Is the banking system near collapse?

[angrychair]

Federal Reserve liquidity facilities caught fire on Friday as month-end pressures pushed a key lending tool to a record level of usage.
The Fed’s Standing Repo Facility lent a total of $50.35 billion on Friday to eligible financial firms in two separate availabilities, the highest-ever usage since the tool was put in place in 2021 to provide fast loans collateralized with Treasury or mortgage bonds

Banks are running out of money. This is not the first time but the second time in a row banks have taken these short term loans. Nothing about this is normal.
AI is a sinkhole of cash that is being passed around like a pocket comb on picture day by 4 different corporations but offering no utility in the market. Nvidia was recently "valued" at $5 trillion dollars. This is not a good thing because it's completely built on a false premise.
The money and stock markets are far more fragile now than they were in 2008.

The Federal Reserve is spinning it as normal and even planned but there is absolutely nothing normal about what is happening in our economy right now. Tariffs, consumer confidence and AI are bleeding our economy and making it more and more unstable with each passing day.

Source: https://www.reuters.com/business/finance/banks-tap-fed-standing-repo-facility-record-numbers-amid-month-end-pressures-2025-10-31/

[Bernardo de La Paz]

1. No. . . . nt

[angrychair]

2. I guess we will see...n/t

...

[Bernardo de La Paz]

9. We are in a risky phase.

Banks are not running out of money, not in the sense most people think of "running out of money". Overnight lending operations are normal, even if the quantity is unusual.

The capex investment in AI is a bubble, but it is not built on a false premise. AI is providing utility, which is evidenced by their popularity with people and by their successful deployment in specific areas like programming. AI is not bleeding the economy; capex is propping it up. Without data center and power supply construction, growth would be close to stagnant. AI is not going away, just like the internet did not go away after 2000, and radio/mass produced automobiles did not go away after 1929, and railroads did not go away after the panics 1873 and 1893. The AI of 2050 will be different from today's AI just like the internet of 2025 is different from the internet of 2000.

What is not normal is the shutdown and tariffs and Executive branch turmoil.

The markets are not "far more fragile". They are very over-valued. I do not expect a market crash, but I do expect a long steepish decline sooner rather than later. It would not surprise me if the SP500 breaks 7,000 before it hits 3,000. There might be a crash; nobody has a functioning crystal ball. Market timing is impossible, but one can recognize general risk and opportunity. We are in a risky phase.

[ProfessorGAC]

13. Generally Agree

Don't see the indices falling as much as you do, but a correction is due.
There have to be investors ready to take their profits.
If you & I know many of those equities are overvalued, they do to. I know the if I made 300% in 4 years, I'd want to do some profit taking.

[Bernardo de La Paz]

14. Dunno if 4000 or 2000 is where the bottom will be, but I expect a bear more than a correction

[ProfessorGAC]

19. We'll See, But...

...we agree on the direction it will go.

[EdmondDantes_]

15. Is it the market or specific stocks that are overvalued?

A (slight) majority of the S&P's 2024 gains were from 6 companies all highly associated with AI. The market seems like it's dividing somewhat on AI or not.

[Bernardo de La Paz]

16. It's the market, overall. Google & Meta not too bad at 28 and 29 respectively bc they are mature growth stocks

... with well established revenue streams.

But there is a lot of froth in the market. Palantir (Thiel, AI) at 666 times earnings (a funny number). Fermi (Rick Perry, data center energy) valued at $15.5 Billion, with zero revenue. Figma (user interface design) closed first day at $115, now is at $50 which is more reasonable, but earnings ratio is still 250.

The Shiller (Nobel laureate) CAPE (cyclically adjusted PE ratio) https://www.multpl.com/shiller-pe is at 40.88, second highest historically back to 1870s and nearly at 44.19 Dec 1999 levels of the dot com bubble.

[fujiyamasan]

18. Yeah the PLTR valuation is difficult to justify

The bulls claim it’s going to be OS of AI, but Microsoft never had a PE like this, or a P/S of something like 138x

Nvidia’s PE is at 57 by contrast. Even with its recent bull run, Google is valued somewhat fairly.

