At the Organic Prepper, Daisy Luther discusses the recent collapse of multiple banks, and the latest of those, First Republic. Luther writes:
It was only 6 weeks ago when the nation was briefly paralyzed with concern as we watched three banks go under, with their deposits under FDIC control. At the time, I wrote that one of the next banks to fail could be First Republic Bank.
And today may be the day that it does unless there’s a dramatic last-minute save. If it does fail, it will be the second-largest bank failure in American history.
UPDATE: First Republic has failed. The FDIC has taken control of the deposits and sold the bank to JP Morgan. As per Zero Hedge:
In the end, early on Monday morning, the US unveiled a hybrid solution – after all other attempts at a private rescue effort failed – one where the FDIC would seize the insolvent First Republic, the 14th largest US bank by assets, making it the second biggest bank failure in US history, and immediately sell the bulk of its assets and all of its deposits to JPMorgan after a sham but “highly competitive bidding process” had taken place over the weekend (one in which virtually nobody wanted to participate as nobody would buy FRC without explicit government backstops, which in the end is precisely what they ended up getting on FRC’s IO and CRE loan portfolio) while keeping FRC’s toxic Interest-only mortgages to Hamptons’ billionaires.
According to the FDIC announcement, JPMorgan would assume all of First Republic’s $92 billion in deposits — insured and uninsured, including the $5 billion in deposits gived by JPM to First Republic on March 16. It is also buying most of the bank’s assets, including about $173 billion in loans and $30 billion in securities.
And the rich get richer.
If you think that your money is safe in the bank, you may want to reconsider. And you may want to do it quickly because just last month, we saw how rapidly the domino effect could take down one after another. (I hold my savings in precious metals. You can learn more here.)
What led up to it?
First Republic’s problems appear to relate to increasing interest rates. CNBC explains:
First Republic is a regional bank that has focused on high-net-worth individuals and their businesses, including offering mortgages at low interest rates to those customers.
Those mortgages, as well as other long-term assets on the bank’s balance sheet, have fallen in market value since the Fed began hiking rates last year, making investors worried that the bank would have to book a sizeable loss if forced to sell those assets to raise cash.
On Friday, stocks for First Republic Bank tanked by 43%. (That’s not the worst of it – stocks have fallen by 97% this year.)
According to Fortune:
A group of 11 banks that deposited $30 billion into First Republic in March — giving it time to find a private-sector solution — have proved reluctant to band together on making a joint investment. A few proposals that surfaced in recent days called for a consortium of stronger banks to buy assets from First Republic for more than their market value. But no agreement materialized.
Instead, some stronger firms have been waiting for the government to offer aid or put the bank in receivership, a resolution they view as cleaner — and potentially ending with a sale of the bank or its pieces at attractive prices.
But receivership is an outcome the FDIC would prefer to avoid, in part because of the prospect it will inflict a multibillion-dollar hit to its own deposit insurance fund. The agency is already planning to impose a special assessment on the industry to cover the cost of SVB and Signature Bank’s failures last month.
For the past month, the FDIC has been scrambling to put together a rescue deal for First Republic, seeking bids from banks like JPMorgan Chase & Co., PNC Financial Services Group Inc., Citizens Financial Group Inc., Bank of America Corp., and US Bancorp. (The latter two declined to bid.) However, the deadline for acceptable bids came and went yesterday with no resolution.
This makes it likely, according to the experts, that the FDIC will seize control of First Republic’s deposits today, putting the beleaguered institution into receivership.
Read more here.
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