Posted on 03/17/2023 9:51:49 AM PDT by Red Badger
Shares in First Republic Bank plummeted some 26% on Friday morning even after a rescue deal backed by a number of large financial institutions.
Wells Fargo, JPMorgan Chase, Bank of America, and Citigroup each offered to contribute $5 billion of liquidity to assist First Republic Bank, which is heavily involved in wealth management and has many customers with deposits exceeding the $250,000 threshold protected by the Federal Deposit Insurance Corporation. Banks such as Truist Financial and BNY Mellon also contributed to the overall $30 billion arrangement.
Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, FDIC Chairman Martin Gruenberg, and Acting Comptroller of the Currency Michael Hsu said in a statement that the “show of support” is “most welcome” and “demonstrates the resilience of the banking system.”
Share prices for First Republic Bank, which had exceeded $147 as of last month, nevertheless fell below $26 as of Friday morning, indicating an 83% decline. Executives announced on Thursday that they would suspend the company’s dividend.
John Heagerty, an analyst at Atlantic Equities, downgraded First Republic Bank and noted that the firm may need another $5 billion in capital. “Management is exploring different strategic options which may include a full sale or divestments of parts of the loan portfolio,” Heagerty remarked, according to a report from CNBC. “The limited information provided implies that the balance sheet has increased substantially, which may well necessitate a capital raise.”
Wedbush Securities likewise downgraded the company and noted that a distressed merger could “result in minimal, if any, residual value to common equity holders,” according to a report from The Wall Street Journal. Analysts nevertheless believe that a sale of First Republic Bank to a larger financial institution “should be beneficial for the banking system as a whole, and should help ease contagion fears.”
Shares of First Republic Bank had declined some 73% between March 8 and March 13, the time horizon over which Silicon Valley Bank and Signature Bank were shuttered by the FDIC as depositors rushed to withdraw funds. Prices for First Republic Bank had risen more than 10% on Thursday amid the deposit assistance discussions.
First Republic Bank maintains $271 billion in assets, an amount comparable to the $212 billion maintained by Silicon Valley Bank and the $110 billion maintained by Signature Bank. JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo control $3.7 trillion, $3.1 trillion, $2.4 trillion, and $1.9 trillion respectively, a phenomenon noted by those who observe that the collapse of smaller banks could induce consolidation in the financial sector.
As with First Republic Bank, the vast majority of deposits at Silicon Valley Bank, which offered services to nearly half of the venture-backed technology and healthcare firms in the United States, exceeded the $250,000 threshold typically insured by the FDIC. Regulators scrambled to guarantee all deposits at Silicon Valley Bank such that the remainder of the financial system, in which roughly half of deposits surpass $250,000, would remain protected from bank runs.
Yellen nevertheless asserted on Thursday that financial regulators were more likely to favor large banks whose implosion could “create systemic risk and significant financial and economic consequences” when deciding whether to protect deposits above the insurance threshold.
Think of it this way....Your financial adviser put your money into Republic shares and it was over 200.00..Great for your retirement portfolio.....It is now 26.00 a share and thank you ESG.....Who do you go to to get your investment back ????
So,from now on, everyone has to worry if their bank is “too big too fail” and would they get their investment/deposits back????
Who do you go to to get your investment back ???
You have it backwards: from now on, everyone needs to make sure their bank IS TOO BIG TO FAIL, so that they get their money back.
Oh wait: that's not true either.
You have to worry if you're politically connected enough and powerful enough to get your money back.
If it's not clear by now, the only people NOT too big to fail are us TAXPAYERS.
That's why regulators missed what was happening to SVB.
-PJ
So much for equal protection under the law. You non-elitists don’t matter to us.
Vinny....................
These bank failures are just the warm up act to the second half of 2023!
If the economy is so damn great why are the banks failing?..................asked no reporter ever..........
Superb point.
Demonstrates the resilience of the banking system.
Yeah like a poker game with a marked deck.
Washington, March 17, 2023 -
Today, the Chairman of the House Financial Services Committee, Patrick McHenry (NC-10), and the Ranking Member of the House Financial Services Committee, Maxine Waters (CA-43), announced a bipartisan hearing with federal financial regulators in response to the failures of Silicon Valley Bank (SVB) and Signature Bank to be held on March 29, 2023. The Committee will hold additional hearings as appropriate.
Witnesses:
The Honorable Martin J. Gruenberg, Chairman, Board of Directors of the Federal Deposit Insurance Corporation (FDIC)
The Honorable Michael S. Barr, Vice Chair for Supervision, Board of Governors of the Federal Reserve
Additional witness(es) may be added as the hearing date approaches.
“The House Financial Services Committee is committed to getting to the bottom of the failures of Silicon Valley Bank and Signature Bank,” said Chairman McHenry and Ranking Member Waters. “This hearing will allow us to begin to understand why and how these banks failed. As Chairman and Ranking Member, we take our oversight duties seriously. We are working around the clock to deliver answers to the American people in order to protect depositors, promote the safety and soundness of America’s banks, and strengthen our financial system. We will conduct this hearing without fear or favor to get the answers the American people deserve.”
https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=408654
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