In recent days, a crisis in the financial sector has centered around regional banks as Silicon Valley Bank and Signature Bank collapsed, both casualties of poor management in the face of eight interest rate hikes by the Federal Reserve in the last 12 months. Wednesday morning attention turned to the big banks with shares of Credit Suisse hitting an all-time low.
Saudi National Bank, Credit Suisse’s largest investor, said Wednesday it could not provide any more funding, according to a Reuters report. This comes after the Swiss lender said Tuesday it had found “certain material weaknesses in our internal control over financial reporting” for the years 2021 and 2022.
As Credit Suisse dragged down the European Bank sector, U.S. big bank shares declined in sympathy. Citigroup and Wells Fargo shed 3%, while Goldman Sachs and Bank of America fell 2%. The Financial Select Sector SPDR Fund lost 2.9% in premarket trading, giving up its 2% pop on Tuesday.
Regional Banks, whose rebounded helped lift sentiment for the broader market on Tuesday, fell back into the red again. The SPDR S&P Regional Banking ETF (KRE) was down 3% in the premarket, led by losses in Old National Bancorp, Zions Bancorp and Fifth Third Bancorp. To be sure, shares of First Republic Bank were clinging to gains.

Credit Suisse on Tuesday published its annual report for 2022 saying the bank had identified "material weaknesses" in controls over financial reporting and not yet stemmed customer outflows.
Switzerland's second-biggest bank is seeking to recover from a string of scandals that have undermined the confidence of investors and clients. Customer outflows in the fourth quarter rose to more than 110 billion Swiss francs ($120 billion).

https://reuters.com/business/finance/credit-suisse-shares-drop-fresh-record-low-cds-widen-2023-03-15/
Oakmark funds sold their remaining shares last week.

@hank, I grew up with the irresolute response to the last inflation. I don't want to spend what could be the rest of my life going through that again

The economic results of this counterrevolution were far from unambiguous. Growth in the early 1980s slumped. Entire industrial sectors were rendered uncompetitive by soaring interest rates and surging exchange rates. Unemployment hit postwar records. It was painful, but on the conservative reading there was, as British Prime Minister Margaret Thatcher liked to say, no alternative. If the struggles of the 1970s had continued, she suggested, the result would have been a slide toward ever more rapid inflation and threats to the institutional status quo. Ultimately, the Cold War order was in peril, and if avoiding that fate required turning monetary policy into a more blunt-force form of political struggle, then so be it. In fighting the mineworkers into submission in 1984-85, she was waging war on enemies within, as she waged war on the Soviet enemy without. The prize was nothing less than a permanent shift in the balance of social and economic power and the exclusion of alternatives to the rule of private property and markets.

In interviews with [Business] Insider, founders and investors acknowledge privately that they are looking to Twitter as a case study of efficiency. (All spoke on the condition of anonymity, to avoid a backlash from their employees.) If Musk can run his social network on half of its previous staff, they say, perhaps their companies can, too. "It's not a bad look to make the tough call, because everyone is making the tough call," says the founder of a large startup whose investors are urging him to cut the fat and slow hiring. "Elon is the most extreme example of that so far, but this is what a lot of smart companies are doing."

The securities in your Schwab account—including fully paid securities for stocks and bonds and excess margin securities—are segregated in compliance with the U.S. Securities and Exchange Commission's Customer Protection Rule. This is the legal requirement for all U.S. broker-dealers. Your segregated assets are not available to general creditors and are protected against creditors' claims in the unlikely event that a broker-dealer becomes insolvent

The Federal Reserve’s hotly anticipated March 22 interest rate decision is just a week and a half away, and the drama that swept the banking and financial sector over the weekend is drastically shaking up expectations for what the central bank will deliver.
Before this weekend, investors believed there was a substantial chance that the Fed would make a half-point increase at its meeting next week. But investors and economists no longer see that as a likely possibility.
Three notable banks have failed in the past week alone as Fed interest rate increases ricochet through the technology sector and cryptocurrency markets and upend even usually staid bank business models. The tumult — and the risks that it exposed — could make the central bank more cautious as it pushes forward.
Investors have abruptly downgraded how many interest rate moves they expect this year. After Mr. Powell’s speech last week opened the door to a large rate change at the next meeting, investors had sharply marked up their 2023 forecasts, even penciling in a tiny chance that rates would rise above 6 percent this year. But after the wild weekend in finance, they see just a small move this month and expect the Fed to cut rates to just above 4.25 percent by the end of the year.
Economists at J.P. Morgan said the situation bolstered the case for a smaller, quarter-point move this month. Goldman Sachs economists no longer expect a rate move at all.
Other economists went even further: Nomura, saying it was unclear whether the government’s relief program was enough to stop problems in the banking sector, is now calling for a quarter-point rate cut at the coming meeting.
The Fed will receive fresh information on inflation on Tuesday, when the Consumer Price Index is released. That measure is likely to have climbed 6 percent over the year through February, economists in a Bloomberg forecast expected. That would be down slightly from 6.4 percent in a previous reading.
But economists expected prices to climb 0.4 percent from January after food and fuel prices, which jump around a lot, are stripped out. That pace would be quick enough to suggest that inflation pressures were still unusually stubborn — which would typically argue for a forceful Fed response.
The data could underline why this moment poses a major challenge for the Fed. The central bank is in charge of fostering stable inflation, which is why it has been raising interest rates to slow spending and business expansions, hoping to rein in growth and cool price increases.
But it is also charged with maintaining financial system stability, and higher interest rates can reveal weaknesses in the financial system — as the blowup of Silicon Valley Bank on Friday and the towering risks for the rest of the banking sector illustrated. That means those goals can come into conflict.
Some saw the Fed’s new lending program — which will allow banks that are suffering in the high-rate environment to temporarily move to the Fed a chunk of the risk they are facing from higher interest rates — as a sort of insurance policy that could allow the central bank to continue raising rates without causing further ruptures.
“The Fed has basically just written insurance on interest-rate risk for the whole banking system,” said Steven Kelly, senior research associate at Yale’s program on financial stability. “They’ve basically underwritten the banking system, and that gives them more room to tighten monetary policy.”

The Justice Department has launched a inquiry into the sudden collapse of Silicon Valley Bank, according to a person with direct knowledge of the investigation.
Federal prosecutors are starting to ramp up a probe into the doomed Silicon Valley Bank just days after a bank run led to its swift collapse. In response, the the Biden administration took extraordinary measures to shore up billions of dollars in deposits to contain contagion from spreading across the banking sector.
While the exact nature of the investigation remains unclear, a source familiar said a formal announcement from the Justice Department is expected in the coming days.
According to former federal prosecutors, one area that may intrigue Justice lawyers involves shares sold by top company executives before the bank imploded.
Silicon Valley Bank CEO Greg Becker sold $3.6 million of company stock two weeks before the bank reported massive losses in the run up to the bank's implosion, according to regulatory filings.
"A top company executive engaging in a significant financial transaction so close to a cataclysmic event makes sense as something that would be interesting to prosecutors," said Tamarra Matthews Johnson, a former Justice Department lawyer who is now in private practice.
The sale has triggered new scrutiny of Becker and prompted some politicians to call for him to give the money back.
Becker has not been accused of any wrongdoing in connection with the stock sale. Becker did not return NPR's request for comment.
The Wall Street Journal earlier reported news of the Justice Department investigation.

@AndyJ said:
Oversight and regulation matters. The 2018 change in the regulatory scheme (as detailed on Marketplace Morning Report today) was to move the bank exemption from oversight up from $5 billion or less valuation to $450 billion or less. No stress tests, no risk assessment, nothing.