1/ CALLING OUT A DOUBLE STANDARD: I chewed on @CampbellJAustin's great🧵about selective enforcement against #crypto while protecting #tradfi, which prompted me to review the FTX fraud. Lo & behold, there seems to be ANOTHER pattern of selective enforcement

https://x.com/CampbellJAustin/status/1840077023433093517

2/ The FDIC's Inspector General disclosed that 11 US banks "may have had involvement in alleged wire transfer fraud," & I tweeted the below screenshot of it on February 22, 2023:

https://x.com/CaitlinLong_/status/1632258328322625536

1/ I DUG INTO the Fed's latest master account list, released last night. The big news is what's happening with OCC-chartered trust companies--2 new ones applied for Fed master accounts. This is noteworthy for several reasons, explained below. Data here: federalreserve.gov/paymentsystems… 2/ But first, among the ~430 Fed master account holders that are not FDIC insured (or equivalent), 11 are trust companies chartered by the OCC:

🚨 1/ BOMBSHELL REVELATION that Silvergate was liquid & solvent when the Fed forced it to close changes EVERYTHING when analyzing the March 2023 bank failures. Look at the dates:
* Mar 8: Silvergate voluntarily liquidates
* Mar 10: Silicon Valley fails
* Mar 12: Signature fails 2/ Stop & think about that timeline.

Think.

Would Silicon Valley Bank have failed had Silvergate not been forced by the Fed to close just 2 days earlier?

Recall the bank run at Silicon Valley really got started on Mar 9--the day after Silvergate announced it would liquidate.

DID I JUST SEE US GET SEN KELLY FROM AZ, @twobitidiot ??? 🙌 AND HICKENLOOPER OF CO!!!

Peeps—all these Dems are rejecting @ewarren & crossing the Biden White House. This is more than I’d expected. PEAK WARREN IS OVER!!!

QUIET PART OUT LOUD: they're rightly worried abt Hong Kong via USD stablecoins becoming a hub for USD clearing that's outside US's reach, while the US dithers. But it's not just HK. Obvious fast path for Milei to dollarize Argentina is via USD stablecoins.
ft.com/content/39f101… 2/ 👇But the US (under Sen Warren's control of the Biden Admin's financial svcs policy) is blocking everyone working on regulatory-compliant USD stablecoins, while letting big banks continue to build their own versions.😡 But the world already blew past the walled-garden versions

1/ OH BOY...#PrimeTrust's failure just took a BIG turn--its receiver today filed to put it into voluntary Chapter 11 (federal bankruptcy). I was afraid for Prime Trust customers of this very outcome & discussed why in the debate w/ @mikebelshe on @zGuz's podcast last month. 2/ In that debate, I laid out why banks as legal entities better protect customers than state-chartered trust companies in the event of failure--bc the federal bankruptcy process is designed to bring assets into the estate, while bank receivership is designed to protect customers

1/ 🚨ON THE DAY #FedNow is scheduled to launch, I noticed something...interesting, shall we say. 🤔Among the list of banks & credit unions in the Fed-authorized 1st group of participants is a #fintech--& it's a European fintech, not even an American one. So I went digging... 2/ But wait, you're thinking, how does a #fintech even have a Fed master account so it can qualify to clear US$ payments at the Fed--isn't the Fed keeping #fintechs out???

Yes, yes it is--except for certain fintechs. Europe lets its fintechs qualify for special bank charters.

1/ BIG NEWS for #fintech! A sixth US state--Idaho--is willing to charter uninsured, non-lending, 100% reserve banks that are eligible for Fed master accounts (the other states are CT, ME, NE, VT & WY). This trend could turn the "bank-as-a-service" (#BaaS) model on its head!!!!! 2/ The revelation was buried deep in the Fed's master account database (which Congress had to force the Fed to release--which it did late on a Friday afternoon before the Juneteenth 3-day weekend. Hoping no one would see it???) It's a #GiftThatKeepsGiving.
federalreserve.gov/paymentsystems…

TWEET 🧵on state-chartered trust companies, #PrimeTrust & whether customer funds are really theirs amid a failure. I responded to the below tweet from @mikebelshe but the thread was cut up, so I'm re-posting here in whole. First, Mike's tweet & then my 11-tweet response in whole: Mike's tweet here, asserting "it's the client's money" and "will you stop pushing the bullshit that WY is somehow special?"--@mikebelshe

https://twitter.com/mikebelshe/status/1674256330377551872?s=20

1/ WOW--PRIME TRUST RECEIVERSHIP WILL BE A MESS & it's *EXACTLY* what the State of #Wyoming enacted its laws to avoid. Big ?s:
*who will pay the legal bills--NV taxpayers or #PrimeTrust customers??
*some PrimeTrust customers are IRAs/ERISA plans--can these even be bailed in??

https://twitter.com/tier10k/status/1673743351785439251

2/ Avoiding this situation is *EXACTLY* why #Wyoming set up special-purpose banks to service digital assets. Things Wyoming did but Nevada didn't:
*require SPDI banks to pre-fund receivership costs w/ regulatory capital
*clarified its UCC
*uses banks, not non-banks. Why? 👇

1/ THIS IS WHY Biden Admin's anti-#crypto strategy to push crypto into the shadows makes no sense: They want compliance w/ AML/CFT laws, but crypto is just code--so compliance can only be assured at the very connection points that they're actively choking.
home.treasury.gov/news/press-rel… 2/ It's *already* the case that the world's 8bn people can create & transact in US dollars w/ any permission or compliance screening--simply by downloading & running code on their smartphone. Given that reality, what's the optimal policy to maximize compliance w/ AML/CFT laws??🤔

5M views for @RobertKennedyJr’s anti-#CBDC tweet👇. #FedNow isn’t a CBDC but all the criticism from different corners is interesting.

