Peregrine

Looks like regulators finally waking up: https://www.reuters.com/markets/us/us-officials-assessing-possible-manipulation-banking-shares-source-2023-05-04/

And just like that, FT deleted their original story. Pretty slimy if they put false speculation out there to benefit some shorts.

Wow. I wonder how much of this is being manipulated by the short and distort artists.

Re: juiciness Because FRC is worth more to JPM than simply the market value of its loans. Re: quick receivership I don't see how this was at all rushed. FRC lost nearly all its deposits within a few weeks' time and was given nearly a whole month to find a private solution. And when it couldn't, this bank tried brinksmanship tactics by threatening its suitors that if they didn't save it the costs would be worse. You really think the FDIC should let this bank operate with no deposits of its own and negative NIM and generate losses for the foreseeable future?

"Juicy" terms? Based on FRC's own FV marks, JP Morgan paid $10 billion more than they should've to the FDIC! The longer it goes on, the worse the bid the FDIC gets. And the longer it goes on, the more desperate FRC gets. Back during the S&L crisis when probably more than a half of S&Ls were zombies and operating with negative equity, S&Ls kept upping the ante in raising deposit rates and driving further down the credit spectrum in a desperate bid to become viable. Needless to say, this is not good for the financial system.

Rapid receivership and sale happened all the time during the S&L and GFC crises, especially when a bank lost deposits at the rate that Signature, SVB and FRC did. Without rapid receivership and sale, the cost to the FDIC would've been a lot greater in all likelihood. The longer it goes on, the worse for the FDIC and the worse for the financial system.

It's kinda funny how posters in this thread somehow forgot that FRC was mark-to-market insolvent and based on their own FV marks, no less. They couldn't hold on to their deposits, which forced them to get high cost financing, which turned their bank upside down. The regulators didn't do that to them - if anything, they helped them. If there were no visible hand, this bank would've gone down a lot sooner and everyone owning the capital stack gets zero'd a lot quicker.

That number's from 2019. The 2021 census had the GTA at 7.3 million. With over 1 million new immigrants in Canada last year alone I have to imagine that the 2023 census is close to 8 million or above that. Not to mention that with urban sprawl what qualifies as GTA should be broader encompassing than the official definition.

The GTA probably has a population that's around 8 million now, on par with New York City. I remember 20 years ago when they had less than 5 million. I think it's surely the fastest growing developed city in the world. Combine this with housing NIMBYism and a public transport system that hasn't budged and it's really unsurprising why housing prices are what they are. The Tier 1 cities in China have the same problem with housing prices and they don't have the NIMBY problem because the state owns all the underlying land.

What I meant was that landlords will push back.

Well, the feds just pushed the annual rental increase to 2.5% and I suspect that there will be a lot of political pushback against that number given where inflation is.

One more thing that deserves mention: The speed of the housing decline. The 20% decline from peak to trough in Canada in 90s took place over the course of 7 years. In the US GFC, a 20% housing price decline from the peak took barely 2 years. I think this clearly was the effect of a huge amount of foreclosures or homes from distressed sellers that flooded the market with housing supply. And why were there so many foreclosures? It came from insanely lax mortgage rules that fueled a massive homebuilding boom that took the US a decade to recover from. As mentioned before, Canada's big housing problem is a lack of supply. I doubt that a huge number of homes suddenly come on market even if arrears rates kick up substantially.

Some more interesting data: Canada prime rate: 1972: 6% 1981: 21% Canada housing prices indexed to 2010 at 100: 1972: 39 1981: 52 So during the time frame when the prime rate more than tripled, housing prices went up 33%. The real downturn was from 1989 to 1996 when prices fell 20%. And this was during a period when prime rates fell from 12% to 5%. Seems like housing prices are more correlated with unemployment than anything else.

Yeah. I'm not sure there's as much meaning in this as there is in "US healthcare is 2x as a % of GDP as Canadian healthcare".

There's $200 bn in HELOCs in Canada, compared to $1.6 trillion in mortgages outstanding. I think that average balance might include HELOCs, though I'm not sure.

If you're saying that most mortgagors didn't default in the GFC then you're correct. Of course, if over 50% of mortgagors default, the world would be over. Non-performing rates on US mortgages peaked at 10% and that was enough to bring about the worst recession since the Great Depression. Same metric in Canada never peaked above 0.7% or something.

Not all 120 mm households in the US are homeowners. And a very small percentage of homeowners are actually looking to sell in any given year. There were >4 million foreclosures from 2007-2011. It absolutely flooded the housing market (in some areas more than others) with supply that no one wanted and had a huge effect on housing wealth for years that was felt by pretty much everyone. Even prosperous areas like San Francisco saw prices down 25% from peak to trough in pretty short order. Canada's housing problem is not an excess of supply but a dearth of it.

Average homeowner in the US was not fine in 2009. Poor underwriting started off as pretty marginal and very quickly became table stakes. Even conforming mortgages at F&F became awful. Mass foreclosures ensued because so many borrowers didn't even put on a down-payment, resulting in a glut of homes that suppressed home prices and killed home building for more than a decade. Mortgage underwriting has only gotten more stringent in Canada. Borrowers need to qualify at a 2% higher rate than the contracted rate so some level of rate sensitivity is already baked in. But agreed that first-time homebuyers are most at risk.

It may surprise you, but: Average mortgage balance in the US: $US 230k Average mortgage balance in Canada: $CAD 200k Canadians are just sitting on a lot more equity in their homes.

Certainly a positive that they're no longer seeking the ouster of their leadership.

If Putin is still rational, then he won't continue with this war any longer than he has to. Time is of the essence and he risks destroying the Russian economy if he prolongs this further. The West also has reasons to seek a negotiated peace ASAP.

It's liquidity that does companies in, not solvency. You can have the most well-capitalized bank possible, but they won't be able to withstand even 5% of their deposits leaving at a time. Same for companies that require financing for working capital. There's a surprising number of non-financial companies that require short-term financing for the basic functioning of operations.

Russia has basically explicitly said that they're willing to go to thermonuclear war to prevent Ukraine from joining NATO. Do Western leaders really want to call to see if he's bluffing? That Ukraine joining NATO is not even remotely important enough to the West to even test that makes me optimistic that a successful negotiation can happen soon.

The most balanced take I've seen on this yet. From MSNBC no less. This quote was on point: "It may sound cruel to suggest that Ukraine could be barred, either temporarily or permanently, from entering a military alliance it wants to be in. But what’s more cruel is that Ukrainians might be paying with their lives for the United States’ reckless flirtation with Ukraine as a future NATO member without ever committing to its defense." https://www.msnbc.com/opinion/msnbc-opinion/russia-s-ukraine-invasion-may-have-been-preventable-n1290831

Agreed with much of what you say here. Putin is dealing from a position of weakness and was perhaps desperate. Not sure if Putin is doing this from a standpoint of self-preservation - I think the chances of a coup has gone up a lot since this act. And I wonder if he's no longer rational thinking. Did he need to resort to a frickin' invasion to ensure that Ukraine doesn't side with the West?