“Now comes the more controversial part. First he marks to market losses on loans and securities created during 2020 and 2021, for the impact of this year’s Fed rate hikes. That right there is enough to push banks into insolvency, with some $1.74 trillion of losses from marking to market. Another $794 billion losses comes if bank holdings of U.S. Treasury securities, mortgage-backed securities and state and municipal securities also are marked to market. Put it all together, on Whalen’s calculations, and banks have a $1.3 trillion shortfall as of the second quarter.”
USAGOLD note: Why banks can live in a fantasy land in which it does not have to mark its assets to market is one of the great mysteries of contemporary finance. In a few short sentences (posted above), Christopher Whalen, the respected chairman of Whalen Global Advisors, explains how deep a hole the Fed and commercial banks have dug for themselves, i.e., the reality.