First Republic Bank Becomes the Latest Bank To Be Rescued, This Time By Its Riva...
source link: https://news.slashdot.org/story/23/03/16/1951243/first-republic-bank-becomes-the-latest-bank-to-be-rescued-this-time-by-its-rivals
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First Republic Bank Becomes the Latest Bank To Be Rescued, This Time By Its Rivalsbinspamdupenotthebestofftopicslownewsdaystalestupid freshfunnyinsightfulinterestingmaybe offtopicflamebaittrollredundantoverrated insightfulinterestinginformativefunnyunderrated descriptive typodupeerror
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California-based First Republic has experienced an exodus of depositors since the failures of those two banks, as many of its customers moved their money to larger rivals. That happened even after the lender said it had lined up $70 billion in new financing from both the Federal Reserve and the world's largest bank, J.P. Morgan Chase. First Republic also noted it was eligible to seek additional funding from the Fed if there were heightened demand for withdrawals. The bank has also said its balance sheet is sound and that depositors are safe, but investors have still worried they were vulnerable to a similar run on deposits as Silicon Valley Bank.
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Nonsense, they just printed a fresh $30B so they're flush with cash.. haha
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They don't even have to print it, Just wack a few more zeros onto the balance in the books. No one will ever know.
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They can do even better than that. A bank may lend you $1,000 even if it doesn't actually have that $1,000 in its vault. Of course depends of the lender to repay the loan, but when that happens the bank then has for all intents and purposes created itself $1,000 out of thin air.
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Twitter/Reddit or the media can cause a bank run just by rumors. It can be self-fulfilling. In fact this bailout itself might do something like that.
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Any bank rumored to be bankrupt is. No bank, not a single one, could survive a run. Not because they're in bad shape, but because that's how banks work. They don't sit on your savings account, they lend that money to companies and people to earn the interest. And that works pretty well until suddenly EVERYONE shows up at their door and wants their money back NOW.
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If a real bank run happened, the average bank branch would probably be cleaned out within minutes to hours. I've read that the average branch doesn't have more than maybe 50K sitting in their vault. They only keep enough cash on hand to handle their average daily check cashing operations, which these days are probably very low volume with things like direct deposit and debit cards. People still cashing checks likely are those not served by bank accounts and are doing it at their corner check cashing spot/lo
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While true, I am not talking about a branch. I'm talking about the whole bank. You can bring down BoA with a credible rumor of them not being solvent.
There is usually very little actual cash in the average bank today. If you go and take a closer look at the fine print in your banking contract, you'll find that you have to pay a rather hefty withdrawal penalty in case you want to withdraw a serious amount of cash without announcement (usually around 100,000, i.e. nothing a normal person would want to withdra
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Show your work. Demonstrate your claim, please.
The whole point of deposit insurance is to make rumors of bank insolvency implausible to most depositors, meaning they will not trigger a bank run. Other large banks have larger fractions of insured deposits than SVB and Signature Bank, and -- except for Citi -- also higher than First Republic: https://www.axios.com/2023/03/... [axios.com] . It is much harder to make a convincing rumor of insolvency for banks with lots of insured deposits.
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I saw this one.... "It's a Wonderful Life"... but wait, they didn't have Twitter _or_ Reddit back then!
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"Are you doing okay, George? Do you need any police?"
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The devil is of course in the details. Why would a handful of mega banks decided to prop up a competitor when they would instead gobble up its assets out of bankruptcy.
The surface reason is of course to stave off interventions by regulators who might balk more industry consolidation. On the other hand its unlike them do anything without some direct path to profits...
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Because the world is not necessarily a zero sum game? Because if there are bank failures, it might hurt everybody and benefit nobody?
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The devil is of course in the details. Why would a handful of mega banks decided to prop up a competitor
So that the customers have enough time to withdraw all funds and put them in a mega-bank.:-)
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Sure that's it. Let me lend 30k to the soon to be bankrupt restaurant down the road so they can make payroll this month and their assistant manager who rents the income property I own can make his $1200 payment this month - makes total sense:-)
SK - just having some fun here, perfectly plausible there is some scheme around positioning themselves to have the pick of the banks best assets and customers when it does go pop..
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Technically it's a pretty safe "loan", just sucks when it could make more interest doing anything else. These banks seen to have assets that would *eventually* mature to cover deposits, but they are too long term and trying to sell then to others would not work out due to the low rate of return promised when new bonds would have a better return in shorter time.
Basically it's forgoing reasonable return to mitigate the chance of a collapse that will bring them down with it. Economy is in large part psycholo
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Because the FDIC is forcing them to bail out any depositor losses in the last two banks via a special assessment. Probably more profitable to loan failing competitors money that eventually gets paid back than to be forced to give away money by the government.
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I don't see any banking system collapse. Nope. Nada, zilch.
This is just business as usual. Our government has assured us that everything's ok - they have regulators and regulations in place to prevent this sort of thing, and it can't happen like the last time Joe Biden was in the White House.
Nothing to see here, just move along. Trust the government.
Hi. In this timeline, the Lehman Bros. collapse [wikipedia.org] and the 2008 financial crisis were well underway prior to the November 8, 2008 presidential election and the January 20, 2009 presidential inauguration of President Obama and Vice President Biden.
