In one of the biggest bank collapses ever, First Republic Bank is down 96 percent in two months.
But look on the bright side. Silicon Valley Bank (SVB) fared even worse.
At least FRC is still kicking. It rose 8.79 percent on Thursday.
No Buyer at Any Price
You likely can’t give FRC away. There would be no takers. Its assets are worth less than zero.
That’s because merger accounting rules would require a buyer to immediately mark down FRC’s assets to fair value.
FRC lost $100 billion in deposits. And unlike SVB, it is stuck with severely underwater mortgage loans.
The FRC business model was to give ridiculously cheap mortgage loans to high-wealth clients in return for their business. When that model started blowing up, clients pulled their deposits.
Given all around silliness by banks chasing yield, any buyer would likely have to raise capital which would hammer their own share price.
According to the WSJ, Autonomous Research analyst David Smith commented “It might cost you $30 billion of capital to buy the bank for free.”
If the run on assets continues, either the Treasury or the Fed is likely to step in. Elizabeth Warren would then moan about the Fed bailing out the wealthy. If the bank went under, she would moan about something else.
Meanwhile, Treasury Secretary Janet Yellen repeated her comment that the U.S. banking system remains sound and the U.S. government will take “any necessary steps” to keep it the strongest and safest financial system in the world.
OK Then, Party On Dudes
The Inflation Reduction Act Price Jumps From $385 Billion to Over $1 Trillion
Here’s another reason to party. The Inflation Reduction Act Price Jumps From $385 Billion to Over $1 Trillion
That means there’s still more money sloshing around. Did you get your fair share?
Worst of Both Worlds, Stagflation Right Now, But What’s Ahead?
We have high inflation coupled with a GDP slowdown but what’s ahead. Here’s a look at inflation and deflation forces.
Finally, please see Worst of Both Worlds, Stagflation Right Now, But What’s Ahead?
Hmmm. Maybe we better hold off on that party.
This post originated at MishTalk.Com.
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Mish
Lol!!! Thats so funny. They don’t talk about it for a couple of reasons:
system. I assume that those that believe in capitalism, will applaud
this.”
MISH 38 MINUTES AGO” is absolutely ABSURD.
Any deep pocket bank reverses the Balance Sheet just by moving Other People’s Money around the block – pay off debt and Fed’s with its own DEEP Pockets then proceed as if nothing ever happened with FRC’s LOAN BOOK and Investments. It WILL continue “Business As Usual” making at least 1B EVERY Quarter. Asking you here to explain Why Not? FRC making money, for years now at around 1B a Quarter is proven. How can its current Loan Book and Investments not continue to make money and have no value?
of Money Finally Solved” works.
“For nearly a century the progress
of macroeconomics has been stalled by a single error, an error so silly that
generations to come will scarcely believe that it could have persisted for as
long as it has done.” & “The logic was that such precautionary holdings are
not intended to be spent and hence do not qualify as money.”
on Savings and Residential Financing 1961 Proceedings, United States Savings
and loan league, Chicago, 1961, 42, 43. By Dr. Leland James Pritchard, Ph.D.,
Economics, Chicago 1933, M.S. Statistics, Syracuse.
See: “Profit or Loss from Time
Deposit Banking”, Banking and Monetary Studies, Comptroller of the Currency,
United States Treasury Department, Irwin, 1963, pp. 369-386