TBTF. Right.

Ask yourselves what's the next shoe to drop that could potentially take down a Too Big To Fail Bank. For my money, it's Commercial Real Estate. Some companies have already stopped paying their leases or abandoned the premises. 

That could be the beginning of a cascading effect and it comes on the heels of a similar phenomenon in Residential Real Estate.

Add to that the lack of confidence in the entire banking sector that seems to be growing and you have quite a recipe for a banking catastrophe.

Money is being pumped into the system by Treasury, The Federal Reserve and the largest banks themselves and still no end in sight for this banking crisis. 

Meanwhile, traditional instruments seen as safe are taking a hit: Treasuries are now less attractive along with corporate bonds. Bitcoin and Crypto are also viewed as somewhat suspect while Gold is the great unknown what with only one-half of one percent invested in it. 

So...what's the next big thing where money can flow as we head into a likely recession? Certainly not stocks.

I guess that means we can now kiss off disinflation, as inflation fails to sufficiently moderate, even after interest rate hikes. Some say, hyperinflation is in the cards next. I doubt that the dollar can be killed off that easily. I'm more a stagflation type of guy.

There also seems to be some worry about Wells Fargo and Bank of America but is that founded? Who knows. But just look at human psychology -- a clearly rattled Yellin and Powell -- tells you all you need to know about what could potentially come next.

It's like the blind leading the blind, with no one having a clear idea of what to do next. It's improvisation at its worse. Comforting thought...the plan is no plan.

American Bank Bail-Ins Almost Inevitable.

First off, let's start with a truism: Treasury, The Federal Reserve and FDIC simply don't have the reserves to make all depositors whole across every bank that gets into trouble as the contagion continues to spread. Hence, talks are ongoing with Warren Buffett, who in previous incarnations bailed out Bank of America and Goldman Sachs. Sound familiar? And now, Buffett supposedly will backstop some regional banks, but can the contagion be limited to that bank category? I doubt it.

You can thank the Trump Administration for a lot of this: the Federal Reserve eliminated all reserve requirements for depositary institutions in March 2020. Bingo. Before that, large banks had to have reserves of 10% and medium-sized banks 3%. Good going! Thanks to those idiots, there no longer is a fractional reserve requirement. Translation: when there's a run on a bank, there is no money there set aside by the banks to deal with it. 

Banking is all about depositors and their confidence that when push comes to shove that the money will be there to make them whole for each account they have in a bank to the tune of $250,000 USD. But if bank runs multiply like rabbits, then the system eventually goes under. For now, people are moving their money up the food chain, likely leading to more small and regional bank failures. But don't expect the fun to stop there: once people realize that the so-called Too Big To Fail Banks have no fractional reserves either, then it's all over. 

Biden doesn't want to go there. In fact, they've chickened out at least for now on bank bail-ins, but that can't last. That's why the FDIC has seized SVB's 2 billion. They want to give it to depositors to lessen the burden on FDIC. Will a bankruptcy court judge go for that? Probably. So what does that do to the concept of banking when bondholders end up holding the bag? Not good. 

Look at Credit Suisse, where AT1 bondholders get zip after UBS buys Credit Suisse. So, that in effect is a bank bail-in for bondholders. An ominous trend for the future.

But back to American banks: if the contagion takes on a life of its own, which could very well happen, then the gloves will almost inevitably come off about bank bail-ins in the United States. It will be either that or watch potentially a TBTF bank go down. Think back to 2008 when the TBTF banks ended up being bailed out by Uncle Sam. Otherwise, it was bye, bye.

These are exceedingly dangerous times. Perhaps Churchill put it best when he said: "It is not even the beginning of the end. But it is, perhaps, the end of the beginning."

FTX...Silvergate...SVB...Signature.

Hum, why has the federal government chosen to make depositors whole at SVB and Signature? And why not any other banks in the future?

Maybe, just maybe, a lot of these folks were reliable Democratic Party donors. No kidding. But then there's the other thing: crypto banks and money laundering. Funny thing is, when you make all depositors magically whole, you tend to shut tight a lot of mouths that might otherwise have run off and had plenty to say, if they suffered a financial beef. The United States government, hard at work for all of you, and with a smile! Crony capitalism at its best.

How Many Other Shoes Are About To Drop?

Credit Suisse is well on its way to being taken over by UBS. But what will be the next shoes to drop? Commercial and Residential Real Estate are in crisis worldwide. The magnifying glass is on Blackstone right now. Others, like Pacific Investment Management and Brookfield, are also being eyed as well.

In this country, that brings me back to BMO and CIBC. So, we definitely live in interesting times, but to qualify this as interesting is the understatement of the year.  

Banks: Waking Up North Americans By Giving Them A Nightmare.

My advice is to get drunk now. After First Republic's bailout from other banks, and Treasury, The Fed and FDIC making all depositors whole at SVB and Signature, there's no way that they can do that for the next 180 banks who could theoretically go under, or if you prefer, become technically insolvent.

