Think Rising Rates Are Good For Banks? Think Again! | Chris Whalen

An oft-cited fact is that rising rates support the profitability of the commercial banking system. Chris Whalen, veteran banker, chairman of Whalen Global Advisors & Author of The Institutional Risk Analyst begs to differ. Whalen explains to Farley that banks make money by the spread between their yield on their loans and their cost of funds, and that while rising rates do increase loan yields, they also increase banks’ cost of funds. Whalen also explains why he thinks the Federal Reserve will be unable to do Quantitative Tightening because it will be stuck with mortgage-backed securities (MBS) for many years.

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BCB is Europe’s leading provider of business accounts and trading services for the digital asset economy. With a dedicated focus on institutional payment services, BCB Group provides business banking, cryptocurrency and foreign exchange market liquidity for some of the world’s largest crypto-engaged financial institutions.
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Timestamps:

00:00 Introduction
12:35 Inflation
18:13 The Problem The Fed Faces with Mortgage-Backed Securities (MBS)
21:08 Can the Federal Reserve Become Insolvent?
24:57 Mortgage Lending At Commercial Banks27
27:32 BCB Ad
28:20 Are Rising Rates Good For Banks?
31:54 Why A Recession Is Likely?
34:51 Outlook on Bank Stocks and U.S. Treasuries
44:00 Biggest Risk: Non-Bank Lenders
48:31 Credit Card Lending
51:16 Will Banks Suffer Losses from Russia's Invasion of Ukraine?
54:40 European Banks
58:35 Jack's Post-Conversation Explanation

[moriartyco]

wow, that was so interesting i had to watch it twice.

[jiaqingw]

10 months later, this guys Chris is dead accurate in everything. Man, it's impression!

[kenthendrix.]

Individuals don't realize that corporations like banks are likewise motivated by greed. One of the causes of SVB's collapse was the banks' overleveraging of their assets beginning in 2020. I've never felt comfortable storing a lot of money in the bank. I merely make investments through my financial advisor, get my gains, and then spend them as I like.

[peblopadro]

I just heard this after the collapse of SVB. Chris Whalen impressively predicted many months in advanced for what ended up happening 👏

[andrewm]

man, this was a beast of an interview. best content I've seen for a while. get more bankers in to go deep on plumbing in the future!

[rocking]

Thanks Jack for extracting so many great insights from Chris - he is super knowledgeable and says it as he sees it (no conflicts!) ..

[slovokia]

A financial system that can only function properly if interest rates are kept very low (well below the rate of inflation) is not a sustainable system. The question is how will all this break and who will lose when it does.

[jimuren]

This guy has a knack for explaining how the pieces fit together. This was pitched at a great level for us amateurs LOL.
Just one example of the many nuggets of info. Mr Whalen talked about how banks love to service small companies, how profitable it is to process their payroll and so on. So ... what happened during Covid? If you said "Little guys got swept away while big players like Amazon hoovered up government aid" then you have another piece of the puzzle.

[sanshuma]

This interview is super informative every minute of its entire length! Well done Blockworks Macro!

[jackgoldman]

I was building houses in 1980, 18 per cent mortgages. The mortgage brokers laid off 90%. All belly up. Rates fall for 40 years, the bubble builds back up. Now rates rise to 5%? Laughable. Financialization has expanded banks and government but the commodity producers, the Russians, are pissed off getting cheated. Chinese are cheated too. People who are cheated paid with IOUs, squiggles, pixels are pissed off. Minimum wage was one ounce of silver in 1966. One ounce from US Treasury is $35 plus. $70, 000 is minimum wage.

[mswillowglen]

You are a remarkable young Podcaster to have access to such a candid and knowledgeable investor. I come from mortgages, real estate and treasury management. This is great! I followed your instruction from A newer interview in March 2023.

[markbrzezinski]

It's great to hear Chris again. It's been way too long for me. He should have his own show.

[vm-bzcd]

wow! this guest knows his stuff cold! always good to have real expert on the show... versus people who sound good but are making up stuff...

[cex]

This is absolute GOLD in light of what went down w SVB this week.

[ServoSambo]

Hey Jack. Just love your interview style and perspective. Thank you.

[ponzianomanning]

Yes, Chris predicted the " bank squeeze, " and precisely why throughout this video. ( esp. min 25...).

[yowhdis]

Jack, you put out some of the best financial content from the smartest people. don't stop.

[voxpopuli]

When I see Chris, i drop everything and listen

[danielclayton]

I watch a lot of these type podcast, but this one is by far one of the best. Thanks

[DanSme]

This is the most disturbing video I’ve listened to in the last several years. I don’t believe the Fed can carry through with their policy to raise rates without triggering a serious crisis. As was pointed out, the balance sheet is frozen, except for the possibility of a greater-fool transaction with BOJ.

Love it! Chris knows what he’s talking about. “If the Fed raises interest rates too quickly, this thing is going to ‘vapor lock’…” Right on! 🫣

Chris Whalen is the best.