Posted on 05/01/2023 5:41:34 AM PDT by PK1991
"Regulators seized control of First Republic Bank early Monday, making it the third financial institution taken under government control this year, then promptly accepted a bid from JPMorgan Chase for virtually all of the lender's assets.
The state's Department of Financial Protection and Innovation (DFPI) said it had taken over San Francisco-based First Republic and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. The DFPI also said the FDIC has "accepted a bid from JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all deposits, including all uninsured deposits, and substantially all assets of First Republic Bank. **** First Republic has $229 billion in assets, making it the second-biggest bank to collapse in U.S. history after the 2008 failure of Washington Mutual, which at the time had roughly $309 billion and which also was sold to JPMorgan. The FDIC estimated the cost to the Deposit Insurance Fund at about $13 billion.
"Treasury is encouraged that this institution was resolved with the least cost to the Deposit Insurance Fund, and in a manner that protected all depositors," A U.S. Treasury Department spokesman said in a statement. "The banking system remains sound and resilient, and Americans should feel confident in the safety of their deposits and the ability of the banking system to fulfill its essential function of providing credit to businesses and families.'"
(Excerpt) Read more at cbsnews.com ...
Faux Business will declare the banking crisis is over. It will be the 3rd time in the last 3 weeks they have made that claim.
Not my field, and perhaps this is sort of “how it’s supposed to work” but this feels odd.
I see the government seizing a bank through its regulatory power. Basically nationalizing the bank. But then selling the bank to good ol’ JP Morgan. The outcome may, I suppose, be beneficial — but this seems like yet another collaboration between Big Business and Big Government where a powerful central government is able to shift financial power to its friends in order to further political goals. Doesn’t seem terribly “free market” to me.
You are correct. It is called Fascism.
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They (the Federal Reserve bank JPM) need to wash out the management and assets that led to the default. High probability of fraud. Whose books it goes on matters. It goes on the Taxpayers’ books. If the FedRes didn’t seize the bank and take punitive actions against the managers other banks would fail and say “Oooops, looks like we failed time for the taxpayers to backstop us”
Just remember: Dylan Mulvaney is a little girl and Bud Light is a beer.
Nothing to see here, this is all normal, we have it under control. There is no financial crisis.
My first career was as a state bank examiner. When a bank fails, the chartering authority appoints the FDIC as receiver, who disposes assets and pays off insured deposits in the most expeditious and inexpensive way possible. The basic way first Republic is being resolved is essentially the same way they resolved even small banks back in my examiner days. Very rarely did they write checks to pay off insured deposits.
The big difference started with the 2007-8 failures of large banks where they covered uninsured deposits with the “purchase and assumption” transaction. The settlement process will cost more in the end because of it. The acquiring bank will have a finite period of time to review and “put back” loans and other assets that they perceive to be low quality. The FDIC will write a check back to the acquiring bank to cover the poor quality assets they do no want to keep. The “bid” the acquiring bank pays to the FDIC boils down to a premium paid to assume the core deposits. But the first bad practice I mention here is now routinely effectively guaranteeing what are large, uninsured deposits.
The most egregious aspect of P&A resolutions has been the ever increasing “big fish eats little fish” effect of these transactions. The result has been a continuously growing concentration of banking assets in our country. It increases risk to our economy and exposes the public to excessive control of the public by banking organizations. In my personal opinion, that is the way the elites want it. To avoid concentration of banking assets, the FDIC should be mandated to break up the deposit assumption part of the process for banks of $10 billion or more. To be sure it would be a messier and more costly way to liquidate, but it would pose far less overall risk to the banking industry and to the public at large.
Two-thirds of deposits were uninsured. First sign of trouble and depositors ran.
Let's look at this graph in 10 years to see if the red line follows the green line as in 2007:
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