As a matter of fact, 7 weeks and a day before the election. During the second term of the George W. Bush administration. When Joe Biden was definitely not in the White House.
Thanks for playing another round of "Easily Debunkable False Realities."
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Like when gas went from $1.50 a gallon to $3 a gallon during Bush II. Republicans don’t like to remember those days.
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Mission Accomplished!
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and yes, I hit an 8 when I meant to hit a 4 for the election day date.
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This is what the Preview button is for: catching typos, punctuation errors, missing words and/or tags that aren't properly closed.
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It also gives you a second chance to decide if your comment actually adds anything to the conversation, or just makes you sound arrogant.
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The preview button is unavailable if you are visiting with a mobile client. Hitting the mobile web page with my phone shows no preview button.
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I've always thought that the timing on that was remarkably convenient for the Democrats: long enough before the election for the Democrats to take advantage of it but not long enough for the Republicans to do anything about it.
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An insolvent bank ultimately needs new capital, not liquidity. Liquidity is a only a very short term way to keep them going, to give them time to raise capital. You could say that the other banks providing deposits is a sign of confidence that capital is coming, but they have people awake 24/7, they can run on the bank faster than you.
The combination of supply shock and Powell's power trip aren't going to be over any time soon... I don't expect private parties will be lining up to give them capital. That l
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Exactly. AC speaks the truth. Aside for the fact that their depositors are not withdrawing that much, it's more the stock price that's taking a beating.
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Moody's and Wedbush Securities seem to disagree.
Why be forced to wait for the FDIC to open a bridge bank and then hope they will also declare First Republic systemic when you can just run? To be a good citizen? Hah, just run.
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They have capital, they needed liquidity. Dummies bought long bonds which are underwater now after all these rate hikes inverting the yield curve.
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So what were they supposed to do? The FED has kept the prime rate at near zero for 15 years. QE has been running which help keep rates on commercial power down as well. Its easy to call them dumb but what should have been doing?
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By that metrics all banks are insolvent. Take any banks, if all depositors go at once, the bank is gone. First Republic doesn't need capital, they need liquidity to restore confidence, and that's exactly what's happening.
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All banks *are* insolvent. They're only required to keep 10% on hand, and that requirement was wiped out by Trump during the pandemic. Biden never put the requirement back in place, and when a bunch of people demand money, suddenly the bank is screwed. This is exactly what happened to Washington Mutual in 2008 during the bailout / crisis, a demand on people freaking out and wanting their money caused WM to die. I still miss that bank.
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Banks can, some might say should, have marked to market assets larger than their liabilities.
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In the case of SVB though, and presumably First Republic here, though they are not insolvent they are illiquid.
They had a bunch of their reserves in long dated bonds, but those bonds were at very low rates. They have those because well the FED held rates at near zero for 15 years so what else would we reasonably expect.
The bonds themselves are 'good' the creditor (largely the UST) will pay at maturity. However the banks assumptions about being able to sell these bonds prior to maturity has been up-ended by the rapid rise in rates. Nobody wants to buy a 10 year treasury at 0.5% with 8 years left on it when you can get a 2 year notes that pays 3.8%.
So these banks are stuck. Another institution that can inject enough liquidity could in fact get them out of these even profitably - though not as profitably as if they had better yielding reserves.
The question I posted above and still want to know the real answer to, is why would they. Hard to think its just be 'kind' or hold off regulatory action.
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Mark to market they are insolvent.
Mark to market is reality, book value is fantasy.
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> An insolvent bank ultimately needs new capital, not liquidity.
Except the bank is not "insolvent." Their problem is literally a lack of liquidity. Insolvent means they can't pay their debts, but deposits are not debts are they? No, they are not. I'm sure you knew that too.
Bank deposits are lent out or otherwise invested, and the bank primarily makes their money on the returns of those investments. At any given time, your bank does not have the cash on hand (aka, liquidity) to give every depositor the fu
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Demand deposits for a bank are debt which can come due at any time.
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It'll be a great ride... until it isn't.
Canada has a very strongly-regulated banking industry. We had zero [nber.org] financial institutions fail in the 2008 crisis.
Maybe there's a lesson for others? Hahaha, I make myself laugh so much. The US will continue on the path dictated by greedy oligarchs to the detriment of everyone else.
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Canada is a tiny drop in the bucket of the financial world. I'd bet that the biggest bank in the US us bigger than all the banks in Canada combined.
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Trudeau created the start of a bank run when he declared emergency powers and froze protester's bank accounts about a year ago. He reversed course just in time.
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Don't laugh too much. You might have a little more exposure than you thought.
https://www.forbes.com/sites/k... [forbes.com]
"Canadaâ(TM)s Biggest Banks Are Spending Billions On M&A To Build Their Footprint In The U.S."
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Amazing, he did that without even being president. No wonder voters in that year's election ensured he was sworn in as president in January 2009.
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An economist devoted an entire thesis to proving beyond doubt that loan money just appears on a computer screen. Nothing real about it. No one is missing anything. Contradicts the entire narrative of loans..
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Everything works as long as the music keeps playing. It's when the music stops and everyone tries to claim a seat that they realise there's not enough to go around.
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