Jeff Snider, Steven Van Metre and Johnny Bravo are already all over it on YouTube. Waiting for The Maverick of Wall Street and Greg Mannarino, The Robin Hood of Wall Street.

UPDATE: If over 180 banks were to go down, all depositors would be wiped out, period. Why? Because the FDIC and CDIC simply don't have the assets to cover all depositors across a far reaching banking panic. This is a self-fulfilling and self-perpetuating hamster wheel: depositors panic and move their money to larger institutions. That undermines the small and regional banks as contagion spreads. So, in effect, it's more depositors that are killing the banks than the greedy and incompetent management that made so many banks already technically insolvent. How ironic is that? At some point, no bank becomes too big to fail. Even Canadian banks are potentially at risk, what with the real estate shenanigans which reportedly took place at BMO and CIBC. Fun, eh?

Trump, Trump, Trump, Again.

As most of you already know, I think of Trump as a POS, even on his best day. That will never, ever, change, but hey, unlike our Prime Minister, he actually isn't a total idiot: the guy is smart enough never to touch entitlements: Trump did not and will never go anywhere near Social Security, Medicare, Medicaid, etc. That's called political smarts. Haley and others are playing with fire, even though it takes guts to talk about entitlements, the retirement age and the rest of it. Another place where Trump is dead-on is when he labelled DeSantis DeSanctimonious. Bingo! Sanctimoniousness goes down great with the red-meat crowd in the party, but with crucial Independents, not so much.

Remember that the biggest lie in American politics is that this is a 50-50 country. Not a chance. Independents are by far the biggest political group, followed by Democrats, with Republicans bringing up the rear. Trump won because he had Independents with him. He lost because Independents went with Biden last time. Trump has learned his lesson. He knows now that Independents are incredibly turned off by preachy sanctimony. 

But this is the Republican Party we're talking about. Trump is beyond thrilled that he likely will be charged in Manhattan. He's calling for protests, you know, the same old MAGA-type garbage. He actually thinks that lightning will strike again in the same place, but it won't, not after January 6th, when Trump basically lost the country. But put it in Republican-speak, that's the way to go for Trump. He needs something big to fight off DeSantis. Let's get real here. DeSantis is going up in the polls, not Trump. So, Trump has cast himself in the role of Jesus Christ. He thinks it will work, but will it? Kind of depends on if your average Republican is big-picture or not. If not, it'll work great and DeSantis is already history, even before announcing. But if Republicans are primarily big-picture thinkers, they will want to go with DeSantis to broaden support in the general. That's the right strategy for '24. Don't get me wrong, DeSantis IS a sanctimonious hypocrite and asshole, but he's the one who can run the table with Independents. For Biden to lose and Republicans to win the presidency, they NEED to run DeSantis. Take Biden out of the mix and Republicans likely lose, unless Harris is the nominee. She has already been sent to Democratic political Siberia by a plurality of potential voters. Life, in and out of politics, just ain't fair. So, Harris is already finished. 

But back to Trump: if most Republicans want to stick with MAGA, which they probably don't, at least to some pollsters, then Trump's strategy is bound to fail. But if in their heart of hearts, they are still pro-MAGA, then Trump can't lose the nomination to DeSantis. Period. This is the scenario I see playing out. Trump gets the nomination, especially if he's indicted, and then gets blown away politically in the general. Even Biden can beat Trump, but Biden can't beat anyone else, not with this economy and this inflation. 

Now, if I was going to nail Trump to the cross with indictments, there's no way that I would lead with this type of small-potatoes. Most people, in similar circumstances, never get charged. It's a misdemeanour, nothing more. So...it's an incredibly stupid hill for a Democratic Manhattan DA to die on. Can they even get a conviction? I have serious doubts. The last thing most people want, even on grand juries, is to see Trump turned into a martyr. They don't want to go back to the hornets' nest. They don't want to see another January 6th. Tying it all up with a bow means for yours truly that Trump will likely be acquitted on any charges. I think Trump already realizes that and that's why he's playing it up as much as he can because ultimately, it will be to his political benefit.

This isn't about heads, it's all about hearts. How the party collective actually feels will determine the result, both for the Republican nominee and in the general election.

Johnston.

Give me a break. So what if the guy is Trudeau's friend. So what if Harper got him the job of Governor General. Really, do either of those things diminish his potential and likely level of impartiality? Not a chance.

This isn't  a thing to play political games with. Anyone who expects Johnston not to do the job with tenacity, rigour, dedication, thoroughness and impartiality is simply playing politics, for politics sake. Period.

And not only that. Johnston won't be holding or faking any punches. If the goods are there, they will be found with the chips falling as they may.

Johnston is a full speed ahead type of guy and damned the torpedoes. Some people, in some quarters, may come to regret the report when it comes out. If it looks like a duck, quacks like a duck, walks like a duck, rest assured it will ultimately be labeled as a duck. Of that, I have not a shred of doubt. That's quite simply, Johnston at work, the Johnston way.