The Importance of Regional Banks Following Basic Finance Principles

💼 Michael Milken is a highly influential financier and founder of the Milken Institute, known for his work in high yield finance.

📚 Milken is also a philanthropist and author, focusing on public health and medical innovation.

🏛️ The interview touches on the role of regional banks and the current state of the banking industry.

🏦 Regional banks should have followed basic financial principles of borrowing short and lending long.

💸 Banks borrowed at low rates and bought intermediate securities, resulting in a potential unrealized loss of trillions of dollars.

🔒 Banks had enough credit and equity to absorb credit losses, but their excessive borrowing increased their risk.

📉 Regional banks like Silicon Valley Bank and First Republic faced financial challenges due to interest rate risk.

💰 The Federal Reserve's actions of printing money helped mitigate losses in the banking sector.

🌍 Central banks in Europe and Asia also experienced losses in their efforts to stabilize the economy.

🏦 Regional banks should have followed basic financial principles.

💼 There is a conflict between the Federal Reserve and the Treasury in their approach to helping banks.

📉📈 The Federal Reserve is aggressively fighting inflation through interest rate hikes.

💼 Regional banks should have followed basic financial principles.

💰 Financial institutions have reduced flexibility by borrowing short-term and investing in intermediate securities.

🏦 There is a significant amount of liquidity in the financial system, including Money Market funds and major banks.

📉 The current situation is a result of interest rate risk, not credit risk.

💼 Private credit is expected to increase, with long-term asset owners becoming loan owners.

📚 The lesson learned is to match liabilities and follow basic finance principles.

💰 Regional banks experienced a decrease in loans due to reduced checking accounts and commercial deposits impacting their balance sheet.

📊 Since the 1970s, the financing of this country has relied on public and private markets, with banks only holding 20% of the loans.

🏦💪 As loans shift away from the banking system, there will be a stronger presence of long-term liability holders like pension funds.