The Second Wave: Why Regional Banks Are Cracking Under the Weight of the Treasury
Another regional banking crisis might already be underway. Here’s what the signs are telling us — and what B:Side sees ahead.
The market didn’t scream. It didn’t crash. It didn’t wave a flag. It just... shifted. Quietly. But if you knew what to look for, the message came through loud and clear.
At 3:25 PM on September 30, 2025, a half dozen regional bank stocks all took a sharp turn lower. Zions, First Horizon, Citizens Financial, Regions, Truist — all down 2% or more. It wasn’t a bloodbath. But it wasn’t nothing, either. It felt like a whisper in a crowded room: something’s wrong.
And then, just to really drive the point home, the Federal Reserve made a move it hadn’t made in months: it quietly injected $5 billion in overnight repos into the system. That, too, didn’t scream. But it thudded. The kind of thud you feel in your gut before your head catches up.
This is how cracks begin.
What Treasury Supply Has to Do With Bank Panic
Let’s start here: since 2020, the U.S. Treasury has been printing debt like it found a cheat code.
The official number? Treasury issuance is up more than 30% since the pandemic. That’s not just a fiscal footnote. That’s a structural fault line.
Banks, especially regionals, are the poor souls expected to absorb this flood of debt. They loaded up on long-dated Treasuries during the zero-rate bonanza, and when rates jumped, those same “safe” assets turned radioactive.
Unrealized losses on bank-held Treasuries now surpass what we saw in 2008. Let that sink in. Surpass.
This Isn’t About Bad Loans. It’s About Bad Plumbing.
The 2023 regional bank failures taught us that it’s not just about bad loans or credit risk. It’s about liquidity.
Banks don’t fail slowly. They fail all at once. Usually because they can’t sell what they need to sell fast enough.
In March 2023, Silicon Valley Bank collapsed in under 48 hours. Not because their assets were worthless, but because they couldn’t sell them without locking in massive losses.
Today’s banks are facing the same setup. Long-term Treasuries that are technically “risk-free” but functionally frozen. If depositors bolt or markets seize up, those bonds become dead weight.
The Fed knows this. That $5B repo on September 30 wasn’t a typo. It was a signal.
Liquidity is Vanishing. And Everyone Knows It.
The Fed’s reverse repo facility — basically a giant sponge soaking up excess liquidity — is nearly bone dry. That means the system is running out of extra cash.
SOFR spreads are widening. Bank reserves are dropping. Repo market volatility is rising. All of it smells like funding stress.
We’ve seen this movie before. In 2019, repo rates spiked overnight, and the Fed had to step in. In 2020, it was COVID. In 2023, it was SVB.
Now, it’s the weight of a trillion dollars in new Treasury supply colliding with a banking system that’s already full.
And guess who’s most exposed? Not JPMorgan. Not Goldman. Your friendly neighborhood regional.
Regional Bank Stocks Are Flashing Red
Take a look at the price action on September 30. First Horizon down 2.18%. Zions down 2.58%. Truist down 2.21%. Citizens Financial down 2.53%.
These aren’t meme stocks. They don’t move like that on a whim. These are the same names that got hammered in 2023. And they’re back in the danger zone.
Moody’s downgraded many of them in the last crisis, citing liquidity and interest rate risk. The issues haven’t been resolved. They’ve just been papered over.
Literally.
Commercial Real Estate: The Second Punch
As if the bond losses weren’t enough, commercial real estate (CRE) is quietly falling apart.
Vacancies are high. Refinancing is brutal. Office space is still in an identity crisis.
Banks with big CRE books are watching defaults tick up. Charge-off rates are projected to hit 0.66% this year. It sounds small, but in banking, that’s the equivalent of your roof starting to leak in a thunderstorm. You can ignore it... until you can’t.
The Fed Is Quietly Backstopping Again
Remember how the Fed responded in 2023? Bank Term Funding Program. Discount window injections. Quiet guarantees to stabilize the system.
Well, the movie may be back on. That $5B overnight repo on 9/30 is eerily reminiscent of the early days of the 2008 and 2023 interventions.
And the timing? Just after a long week of declining regional bank stocks, and in the shadow of a volatile post-election market that dropped 10% in a week.
No one’s ringing the panic bell yet. But someone just unlocked the fire extinguisher.
Why This Crisis Is Different
In 2008, the rot was in housing. In 2023, it was in long-duration Treasuries and social media-fueled bank runs.
In 2025, it’s the bond market itself.
The Treasury is flooding the market with debt. Banks don’t have the reserves to absorb it. The Fed is tightening and draining liquidity. And the balance sheets are already full.
This isn’t just about risk. It’s about math.
There are more bonds than buyers. And banks can’t absorb the rest without breaking something.
Retail Panic Hasn’t Hit. Yet.
Right now, it’s institutions that are pulling back. Big money is shifting to Treasuries, gold, and yield-bearing stablecoins.
Retail is always late. Until they aren’t.
The moment someone yells “fire,” it won’t be long before the exits get crowded. And with social media still acting like lighter fluid on financial panic, it won’t take much.
The setup is here. All it takes now is a spark.
What B:Side Is Watching — And Doing
We’re not just sitting around pointing at charts.
At B:Side, we’re monitoring:
Treasury auction demand and bid-to-cover ratios
Reserve balances and reverse repo drawdowns
Commercial real estate exposure in our footprint
Partner bank behavior and deposit activity
We’re also updating contingency plans.
Because if regional funding dries up again, we need to be ready to help stabilize the situation for our partners, borrowers, and community. We did it in 2023. We’ll do it again if we have to.
And let us be clear: we support regional banks. We partner with them every day. We know how essential they are to the communities we serve. Our view of market stress isn’t a critique of their role. It’s a recognition of the landscape we all have to navigate together.
That’s why B:Side is actively standing by to support our regional partners. Whether through loan participations, direct lending, back-office servicing, or working capital solutions for their clients, we’re not stepping back — we’re leaning in.
This isn’t our first time navigating chaos. It probably won’t be our last.
Don’t Ignore The Signs
There’s an old saying: markets don’t crash on bad news. They crash on surprises.
Right now, the signs aren’t hidden. They’re just being ignored.
Treasury supply is excessive. Bank reserves are thin. CRE is wobbly. Regional bank stocks are flashing warning lights.
And the Fed is already backstopping. Again.
This isn’t about being alarmist. It’s about being clear-eyed. If we’re lucky, this stays a tremor. If not, we’ll look back at September 30th as the day the second wave started.
We’re watching closely. We hope others are too.
And we’re not waiting for the sirens to start.