Yes, this looks frothy, but it’s impossible to know the top, so while shorting it or buying puts is tempting, you’d be bleeding for a while until the bubble pops.

That’s why trying to time this market is pointless.

[SheltieLover]

3. Is FDIC still in effect?

[Ritabert]

6. For the moment but Project 2025 wants to scale back protections.

In the banking section it calls for looser restrictions on banks to invest in riskier investments. They want to cut the amount of insurance back from $250,000 as well.

[SheltieLover]

10. Ty

[Ritabert]

11. 😁

[Fiendish Thingy]

4. Your theory has lots of missing information

Who is getting the loans?

Is it a bunch of banks, a few shady ones, , or just high risk investors trying to pump more cash into the AI sinkhole?

I don’t see enough specifics in your post to support your conclusion that the banking system is near collapse.

There is plenty of danger on the horizon, especially in the overvalued stock market, but I’m not seeing the evidence regarding the banking system.

[angrychair]

5. Think you misunderstood

The quote from the article is enough to support the belief that the banking system is in trouble and running low on cash on hand.
The loan type being referenced is a short term collateralized loan in which banks trade stable bonds and securities for liquid cash because they don't have the ability to maintain required cash levels going into a new month or longer. This is the second month in a row banks have done it.

I found no articles or Fed publication that breaks it out by bank.
The evidence is the taking of the loans themselves.

[Fiendish Thingy]

7. The lack of detail doesn't support the conclusions

If it were a bunch of banks borrowing the money, that might be worrisome.

If it’s just a couple of shady Silicon Valley banks, then I’d say that is more an indicator that those banks are under-capitalized, and at risk of failure, and if they need the money to invest/pay off
leveraged loans in AI, or launder crypto, then that could be a sign that the bubbles in those markets are about to pop.

[anciano]

8. Highly unlikely.

[Bluetus]

12. There is no such thing as "running out of money" because it is fiat currency.

The banksters can just wish any amount of cash into existence, and in that sense the dollar really isn't that much different from crypto.

The issue is not money supply. That is unlimited. Banking system "collapse"? That's a different question. But even that is more of an academic question because Friends of Trump will get bailed out as needed. It always works that way.

The more difficult question is how all of this hits the average American in terms of inflation and recession. Lots of unpleasant signals on that and the bailouts won't help that.

[Bernardo de La Paz]

17. Dollar different fr crypto bc industry & services are behind it. Nothing behind crypto except marked to the dollar. . nt

[SWBTATTReg]

20. Well, I think that they ended some of the safeguards (the tRUMP adm) so this is no longer available to stop unwarranted

and harmful economic things from happening...

The Trump administration is preparing to roll back a key financial safeguard imposed after the 2008 crisis, in a move expected to benefit major Wall Street banks, Politico reported Saturday, citing people familiar with the matter. Regulators appointed under President Donald Trump are finalizing a proposal that would reduce the amount of capital large banks must hold to protect against financial shocks.

The forthcoming proposal, developed collaboratively by the Federal Reserve, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), is anticipated to be unveiled in the coming months.

At the center of the debate is the supplementary leverage ratio, a requirement that compels banks to hold a minimum level of capital based on their total assets, regardless of risk. Critics of the rule, including some Republican officials and industry advocates, argue it discourages banks from holding safe assets like U.S. Treasuries, thereby limiting liquidity in government debt markets.

Treasury Secretary Scott Bessent has made reducing capital requirements a top policy goal. He has pointed to the recent turnover in regulatory leadership following the 2024 election as a key driver for advancing this shift, suggesting that financial institutions now have a clearer path to influence regulatory outcomes. Bessent also emphasized that easing the SLR could help lower interest rates by making it easier for banks to participate in the Treasury market. Etc.

[Buckeyeblue]

21. Mainly delinquencies and loan losses are up

But lending is also up. If lending was down and loan losses were up it would be a bigger issue.

The fed lowering rates is helpful to people struggling to make payments because they will be charged less interest.