and Jack in particular the most standout host of all the finance podcasts I have listened to that always has the best guests on deck. Appreciate all you do!

[bn]

This conversation is not from the perspective of a portfolio manager, or capital preservation. Unfortunately you have to hedge the risk or suffer the blowup and loss of capital. If banks are so reckless to just “hope for the best”, then they deserve to go out of business. They have to match their assets to liabilities and manage them with swaps, options, FRN, or other variable rates to not suffer the duration loss.

The idea that banks just cannot hedge perfectly is not a “get out of jail free card”.

This conversation is rooted in all banks are too big to fail and just bail them all out. I disagree entirely, after 500+ fail, like 2008, then we can discuss helping some of them.

Also, Randy said all is OK for Banks. Cannot blanket say that because banks have a lot of risk going on outside of HYM and AFS. They have a loan book, MBS, COMM MBS, etc., and just general expenses, branch expenses, etc.

This conversation was frustrating because it wasn’t framed well.

[wsdmrtst]

Great interview! Loved hearing the complexity of both sides of this argument... gives me more food for thought instead of just being judgemental about the banks. Loved these guys and both sides of their arguments.

[Sueni]

Great interview. I like that both are polite but still critisicing each other's ideas. Being polite doesn't mean one has to be a sychophant and act like they agree. This is exactly the debates we need. Superb

[Parietal-Polymath]

He keeps saying "you can't make that guess (in regards to rate hikes or cuts)" but it wasn't a guess. We weren't talking about an IR of 2-3% going +/- 100BP. We're talking about near zero rates and a FED telegraphing a year of rate hikes. Asymptotic risk. 46:40

[merrywalsh]

I so appreciate the insight that Randy is giving from his unique position. He is really dispelling a lot of myths here. As a retired RN, I have tried to do my part to dispel the mountain of misinformation around how the CDC and others in the public health sector went about managing the pandemic. There are intricacies in both scenarios. You don’t know what you don’t know…until you find someone like Randy…and yes, I did talk to the CFO of one of my banks, and a VP of another this week, probing them on the health of their institutions. Great customer service here in Hawaii.

[dybojoc]

Best guest you guys have had on about this topic so far.

Can you get Daniel McNamara on to talk about CRE?

[MrTigerStarX]

Randy makes an excellent case for how zero interest rates undermined the banking system.

[Unlikelygap]

Randy saying there is no risk? Obviously there was lol.

[LostSoulAscension]

Acting like the banks literally had no idea and no way of adjusting when in fact the FED announced rate hikes in December 2021 and started rate hikes in March/April of 2022

[hemantjain]

Absolutely fantastic podcast. Randy taught banking the way it happens on the ground with elan

[klausmueller]

Hugely grateful to Randy: great insights, practical, easily explained. Please get Randy back soon!

[nigeljones]

Guys, depositors can get 5% now on a treasury bill ETF with pretty much zero risk. They are going to take their money out of the regionals because they are not getting enough interest! It has nothing to do with "bad psychology" or deposit insurance. A lot of the banks out there cannot raise interest rates on deposits more than 1 or 2% without turning a loss and that is without the cluster fudd that is about to happen with loan and mortgage defaults.

[georgekush]

Awesome video and discussion. This is really sad what’s happening. A lot of damage caused by central banks 😢