The Banking Collapse of 2023 Is Now Officially Bigger Than the Banking Collapse of 2008 Was

Discern Report ^ | May 2, 2023 | by Michael Snyder

[Red Badger]

Yes, you read the headline correctly. Collectively, the three big banks that have collapsed in 2023 had more assets than all 25 banks that collapsed in 2008 did. Unfortunately, the banking collapse of 2023 is far from over. We still have eight more months to go before this year is done, and many more banks are currently teetering on the brink of disaster.

Executives at those banks are telling us not to worry, but of course executives at First Republic were issuing similar assurances just last week. Personally, I had heard that First Republic supposedly had enough reserves to keep going for months. But that was a lie, and now First Republic is toast.

The following comes from the official statement that the FDIC issued when it took over the bank…

First Republic Bank, San Francisco, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect depositors, the FDIC is entering into a purchase and assumption agreement with JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all of the deposits and substantially all of the assets of First Republic Bank.

JPMorgan Chase Bank, National Association submitted a bid for all of First Republic Bank’s deposits. As part of the transaction, First Republic Bank’s 84 offices in eight states will reopen as branches of JPMorgan Chase Bank, National Association, today during normal business hours. All depositors of First Republic Bank will become depositors of JPMorgan Chase Bank, National Association, and will have full access to all of their deposits.

The government was not going to allow just anyone to snap up the assets of First Republic.

JPMorgan Chase was one of the institutions that was invited to make a bid, and they came out of this process as the big winners…

JPMorgan is getting about $92 billion in deposits in the deal, which includes the $30 billion that it and other large banks put into First Republic last month. The bank is taking on $173 billion in loans and $30 billion in securities as well.

The Federal Deposit Insurance Corporation agreed to absorb most of the losses on mortgages and commercial loans that JPMorgan is getting, and also provided it with a $50 billion credit line.

In addition to providing JPMorgan Chase with a 50 billion dollar credit line, the FDIC will also take a loss on this deal of approximately 13 billion dollars.

So they are definitely one of the big losers in this deal…

The FDIC estimates that the cost to the Deposit Insurance Fund will be about $13 billion. This is an estimate and the final cost will be determined when the FDIC terminates the receivership.

Needless to say, the biggest losers of all are the shareholders of First Republic.

They got completely wiped out…

Stockholders got bailed in and wiped out. They’d already been mostly wiped out by Friday evening in one of the most spectacular stock plunges ever.

Holders of the unsecured subordinated bank notes got bailed in and wiped out just about entirely. This is a form of preferred stock. For example, the 4.625% bank notes, issued in 2017, traded at less than 2 cents on the dollar this morning, another spectacular plunge.

As I have always warned, you only make money in the stock market if you get out in time.

Shareholders of First Republic found that out the hard way.

In comments that he made after the deal was consummated, JPMorgan Chase CEO Jamie Dimon boldly declared that “this part of the crisis is over”…

“There are only so many banks that were offsides this way,” Dimon told analysts in a call shortly after the deal was announced.

“There may be another smaller one, but this pretty much resolves them all,” Dimon said. “This part of the crisis is over.”

And the U.S. Treasury is telling us that the U.S. banking system “remains sound and resilient”…

‘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 fulfil its essential function of providing credit to businesses and families,’ a Treasury spokesperson said.

Does reading that make you feel better?

It shouldn’t.

They always offer such platitudes before things start getting really bad.

As I noted at the beginning of this article, the three banks that have collapsed so far this year were collectively bigger than all of the banks that collapsed in 2008 combined…

The three banks held a combined total of $532 billion in assets, which – according to the New York Times and when adjusted for inflation – is more than the $526 billion held by all the US banks that collapsed in 2008 at the peak of the financial crisis.

We are only one-third of the way through 2023.

And as Charlie Munger recently observed, many of our banks are absolutely packed with “bad loans” right now…

Charlie Munger believes there is trouble ahead for the U.S. commercial property market.

The 99-year-old investor told the Financial Times that U.S. banks are packed with “bad loans” that will be vulnerable as “bad times come” and property prices fall.

