This first republic one was on everyone’s radar for a bit so no shock here. And yes stable banks benefit immensely from loss share acquisitions with the FDIC. But the failing banks depositors also probably win too. They don’t lose any money if they are over the FDIC insurance limits in money. Not positive but it may also be cheaper for the FDIC to loss share and not pay the insurance on deposits and let the bank fail. Probably not a perfect system and above is a very macro level of looking at it.
Not sure if true but someone said that the law that requires that banks maintain 10% of deposited money on hand has been waived since COVID.
Believe you might be conflating the regulation that any individual institution can’t hold more than 10% of insured deposits in the US. This rule was waived to allow JP to make the transaction
Seems like it was a twitter problem and the tweet is back now. Guess this should have gone in the Elon Musk thread.
The bottom falling out the day after FRC is bought and the day before the fed meeting is quite interesting.
It’s such a dumb timeline all together. Where have the regulators been? Insane that the fed rate getting to 5% could cause a systemic banking collapse.
I’m more of the camp it’s out of date bank regulation, if you are going to bail these banks out you might as well increase the FDIC limit per person to a level that will halt the movement from regionals. Jerome and his rate hike campaign has been well telegraphed, if banks want to be stupid and not hedge themselves that’s a completely different story.
Disagree with this. If you listened to the fed back in like 2021, they weren't even thinking about thinking about raising rates, the dot plot projections were all super low, etc. That's when all these banks started buying up treasuries, presumably on the fed's guidance. Fast forward to now and ...........oops.....any bank who listened to the fed and bought treasuries has massive unrealized losses as a result. Sure some of it is banks being stupid. But some of it is also the fed not having a fucking clue what it's doing.
2021 is irrelevant, early in 2022 Powell changed his tune and told you he was going to hike and do QT. Most banks hedged accordingly.
Did they? Or were they just not located in California. Seems like they all have enormous unrealized losses
the crypto/tech sector all operates in fantasyland so it's no surprise the banks they started also operated similarly
while i'm sure you're convinced this is a conspiracy to destroy crypto in america or something similar
First republic was offering $0 down, interest only jimbo mortgages where you didn’t have to pay towards the principal for 10 years Im stunned that didn’t work out well for them
Are we just not going to talk about the knock on effects of the Trump administration slashing banking regs? I feel like that’s playing a bigger role than what I’ve heard. I get that was a minute ago but I can’t help but think that accelerated things.
ummmmm no. I think this is a byproduct of the fed hiking too much too fast (plus things like money market funds, instability of regional banks v. TBTF banks, etc), and it has nothing to do with crypto/tech. 3 of the 4 largest bank failures in history were in the last like 3 months. Framing this as a crypto or tech issue is either ignorant or purposefully disingenuous.
everybody in SF area thought the tech/crypto party would go forever. it didn't. this is a very normal circumstance.
"banks are struggling in a higher rate climate" yes but which banks specifically were struggling and failing the most scale differences matter
What crypto connection did first republic have? What crypto connection did Silicon Valley have? Please define “tech” for us and then list all the banks that aren’t involved in tech. Which of these banks that got crushed today are failing due to crypto/tech
Agree, and SVB clientele was the most interconnected group as well. 250k as a limit is just outdated especially for businesses this needs to be a 7 figure amount now. Until it changes people will continue to move to GSIB banks. We haven’t even mentioned things like mobile banking and how it is making bank runs far easier.
Custodia just applied and was denied to be this exact kind of bank. Fully reserved. Other bank applications with similar proposed structures have been denied. Guess I’ll believe that as a policy solution when it happens, but there seems to be no political momentum to allow it. Perhaps because it would drive massive funds to the one fully reserved bank.
These aren’t taxpayer funded. The FDIC is funded by the banks. All of the banks will soon be issued a special assessment to fund all of these losses and one of the reasons the large bank stocks haven’t rebounded sharply once deposit flows stabilized.