Since the start of 2024, the stock prices of the troubled institution have fallen 83%, reaching a record low this week before starting to rise again.
New York Community Bancorp (NYCB) stock took a dramatic drop on Wednesday, falling 42% before recovering sharply on the news of a $1 billion rescue package from investors.
After the bankruptcy of crypto-friendly Signature Bank in March 2023, the asset-rich American regional bank with over $100 billion in assets, NYCB, took over the financial institution.
But things have been rough for NYCB recently due to lower-than-expected quarterly payouts, worries about possible losses from commercial real estate loans that haven’t been performing up to par, and weaker-than-expected financial results in Q4.
When trading in NYCB ceased on March 6, awaiting news, the stock price fell more than 42% to $1.76. The announcement of a more than $1 billion strategic equity investment, supposedly meant to “restore investor confidence,” caused shares to jump hours later when trading resumed.
Steve Mnuchin, former Treasury Secretary and new NYCB board member, who oversaw the capital injection, stated, “We believe we now have sufficient capital should future reserve increases be required to be consistent with or exceed the coverage ratio of NYCB’s large bank peers.”
The last day of the Federal Reserve’s bank rescue program is March 11, and NYCB is in for a wild ride only one week before that date.
March 2023 saw the beginning of the Bank Term Funding Program (BTFP) in response to many high-profile bank collapses. To guarantee that banks can service all of their depositors, it sought to increase the amount of funds accessible to “qualified depository institutions.”
The St. Louis Fed reports that the US central bank has distributed $164 billion to failing banks since its establishment.
Amidst the US financial crisis and the aftermath of the failures of Signature Bank and Silicon Valley Bank in March 2023, Bitcoin values jumped 40%. This occurred during the debut of the BTFP.
Author and angel investor Balaji Srinivasan made a statement on the banking disaster on March 7 and drew parallels to the 2008 financial crisis.
The situation is extremely similar to 2008, when it was widely believed that the mortgage-backed securities were AAA. Only this time, the new dangerous waste is the Treasury.
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