In recent weeks there have been numerous high profile bank “glitches”, accounts are being shut down without warning at a staggering rate all over the nation, and more institutions continue to get into very serious financial trouble. For a while, I was ignoring some of these reports because I thought they were isolated issues. But when you step back and take a bigger picture view of things, it really does appear that we have a major problem with the banks.
According to CNN, on Friday many of our largest banks “were hit by deposit delays”…
Multiple US banks were hit by deposit delays on Friday caused by an error at a payment processing network, according to the Federal Reserve.
The Clearing House, which operates the Automated Clearing House system, which allows banks to send electronic payments to each other, experienced a processing error with a batch of bank transactions. Banks send everything from direct deposit paychecks to customer bill payments for mortgages and utility bills through the ACH system.
This caused a tremendous amount of distress, because paychecks were not showing up in the accounts of a lot of people.
And considering the fact that more than 60 percent of the country is currently living paycheck to paycheck, that is a big deal.
Incredibly, some banks are still trying to fix the problem. The following is a message that PNC Bank posted on Twitter on Sunday…
Good morning, Amy. Due to an industry-wide delay with Federal ACH transactions, some ACH credits and debits, including some Direct Deposits, haven’t been processed. We recommend that you contact your employer or ACH originator for more information. Thank you.
There have been so many bank “glitches” this year.
So why is this happening?
Could this latest incident have been caused by a cyberattack?
I wish that I had answers to those questions.
Meanwhile, banks all over the U.S. are suddenly shutting down thousands of accounts without any warning whatsoever…
The reasons vary, but the scene that plays out is almost always the same.
Bank customers get a letter in the mail saying their institution is closing all of their checking and savings accounts. Their debit and credit cards are shuttered, too. The explanation, if there is one, usually lacks any useful detail.
Can you imagine how you would feel if your cards suddenly did not work and you did not have access to your money?
Right now, we are seeing a tsunami of “de-risking” by banks that is unlike anything we have ever seen before…
Or maybe the customers don’t see the letter, or never get one at all. Instead, they discover that their accounts no longer work while they’re at the grocery store, rental car counter or A.T.M. When they call their bank, frantic, representatives show concern at first. “Oh, no, so sorry,” they say. “We’ll do whatever we can to fix this.”
But then comes the telltale pause and shift in tone. “Per your account agreement, we can close your account for any reason at any time,” the script often goes.
These situations are what banks refer to as “exiting” or “de-risking.”
To me, this is one of the most alarming financial trends that I have seen in a long time.
On top of everything else, Citizens Bank in Iowa has become the sixth U.S. bank this year to go belly up. The following comes from a press release issued by the FDIC…
Citizens Bank, Sac City, Iowa, was closed today by the Iowa Division of Banking, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect depositors, the FDIC entered into a Purchase and Assumption Agreement with Iowa Trust & Savings Bank, Emmetsburg, Iowa, to assume all of the deposits of Citizens Bank.
The two branches of Citizens Bank will reopen as branches of Iowa Trust & Savings Bank on Monday during normal business hours. This evening and over the weekend, depositors of Citizens Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.
Depositors of Citizens Bank will become depositors of Iowa Trust & Savings Bank, so customers do not need to change their banking relationship in order to retain their deposit insurance coverage. Customers of Citizens Bank should continue to use their existing branch until they receive notice from Iowa Trust & Savings Bank that it has completed systems changes to allow its branch offices to process their accounts as well.
As of September 30, 2023, Citizens Bank had approximately $66 million in total assets and $59 million in total deposits. In addition to assuming all of the deposits, Iowa Trust & Savings Bank agreed to purchase essentially all of the failed bank’s assets.
U.S. banks are sitting on an absolutely colossal mountain of unrealized losses.
So it is just a matter of time before more fail.
And other types of financial institutions are also on shaky ground.
In fact, the biggest publicly traded brokerage firm in the country has started giving large numbers of workers the axe…
Charles Schwab on Monday began laying off employees across the company.
Schwab, the largest publicly traded US brokerage, didn’t disclose how many employees were affected in an internal message seen by The Wall Street Journal. Some remaining employees will have new jobs or managers, according to the message.
Of course layoffs are starting to pick up speed from coast to coast.
According to Zero Hedge, the number of employed Americans went down by 348,000 last month…
Yes, payrolls may still be positive but the actual change in monthly employment isn’t. In fact, in October the number of employer Americans collapsed by 348K (per the Household Survey). This was the second negative print this year, and the 7th negative employment month since the covid crash. Ironically, since then, we have seen just one negative payrolls months which makes sense, since the nonfarm payrolls number is far less accurate and much more gamed due to its market-moving abilities. The plunge in employment coupled with the jump in unemployed workers (by 146K) is also the reason why the unemployment rate unexpectedly went up.
Economic turmoil is erupting all around us, and much more chaos is on the way.
So I hope that you have prepared for very harsh economic times, because the pace of change is only going to get quicker from here.