He is quite correct.

In particular, the collapse of commercial real estate prices threatens to create a massive tsunami of defaults…

Berkshire Hathaway, where Munger serves as vice chairman, has largely stayed on the fringe of the crisis despite its history of supporting American banks through times of turmoil. Munger, who is also Warren Buffett’s longtime investment partner, suggested that Berkshire’s restraint is partially due to risks that could emerge from banks’ numerous commercial property loans.

“A lot of real estate isn’t so good anymore,” Munger said. “We have a lot of troubled office buildings, a lot of troubled shopping centers, a lot of troubled other properties. There’s a lot of agony out there.”

As I keep telling my readers, we really are on the verge of the largest commercial real estate crash in all of U.S. history.

And as mountains of commercial real estate loans go bad, a lot more banks will start to go under.

The “too big to fail” banks will scoop up those that they like, while others are simply liquidated and go out of existence.

Ultimately, I believe that we are going to see a wave of consolidation in the banking industry like we never have before. We are still only in the very early chapters of this crisis. Much worse is yet to come.

It is going to take a while for all the dominoes to fall, but each time another one tumbles over it will be a sign that the clock is ticking and that time is running out for the U.S. financial system.

[Alberta's Child]

I agree. But that’s a whole different matter than sitting on a huge pile of loans in default.

[Alberta's Child]

P.S. — U.S. banking regulations give banks some protection against rising interest rates. If a bank holds a bond to maturity it doesn’t have to mark down its value to reflect current market conditions. SVB got screwed because when faced with a run on their accounts they were forced to sell bonds that they intended to hold to maturity.

[Red Badger]

Sounds like they were the objective of a government sponsored run.................

[Alberta's Child]

I don’t think so. In SVB’s case, they had enormous accounts held by a small number of customers in tech industries. At their peak they were about the 16th largest bank in the U.S. but they only had 28,000 customers and about a dozen branches.

Word of potential trouble spread among their customers, and everyone wanted to bail out at the same time.

It was probably more like COVID hysteria than a planned event.

[Red Badger]

Another FReeper seems to think that there is a ‘plan’ to take over all banks, slowly appropriating them into one huge bank.......................

[NWFree]

Didn’t take libtards long to screw things up

[usconservative]

PacWest, then KeyBank then Comerica.

The domino's are falling. As intended.

We're all going to end up in one of four major banks with digital currency and subject to the whims of what we're allowed to buy or not buy, by big daddy government.

And just when we think we're "safe" with four banks, we'll be down to ONE, run by FedGov who'll deny the ability to buy anything, to all who disagree with it.

That's where this is heading. Thank God I'll be dead by then. Hopefully.

[Tilted Irish Kilt]

Prepper Ping - The U.S. Economy - problems in Banking
And we are barely into the 1/3 of the economy this year, it is believed that banks have been holding a number of "bad loans"
More analysis, forecast, and information contained in the article

(From the article):"As I noted at the beginning of this article, the three banks that have collapsed so far this year
were collectively bigger than all of the banks that collapsed in 2008 combined… (Emphasis Mine)"

"The three banks held a combined total of $532 billion in assets, which – according to the New York Times and when adjusted for inflation
– is more than the $526 billion held by all the US banks that collapsed in 2008 at the peak of the financial crisis."

"Executives at those banks are telling us not to worry, but of course executives at First Republic were issuing similar assurances just last week.
Personally, I had heard that First Republic supposedly had enough reserves to keep going for months.
But that was a lie, and now First Republic is toast."

"The following comes from the official statement that the FDIC issued when it took over the bank…
"First Republic Bank, San Francisco, California, was closed today by the California Department of Financial Protection and Innovation,
which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.
To protect depositors, the FDIC is entering into a purchase and assumption agreement with JPMorgan Chase Bank,
National Association, Columbus, Ohio, to assume all of the deposits and substantially all of the assets of First Republic Bank."

"The Federal Deposit Insurance Corporation agreed to absorb most of the losses on mortgages and commercial loans that JPMorgan is getting,
and also provided it with a $50 billion credit line."
"In addition to providing JPMorgan Chase with a 50 billion dollar credit line, the FDIC will also take a loss on this deal of approximately 13 billion dollars."

