Elisabeth Kübler-Ross described five stages of grief: denial, anger, bargaining, depression, and acceptance. ‎On Twitter, describing the typical timeline for a banking crisis, Real Vision’s Raoul Pal posted:

It’s one bad apple,

Well maybe it’s just a few

“Banks remain strong”

It’s the evil short sellers (we are considering a ban)

Ok, now we are banning shorts

Oh, seems that didn’t work

Cut rates

That didn’t work

Panic

Change . . .

Kübler-Ross’s denial stage would include Pal’s “one bad apple,” “just a few,” and “Banks remain strong.” The anger stage would be “evil short sellers,” “banning shorts,” and it “seems that didn’t work.” The bargaining stage would be “Cut rates” and “That didn’t work.” Depression would be “Panic,” with “Change” being the acceptance stage.

We clearly appear to be only in the anger stage. Kimberly Adams writes for Marketplace:

The American Bankers Association is laying some of the blame for that at the feet of short sellers trying to scare people into thinking banks are about to go under so that the stock price falls and they can profit. On Thursday, the ABA sent a letter to the Securities and Exchange Commission asking the agency to look into the issue. . . .

“We’ve been in constant communication with our members, and they’ve shared with us their concerns, including engagement that they’ve seen on social media,” said Naomi Camper, chief policy officer at the ABA. “And many believe that their shares have been manipulated by short sellers. They’re seeing trading in their shares that defy the underlying fundamentals, and they’re worried about it.”

During the Q and A at Berkshire Hathaway’s annual meeting televised by CNBC, Warren Buffett mentioned a bank stock short-selling ban. Reuters reports that Wachtell, Lipton, Rosen & Katz, a law firm that has represented large companies, said in a letter to clients that “the Securities and Exchange Commission (SEC) should regulate what it defined as ‘coordinated short attacks’ by imposing a 15-trading day prohibition on short sales of financial institutions.”

Taking the other side of the argument is longtime bank analyst Dick Bove. Bloomberg reports: “‘The funds and others who are shorting bank stocks are doing the American public a meaningful service,’ analyst Bove said in a note. ‘They are winnowing the banking industry and forcing these companies to stabilize their financial statements.’”

Bove is right. The average depositor can’t make heads or tails of their bank’s financial statements. At least short sellers give John and Jane Q. Public a heads-up about their banks. Bank regulators are like the fire department, the hook and ladder doesn’t arrive until a house is fully inflamed.

If it plays out the way Mr. Pal believes, a couple more banks will fail, the Securities and Exchange Commission will impose a short-selling ban, and then a few more banks will fail. Then, it will be time for a Federal Reserve rate cut.

Reuters reports that the Fed futures market is factoring in a more than 70 percent chance of a rate cut at the Fed’s September meeting.

This summer may be an interesting one.

About the Author

Douglas French is President Emeritus of the Mises Institute, author of Early Speculative Bubbles & Increases in the Money Supply, and author of Walk Away: The Rise and Fall of the Home-Ownership Myth. He received his master’s degree in economics from UNLV, studying under both Professor Murray Rothbard and Professor Hans-Hermann Hoppe.

Article cross-posted from Mises.

Unfortunately, the recent banking panic has greatly accelerated matters.  In fact, a whopping 98.4 billion dollars was pulled out of U.S. banks during the week ending March 15th…

The readout, released shortly after the market closed Friday, came around the same time as new Fed data showed that bank customers collectively pulled $98.4 billion from accounts for the week ended March 15.

That would have covered the period when the sudden failures of Silicon Valley Bank and Signature Bank rocked the industry.

Just think about that.

Nearly 100 billion dollars in deposits evaporated in just one week.

And it turns out that small banks were being hit the hardest.  Unsurprisingly, big banks actually saw enormous inflows…

Data show that the bulk of the money came from small banks. Large institutions saw deposits increase by $67 billion, while smaller banks saw outflows of $120 billion.

That article didn’t give numbers for mid-size banks, but it appears likely that they experienced large outflows as well.

Overall, JPMorgan Chase is telling us that the “most vulnerable” banks in this country have “lost a total of about $1 trillion in deposits since last year”…

JPMorgan Chase & Co analysts estimate that the “most vulnerable” U.S. banks are likely to have lost a total of about $1 trillion in deposits since last year, with half of the outflows occurring in March following the collapse of Silicon Valley Bank.

This really is a “banking meltdown”, and it has been going on for quite some time.

And as Bill Ackman has aptly noted, if something is not done our small and mid-size banks are headed for disaster.

There are more than 4,000 banks in the United States right now, and the vast majority of them are rapidly losing deposits.

As a result, U.S. banks are being forced to turn to the Fed for help at a very frightening rate…

Banks have been flocking to emergency lending facilities set up after the failures of SVB and Signature. Data released Thursday showed that institutions took a daily average of $116.1 billion of loans from the central bank’s discount window, the highest since the financial crisis, and have taken out $53.7 billion from the Bank Term Funding Program.

Meanwhile, the banking crisis in Europe has taken another very alarming turn.

On Friday, shares of Deutsche Bank plunged due to renewed concern about the stability of Germany’s biggest bank…

Deutsche Bank shares fell on Friday following a spike in credit default swaps Thursday night, as concerns about the stability of European banks persisted.

The Frankfurt-listed stock was down 14% at one point during the session but trimmed losses to close 8.6% lower on Friday afternoon.

The German lender’s Frankfurt-listed shares retreated for a third consecutive day and have now lost more than a fifth of their value so far this month.

It will be interesting to see if Credit Suisse or Deutsche Bank ends up going under first.

Of course the politicians continue to tell us that everything is just fine.

In fact, German Chancellor Olaf Scholz is insisting that there is “no reason to be concerned”…

German Chancellor Olaf Scholz said Friday that there was “no reason to be concerned” about Deutsche Bank.

“It’s a very profitable bank,” he told reporters in Brussels, where EU leaders issued a joint statement describing the European banking system as “resilient, with strong capital and liquidity positions.”

Deutsche Bank declined to comment.

Once upon a time we were told that Lehman Brothers would be just fine.

And earlier this month we were told that Silicon Valley Bank would be just fine.

As Robin Williams once observed, these banks love to make excuses.

https://twitter.com/defundnpr3/status/1639987730720382976

But it isn’t just a few isolated banks that are in trouble these days.

Right now the entire system is coming apart at the seams, and Steve Quayle is warning that things “will really kick into high gear in April”…

The word collapse is a great word, and the other word that comes with collapse is calamity. With the collapse and calamity under way, people think, well, as long as it doesn’t touch me, I’ll be okay or I’ll be dead, and my kids will have to deal with it. What a selfish way to deal with the Biblical times we live in. I think we are in big trouble with this banking situation that will really kick into high gear in April.

You may not have much sympathy for the banks, and I understand that.

But what is going to happen to our economy when the flow of mortgages, auto loans and credit cards is greatly restricted?

Our country is already being torn to shreds like a 20 dollar suit, and economic conditions are still relatively stable.

So what is going to happen when we do fall into a very deep economic depression?

These are such perilous times, and they are only going to get more difficult in the months ahead.

Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.

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Article cross-posted from The Economic Collapse Blog.