Wait – didn't Republic First Bank ALREADY fail? Oops – that was "First Republic" bank, less than a year ago.
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[i][b]Photo above[/b] - stock image of a "Republic First" bank branch, which failed yesterday. Pennsylvania readers - do they all look like this? A cross between a Chevy dealership and a Taco Bell?[/i]
How is this even legal? A bank starts calling itself “Republic First”, when there's already another one named First Republic? Are there no trademark rules? Does that mean I can start a soda company and call it “Cola Coca” . . . ?
In any case, First Republic is the one that failed the middle of LAST year. Today it's Republic First. $6 billion in assets. The cause of death is the same as First Republic and all the other bank failures over the past 12 months: Those darn Fed Funds increases. See link at bottom.
This may be why Fed Chairman Jerome Powell continually channels Hamlet, the prince of Denmark, when he holds press conferences. Rates are going to come down soon. Or maybe they won't. To cut or not to cut, that is the question! On the one hand, Powell certainly knows he HASN'T licked inflation. On the other hand, he also realizes that high Fed Funds rates have killed a half dozen banks, with still more crowding the emergency room. How many are bleeding out? Dozens.
To be fair, Republic First, which died yesterday, was already on a death watch. (see 2nd link below – 5 next banks to fail). These are just the ones with no pulse, however. There are a LOT more with shallow breathing, slow heartbeat, and dangerous depositor runs on their assets.
Why does tripling the Fed Funds rate cause banks to fail? Because the US government REQUIRES all banks they regulate to purchase Treasury Bills. “For safety”. And when Fed Funds rates triple, last year's model T-Bills plummet in value. If depositors get nervous about safety, and run for the exits, then the bank has to sell some of its T-Bills. But then they lose MORE money. Sell enough, and you're dead. Or the FDIC calls your CEO with bad news at 5:15 on a Friday afternoon, after the stock markets have closed. RIP, Republic First. And First Republic. And Silicon Valley Bank (whose CEO was an actual Federal Reserve board member). And Signature Bank. And . . .
I can't find anybody who wants high Fed Funds rates. Not the Biden white house, which is in a tough re-election fight. Not banks sitting on a mountain of depreciated T-Bills. Not prospective home-buyers, trying to score a mortgage. Higher Fed Funds rates were SUPPOSED to bring down house prices, along with all the other 57 flavors of inflation as well. You know that hasn't worked, even if you aren't house hunting. We all buy gas, go to McDonalds, and have googled ticket prices to a Taylor Swift concert or an NFL game.
Congrats to Powell for tacitly admitting that the Fed has NOT tamed inflation, and for keeping rates high. Even if everyone is suffering. Now, Mr. Powell, do you have an ACTUAL solution to inflation? One that doesn't involve bank failures, and sky-high mortgages. Even if you don't, maybe it's time to stop mis-managing interest rates.
I'm just sayin' . . .
[u][b]Philly lender Republic First Bancorp seized by feds in latest regional bank collapse (msn.com)
Banking Crisis Alert: 5 Banks That Could Fail Next | InvestorPlace[/b][/u]
Everything is about greed, savers LOVE higher interest rates, during the age of Zirp, savings rates were at one quarter of one percent!!! A million dollars in a savings account was worth TWENTY FIVE HUNDRED DOLLARS a year!! Not even enough to cover ONE month of expenses!! Today that account could bring in as much as forty five THOUSAND dollars a year!!
GREED is the problem! Lower mortgage rates meant lower payments but hey! People can afford to pay more so,,, we’re going to raise the price of homes!!
We normalize something that was unprecedented and created this situation where the “market” exploded artificially and now when rates return to a normal level we’re in a quandary, how do we maintain our greedy growth now that people are completely maxed out on their ability to take on debt??
We fucked our selves over by being greedy fucks and corporations took advantage of our gluttony in order to suck everyone dry for increased profits!!
And how did that bank become insolvent just because of treasury bonds? Was that their ONLY depreciating asset? were treasuries the bulk of their portfolio and were they forced to sell all of them for a loss?? There is more to that story, poor asset management and risky investments other than treasury bonds are in the mix..
Bring back Glass Stegal and get banks out of the stock market.