" This is an estimate and the final cost will be determined when the FDIC terminates the receivership. Needless to say,
the biggest losers of all are the shareholders of First Republic."
They got completely wiped out… "

We are only one-third of the way through 2023.

"And as Charlie Munger recently observed, many of our banks are absolutely packed with “bad loans” right now…
Charlie Munger believes there is trouble ahead for the U.S. commercial property market."

[The Louiswu]

How long before the Pedo Joe administration just declares that banking cannot be trusted to rich white businessmen and declares that the federal gov will take over ALL banking in the country?

[Bratch]

Against Backdrop of Inflation Continuing, Fed Set to Raise Rate Again Before Debating Pause

May 1, 2023 | Sundance | 148 Comments

Everything about the process of cutting down energy exploitation, then driving supply side inflation, then raising interest rates to shrink demand (stem inflation) created by a desire to lower economic activity to the scale of diminished energy production, is a game of pretending.

The collateral damage from the rate hikes has been the banking destabilization, which shows the priority of the government officials and central banks to support the climate change agenda.  Into the game of pretending comes the second unavoidable consequence with inflation continuing as a result of the energy policy.

They simply cannot cut energy demand enough to meet the diminished scale of production.  There is no alternative ‘green’ energy system in place to make up the difference. That is the reality.  Now, the fed is scheduled to raise rates again, then begin to debate the collateral damage as they continue the pretending game.

(Via Wall Street Journal) – […] Another quarter-percentage point increase would lift the benchmark federal-funds rate to a 16-year high. The Fed began raising rates from near zero in March 2022.

Fed officials increased rates by a quarter point on March 22 to a range between 4.75% and 5%. That increase occurred with officials just beginning to grapple with the potential fallout of two midsize bank failures in March.

The sale of First Republic Bank to JPMorgan Chase & Co. by the Federal Deposit Insurance Corp. announced early Monday is the latest reminder of how banking stress is clouding the economic outlook.

Fed officials are likely to keep an eye on how investors react to that deal ahead of Wednesday’s decision, just as they did before their rate increase six weeks ago when Swiss authorities merged investment banks UBS Group AG and Credit Suisse Group AG. (read more)

There is no other way to look at the combined policy without seeing a Central Bank Digital Currency (CBDC) in the future.  All of these combined policies are creating a self-fulfilling prophecy.

• Stop energy production. [Jan 2021]
• Supply side inflation begins.

♦ Raise interest rates. [April 2022]

• Economic activity slows (but not enough).

♦ Continue raising interest rates.

• Banks destabilize. [Q1 2023]
• Inflation continues.

♦ Continue raising interest rates.

• Economic activity slows (but not enough).
• Banks continue destabilizing. [Q2 2023]

♦ Continue raising interest rates.

• Evaluate banking pressure. [We are Here]

Banks cannot withstand pressure.

Create CBDC

[immadashell]

But…but bonds were supposed to be an essential part of a prudent man’s portfolio!

[Red Badger]

Low interest bonds are like buying a stick of dynamite with a very long fuse that is already lit.................

[steve86]

“Thank God I’ll be dead by then. Hopefully.”

I have good longevity genes. Sometimes that feels like a blessing. Other times, like what you were saying, it scares the heck out of me.

[immadashell]

I don’t understand why anyone would buy bonds in a free money environment. Bond price only had one way to go. Buying long term bonds was insane.

[Red Badger]

Buying long term bonds at low interest rates was insane...........................

[usconservative]

No offense intended, I’m somehow glad that none of the men in my family on either side, live past 72. I’m 60.

[wgmalabama]

I am wondering if someone is shorting then killing these banks. I would love to short a stock that goes to zero.

[eyedigress]

I was surprised to see the bottom feeders buying this stock on Friday.

Win some, Lose Some.

FDIC owed 13B from the rest of the banking world.

If all the majors are underwater on Brandons swift rate hikes, that is quite a transfer to the ??????????.