Hey, give them credit! It's hard to tank a company that makes money simply by existing.
Do you know how many extraneous staff they need to hire pointlessly? How many bad financing decisions need to be made? How many stupidly-offered credit rates to actuarial-table-proven bad choices? It takes EFFORT
First Republic was "doing fine" two months ago. And this is not a "panic" either. It's not a socially caused problem, it's that they and many other banks are over stretched enormously beyond being able to cover their deposits, because finance these days is a hilarious shell game that doesn't stand up to scrutiny.
Doing fine huh? First Republic was "doing fine" a few months ago. How many more isolated incidents have to pop up before you admit a pattern?
Oh and this isn't a "panic" either. The root issue here isn't a social one, it's that modern finance is a vampiric shell game run by self dealers. They're over stretched well past the point of being able to cover their deposits. They cannot withstand scrutiny.
As of April 21, 2023, the Bank had $45.1 billion of cash and cash equivalents and unused available borrowing capacity, representing more than two times our estimated uninsured deposits, excluding
the $30 billion of deposits made by the large U.S. banks.
First Republic had the capital to continue, the receivership was unnecessary. The media needed to stop hitting it over and over again.
The banking system can't handle this level of distrust, and in the long run, FRC's collapse will dissuade investment in regional banks and banks that are under media pressure. This was a huge unforced error.
How do you square that with it having been First Republic that asked for the bailout? If they actually had the cash, or even the assets, they wouldn't have went running to the feds.
The constant media attention after the earnings report caused another bank run that killed the bank.
When the shares were hitting $5 and lower, the media were reporting on it near constantly, especially WSJ, who reported negative information about FRC every time it looked to be recovering.
They had the cash to cover uninsured deposits, not every deposit, something that most banks have. Hardly any bank is going to hold liquid assets up to the value of total deposits.
$45b into $107b doesn't go, but it shouldn't have had to. The media seemed to want this bank failure.
Under the fractional reserve system we use bank runs are always a threat because banks are inherently leveraged institutions. That is, the law allows them to buy assets (various types of loans, usually) far in excess of their reserves (your deposits). Their aim is to make money out of the difference in what interest rate they pay to depositors and the return on the assets that they buy.
However, in a bank run they need to liquidate assets quickly, but that can be a huge problem because their assets may be illiquid or may be marked down relative to what they will eventually pay out if, for example, interest rates have risen sharply. As such, a run can cause a bank which would be perfectly fine under normal circumstances to suddenly become insolvent.
It's amazing that bank failures are just an accepted part of regular life in 2023.
Hey, give them credit! It's hard to tank a company that makes money simply by existing.
Do you know how many extraneous staff they need to hire pointlessly? How many bad financing decisions need to be made? How many stupidly-offered credit rates to actuarial-table-proven bad choices? It takes EFFORT
It’s not a crisis until mainstream news channels declare to the masses that it’s a crisis
Doing the Weimar shuffle.
Let's just ignore that Western Alliance, PacWest and all the others are doing fine.
First Republic was a casualty of SIVB panic, largely pushed by the media.
First Republic was "doing fine" two months ago. And this is not a "panic" either. It's not a socially caused problem, it's that they and many other banks are over stretched enormously beyond being able to cover their deposits, because finance these days is a hilarious shell game that doesn't stand up to scrutiny.
SVB was the first of many.
You should bet on that. Go open short positions, I'll open buy positions.
The crisis is contained unless the media continues to fan the flames like they did to FRC.
First Republic's customers will end up with PacWest after the receivership, and that will be the end of it.
I've been betting on it for a decade. I buy gold, ammo and MREs.
Now is probably a good time to sell gold, it's near the all time high IIRC.
Pretty close yes. But the point of buying gold is to have real money, not to trade it for fiat currency that is useful solely as toilet paper.
Until the next one fails.
And then the one after that.
And the one after that, etc, etc.
Also that's weird, it deleted my comment and then posted it again after I thought I had to retype it. Mobile computing is such a shit show.
Doing fine huh? First Republic was "doing fine" a few months ago. How many more isolated incidents have to pop up before you admit a pattern?
Oh and this isn't a "panic" either. The root issue here isn't a social one, it's that modern finance is a vampiric shell game run by self dealers. They're over stretched well past the point of being able to cover their deposits. They cannot withstand scrutiny.
Media casualty. Never should have gone this way, but the media just had to keep hitting it over and over again.
While I'm sure the media didn't help it much, I think its problems were far more than just that
First Republic had the capital to continue, the receivership was unnecessary. The media needed to stop hitting it over and over again.
The banking system can't handle this level of distrust, and in the long run, FRC's collapse will dissuade investment in regional banks and banks that are under media pressure. This was a huge unforced error.
How do you square that with it having been First Republic that asked for the bailout? If they actually had the cash, or even the assets, they wouldn't have went running to the feds.
The constant media attention after the earnings report caused another bank run that killed the bank.
When the shares were hitting $5 and lower, the media were reporting on it near constantly, especially WSJ, who reported negative information about FRC every time it looked to be recovering.
If they had the cash like they say they did, a run would not kill them. That only happens when you can't cover your deposits.
They had the cash to cover uninsured deposits, not every deposit, something that most banks have. Hardly any bank is going to hold liquid assets up to the value of total deposits.
$45b into $107b doesn't go, but it shouldn't have had to. The media seemed to want this bank failure.
So they were over stretched to the point of having forty percent or less of their deposits? Boy, if I had them for a bank I'd get my money out quick.
Shouldn't a bank be able to handle a bank run?
Under the fractional reserve system we use bank runs are always a threat because banks are inherently leveraged institutions. That is, the law allows them to buy assets (various types of loans, usually) far in excess of their reserves (your deposits). Their aim is to make money out of the difference in what interest rate they pay to depositors and the return on the assets that they buy.
However, in a bank run they need to liquidate assets quickly, but that can be a huge problem because their assets may be illiquid or may be marked down relative to what they will eventually pay out if, for example, interest rates have risen sharply. As such, a run can cause a bank which would be perfectly fine under normal circumstances to suddenly become insolvent.