S7 E2: BNC: The Relationship Between Stock Prices and Bank Health, Tokenization’s Disruptive Potential, and Lots of FHLB Talk with Steven Kelly.

Apr 17, 2024

Steven Kelly, Associate Director of Research at the Yale Program on Financial Stability, discusses the relationship between stock prices and bank health, debunking myths and emphasizing the misunderstood aspects of bank solvency. He also explores the potential of tokenization in financial transformation outside of crypto contexts, highlighting regulatory concerns. The conversation further delves into the role of the FHLB in the American financial system and the dynamics of financial institutions, including a heated debate about the merits of potatoes.

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Introduction

00:00 • 2min

Exploring the Stock Price-Bank Health Nexus

02:18 • 15min

Exploring the Potential of Tokenization in Financial Transformation

16:48 • 16min

Federal Home Loan Bank (FHLB) in the American Financial System

33:08 • 8min

Exploring Financial Dynamics of Banks, Supervisors, FHLBs, and FDIC

41:16 • 4min

Banking Systems and Financial Institutions

44:52 • 15min

The Great Potato Debate

01:00:19 • 8min

In this super special edition of Bank Nerd Corner, Alex and Kiah are joined by Steven Kelly, the Associate Director of Research at the Yale Program on Financial Stability.

They dive into the Q1 Bank Earnings, debating exactly how much stock prices matter in determining bank health. Is there too much emphasis placed on the connection between stock prices and deposit runs at the bank? Kiah, Alex, and Steven debunk some of the biggest misconceptions about bank solvency and unravel how banks have always operated at negative equity—and why that doesn’t mean they won’t turn a profit eventually.

Later, Steven shares his insights into tokenization outside of its crypto origins and explains which aspects of the underlying blockchain technology regulators are most excited about. What are the downsides and risks? And despite crypto’s widespread problems, how will blockchain technology sustain outside of it?

Plus, the gang also unpacks the role of the FHLB in the banking system, discusses the explosive growth of private credit, and gets into a heated debate about the merits of… potatoes. Yep—you heard that right. Kiah has some *thoughts* about the mediocrity of potatoes. We never said they were correct though.

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00:02:44 – Q1 Bank Earnings Released

00:18:21 – Tokenization

00:35:44 – The Federal Home Owned Bank

00:55:04 – Private Credit

01:04:32 – Go Off Kiah!

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