Dead Bank Walking

Get out now while you still can

I’ll make this quick since for some reason I haven’t been paying attention. I’ve been too busy working on my new company.

I love First Republic. I’ve banked there since 2012 or so. Their customer service is incredible. I have my private banker’s cell phone number and he almost always picks up. I have never once had a problem. I adore them.

But holy shit……..I’m not quite sure how we ended up here, but they are done for. Their ability to make a spread on interest has basically dropped to zero or negative at this point and they book is nothing but low interest loans no one wants.

Reports say they’re already in conversations with regulators about a smooth wind down which is always what is said right before the FDIC takes over.

Now, JP Morgan and other banks injected $30 billion of deposits into First Republic last month to try to keep it alive, basically as a favor. This money is just sitting in accounts there. Obviously, this is wildly above the FDIC limit. They have a fiduciary duty to protect that money so as soon as it looks like First Republic is really done for, you can bet they will be wiring that money out, which will immediately kill FR.

We all know the banks are very close with regulators so most likely JPM et. al. will get a little hat tip from the FDIC just before they take over to protect their deposits so they’ll know before we do when the bank collapse is imminent and of course it’ll be non-public information when they take that money out unless they decide to make a statement (they won’t) but watch for it in case they do. That’l happen right before the bank collapses.

Such a shame. First Republic was a great bank. This is definitely contagion as all of those low interest mortgages and other loans are securitized and sitting on balance sheets of almost every institutional investor in the US. I’ll definitely be writing more about this.

Off to bed.