A lot of people weren’t there in 2008 or otherwise forget or misremember, but the Fed caught a lot of shit for Bear Stearns because they guaranteed $30bln of the worst pile of MBS sht you can imagine in exchange for JPM $2/sh bid — the BSC Madison Ave HQ alone was worth more. 1/8

So JPM was actually forced to raise their takeout to $10/share just to try to ease the terrible optics of something that was so obviously favorable. Yes - BSC collapsed, and then JPM had to up the price. But Fed was still on hook for up to $30bln. 2/

By the time September rolled around, the Fed had taken so much sht over JPM-Bear that this was part of the calculus in letting Lehman file and roll the dice. The Fed suddenly cared about moral hazard for all of 48hrs. But suddenly it was “wait wtf is AIG Financial Products.” 3/

Moral of the story here: despite what has happened, this is Bear Stearns for regional/small banks - the shittiest most levered garbage bank always gets drilled first - but saved. But as I said this weekend, there are others that are upside down on AFS/HTM securities. 4/

Big regional top 10ish will be fine. Problem is the public is only beginning to get hip to the fact that you can buy a money market fund easily for 4%, no load. Why park balances at 0? And so balances will continue to shift from bank deposits to MMFs until banks raise rates. 5/

But since upside down banks can’t afford to jack deposit rates and now with “BTFD” Fed facilities they can borrow against HTM without having to sell and take a mark, they can meet depositor outflows but deposits will gradually drift over time to earn a yield. 6/

At some point, a bank will fold that does not meet “systemic” exception criteria, and balance holders who thought they were insured are forced to wait in line …and that will be your Lehman moment for a wave of small-midsized bank blowouts … 7/

… especially as the ex-10 regionals have less HTM and more CRE, ie less collateral with which to tap the BTFD window. And yes I am using that BTFD acronym incorrectly on purpose.

Now go unleash some of those spirits. This is what sugar rush tastes like. /Fin