PacWest Bank: Next Failure?

     A Southern California bank, PacWest, is about to be taken over by the Feds(F.D.I.C., etc.). It's a liquidity problem, again. Too many depositors taking their own money from the institution quicker than they can cover the outflow. Sound familiar? Similar to Silicon Valley Bank and Signature Bank? And First Republic Bank of San Francisco. Yes, excepting PacWest is much smaller in the same state, and caters to a market of high tech businesses like their northern brethren. Assets of PacWest are in the $32 billion range of assets. The company stock has dropped precipitously in recent days, and has fallen from highs in the $66/share range over the past year plus to about $3 and change. My, my. How does this happen to a federally insured institution these days?

      Let me count the ways. Now some pundits say that these banks had too many long term assets on their balance sheets, locked in at low rates, looking for guaranteed returns at 2% annually. Then the FED Reserve announced that inflation was galloping along and had to be corralled immediately. Trumpy thought inflation was caused by hot air. No, said Jerome Powell; too much money in the economy chasing too few goods and services. Then he approved rate increases: steeper at the beginning, then tapering as time went on. The most recent quarter point increase was announced Tuesday, May 2nd. So, now if you hold bonds/paper at 2% yield, those bonds have been crushed in value. Yes, crushed, and nothing can be done if one must sell into a down bond market. How sad. Savers are moving their hard earned dollars to some place that pays 4-5% annually. Like the old days And how about all those PacWest executives, bringing in salaries north of $200k, some at $450k. Hmmmm. Sounds very charitable for a little bank that was probably paying depositors about 0.01% on their savings accounts. And to think they didn't see this coming?  How about reports over a year ago that things were getting a little dicey at PacWest. How many executives ran for the door. How many sold their stock before it tanked. Hmmmm. Have regulators looked into this situation: trading on inside information?  Where will these parasites find work as they cruise the unemployment lines looking for a little support?

      And so it goes. And, the F.D.I.C. know about a lot more shaky institutions; we just haven't heard from them yet.

Have a nice day.