The Trouble with Bank Tribbles

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

Fans of the Sci-Fi classic “Star Trek” no doubt know about “The Trouble with Tribbles.”


That was the title of one of the most memorable episodes from the original TV series, an episode that first aired on Dec. 29, 1967 (for all you Trekkies out there). The episode also happens to be my favorite, and for two reasons.

First, it featured cute, fluffy and purring creatures called “tribbles,” which resembled the teddy bear hamsters I raised as a kid. The second reason it’s my favorite is because it warns us that “trouble,” left unchecked, has a way of multiplying exponentially.

That’s what happened with the tribbles, as the trouble they caused was their rapid reproduction and their near takeover of the USS Enterprise. Sure, a few are cute, at first, but when they multiply and then eat up all of the ship’s food, well, that’s a big problem.


This episode reminded me of another “trouble” of sorts, only this trouble is far from science fiction. Unfortunately, this trouble is fact, and it might just be trouble that’s far bigger than we suspect. In fact, the trouble with banks and the recent bank failures is that they could be about to multiply just like those adorable tribbles!

In today’s issue of my daily market briefing, Eagle Eye Opener, my “secret market insider” provided a detailed look of what he calls, “the true indicator of banking stress.”

Let’s check that out now, as the following excerpt will explain to you why the trouble with banks might not be over just yet. More importantly, you’ll discover the one indicator I’m watching to make sure I know if this situation is going to multiply like tribbles…

Determining whether the regional bank crisis is over is the most important near-term issue for markets right now. And while analysts in the financial media often give opposite opinions, luckily, we have a resource that tells us whether the crisis is getting worse or better, and so far, it’s getting worse.


There are currently two loan programs from the Fed that are specifically designed to help regional banks that are experiencing liquidity issues. The first is the Fed discount window, where banks can pledge U.S. Treasuries to access liquidity. It’s been around for a long time, although it’s likely very few people have paid attention to it since the beginning of the great financial crisis (when all of us were paying attention to it!).

The second program is new, the Bank Term Funding Program, which the Fed just created to alleviate the liquidity issues that brought down SVB and SBNY.

Think of these two programs as “bridge loans” the Fed extends to banks which need cash. These are ­­not facilities that banks use regularly, and just like a company (or person) needs a bridge loan to “stay afloat,” there’s a stigma in the banking industry attached to using these facilities. Put simply, if a bank is using them, it’s a sign it is in trouble, which can make the problem substantially worse. Here’s why this matters.

The usage amounts of these two facilities are updated every Thursday after the close. We literally can see how many banks are using both the discount window and the BTFP, and just like any emergency loan program, the higher the usage, the worse the problem.

  • Since the start of March, the usage of the Fed’s discount window has spiked from about $4 billion (prior to the crisis) to $110 billion.
  • Since the creation of the BTFP, use has surged from $0 (because it didn’t exist) to $12 billion two weeks ago, to $53 billion last week!

So, between the two programs, the Fed has had to lend $160 billion in quasi-emergency loans to banks since the beginning of March. As the chart here shows, that dwarfs what was needed during the pandemic, and equals what was needed during the great financial crisis!


As the old adage goes, “Put your money where your mouth is.” So far, banks’ money and their mouths are telling us that the regional bank crisis is not over, and if anything, may be getting worse under the surface.

Now, that does not mean that stocks are going to automatically fall based on this data. These Fed “bridge loans” are designed to prevent bank runs, and so far, they are working. But the fact that more is needed each week implies that stress is very much in the marketplace, and as such, I think that should directly push back on the idea that, while there have been no more bank failures since SBNY, we are not out of the woods yet!

Looking forward, we will be watching this weekly release, and the analysis here is simple: The bigger these numbers get, the worse the stress (even though it may not seem that way on the surface).

That isn’t a reason to dump stocks or withdraw money from a bank, but it is a reason to resist the urge to think that the crisis has totally passed. As long as these borrowing numbers are rising, it has not.

Conversely, if these numbers drop, that’s a sign that stress is legitimately easing, and it will mean the lower probability of a looming bank-inspired “air pocket” in stocks.


For insights like this delivered to your inbox every trading day by 8 a.m., then you must check out my Eagle Eye Opener, right now.


Spock Wisdom

“Insufficient facts always invite danger.”


“Spock” is a veritable fountainhead of wisdom in the “Star Trek” series, as his logical mind cuts through issues with a razor sharper than William of Ockham could ever hone. Yet, what makes Spock’s character so wise is that he is part Vulcan and part human. And while his Vulcan logic leads, his human nature provides him with the requisite emotions that make being human the greatest gift the universe can ever bestow. Remember this the next time your laments engulf you.

Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.

In the name of the best within us,

Jim Woods

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