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.
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.
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.