As I type this, the Federal Reserve, Treasury, and FDIC are issuing a joint statement outlining their plans for dealing with Silicon Valley Bank (SIVB) . As you've probably already heard from six different sources, depositors will have access to all of their money as of Monday, and the taxpayer will bear no losses associated with the bank's collapse. That said, as new rules and regulations are implemented, I am confident the banks will pass on those costs to the customer.
Due to its similar systemic risk exception, the Federal Reserve, Treasury, and FDIC also announced the shutdown of Signature Bank (SBNY) . And identical to SIVB, SBNY depositors will be made whole, and no losses will be hoisted upon taxpayers.
Suffice it to say shareholders and unsecured debtholders in both banks will be hung out to dry. But frankly, that's how company failures are supposed to work.
I'm not a bank analyst, so I won't pretend to be one today. But I'm always amused by the number of folks that subscribe to capitalism on the way up and socialism on the way down when it turns out they're poorly positioned in the failing company.
Turning to the stock market, we all know that stocks were destroyed on Friday due to banking fears. The SPDR S&P 500 Trust (SPY) and Invesco QQQ Trust (QQQ) both closed beneath the 200-day simple moving average (SMA), and the iShares Russell 2000 Index ETF (IWM) closed well beneath that SMA on monster trade volume.
As soon as government officials announced the bank rescue plan, the overnight futures shot higher. And while the overnight strength may persist into Monday morning's open, I would be cautious before getting too aggressive on the long side.
While the Feds are bailing out depositors, I haven't seen anything that addresses the potential for continued bank runs as depositors fear for the safety of their money. Simply put, a strong opening could quickly fade if the day session volume-weighted average price fails to attract day timeframe buyers.