A big issue w/ FedNow=banks don’t have enuf cash to handle the higher liquidity demands of 24/7/365 pymts. Banks need to hold *a lot* more cash!

https://twitter.com/robertkennedyjr/status/1643658603885101073

2/ Yest, while on a podcast w/ @CathieDWood, I said out loud for the first time: #FedNow may not actually launch in July. Banks will need *a lot* more liquidity to handle 24/7/365 pymts, & to raise that cash they’d need to sell assets at loss—which wld reveal the solvency problem

1/ A 🧵ON THE @federalreserve's precedent-setting 86-page @custodiabank order, released on Friday. Custodia just published a blog post highlighting the newly-articulated Fed policies + the procedural abnormalities it reveals.
custodiabank.com/press/custodia… 2/ First, the policy items. Here are the first two:

1/ ANOTHER 🧵 ON A KEY QUESTION: astute thinkers are asking why community banks matter & how widespread this panic cld become. Dunno--but it *cld* spill over to big banks. One scenario: if FDIC depletes its insur fund, it borrows from US Treasury--which relies on primary dealers. 2/ Many people are saying big banks are safe bc they hedged the interest rate "gap risk" that is now plaguing community banks + they've had fewer deposit withdrawals. Yes, short-term. But here's the scenario:

https://twitter.com/CaitlinLong_/status/1634249490902179840?s=20

1/ SVB—WHAT WENT WRONG
* mgmt: debauched its balance sheet
* depositors >$250k: thought their deposit at a fractional-reserve bank wasn’t an unsecured loan to a leveraged borrower (it is)
* Fed as regulator: that morning, the top cop said Fed-supervised banks don’t have bank runs 2/ * Fed FOMC: created the “gap risk” now kneecapping community banks (which met their bank capital rqmts by buying long-term bonds)
* bank risk managers: didn’t realize such gap risk (unhedged risk of a spike in interest rates) would morph into big liquidity risk amid a bank run

1/ I'VE BEEN THINKING abt #crypto & banking, which is in the news these days (& I'm living it too). I've spent yrs thinking abt the issues. Yes it *IS* possible for trad banks to safely bank #crytpo industry: simply back demand deposits 100% w/ cash held in a Fed master acct.💡 2/ But that's NOT what the US banks banking #crypto generally are doing. Pls see for yourselves by reviewing their financial statements--you'll see, eg, >10yr securities backing demand deposits that customers cld withdraw in minutes🤦‍♀️. That's a prob but isn't inherent to #crypto!

1/ IT'S TIME FOR ME TO REVEAL A FEW THINGS. I've just published a post "Shame On Washington, DC For Shooting A Messenger Who Warned Of #Crypto Debacle." Link to post is here:
caitlin-long.com/shame-on-washi… 2/ First, the revelations. Today, I’m publicly disclosing for the first time that (a) I handed over evidence to law enforcement of probable crimes committed by a big crypto fraud, starting months before that company imploded and stuck its millions of customers with losses, and...

1/ MY SUMMARY🧵re: today's SEC #Custody Rule proposal, which is here: sec.gov/rules/proposed…

*NONE OF THIS IS LEGAL ADVICE*

tl;dr--it doesn't kill #crypto custody; it's a move against state-chartered trust companies; there's one big issue, tho, which will trigger huge pushback 2/ THE BIG ISSUE (& I haven't seen anyone point this out yet)=the rqmt for custodians to indemnify for "negligence, recklessness or willful misconduct." All the banking, #WallSt, commodities & #crypto industries will push back together on this bc it could kill custody biz broadly

A KEY from proposed changes to SEC Custody Rule: account must protect customer assets in event of custodian insolvency. This prob means qualified custodians must be under statutory receivership regime to protect segregation in insolvency & state-chartered trust cos in crosshairs Yep, here's more. Gensler was clear abt this in his prepared remarks & here it is in writing: Assets passing OUTSIDE OF THE BANK'S INSOLVENCY is key. Translation: SEC wants all qualified custodians to be subject to special receivership regime, ie not subject to US Bankruptcy Code

1/ THINKING ABOUT all things bond mkt after catching up on morning reading☕️. 15yrs of my #WallSt career was helping pension plans/life insurers fix their past mistakes (most of which made them inherently short vol). Fundamental probs w/ bond mkt structure exacerbated this prob. 2/ The underlying issue pertains to how fin mkts deal with duration. Pensions & life insurers have the longest-duration liabilities in the fin system & yet they scramble to find duration-matched assets to buy bc there’s either a structural shortage of them, or they’re in banks.

1/ WOW--pageviews on this kinda viral. Thanks all!🙏 2 reactions to comments:
A) ppl seem surprised that I'm talking abt #bitcoin as pymt tech, not as an asset. Not new. I've always said price is the LEAST interesting aspect of #BTC + been critical of its leveraged financializers

https://twitter.com/CaitlinLong_/status/1573443770536067072

2/ Leverage-based financializers & esp criminals & fraudsters set the industry back + manipulated secondary market price (#bitcoin became #WallSt's latest plaything🤮). "Play stupid games win stupid prizes" as saying goes. Hope everyone learns. Innocents: sorry for your losses.