Posted on 04/29/2023 5:04:16 AM PDT by PK1991
"The U.S. Federal Deposit Insurance Corp has asked banks including JPMorgan Chase & Co and PNC Financial Services Group to submit final bids for First Republic Bank by Sunday after gauging their initial interest earlier in the week, Bloomberg News reported on Saturday."
(Excerpt) Read more at msn.com ...
"As the weekend begins, the WSJ reports late on Friday that big banks including JPMorgan and PNC are set to buy First Republic Bank but not in a private, market-arranged deal but rather in a transaction that would follow a government seizure of the troubled lender. A seizure and sale of First Republic, which would wipe out the equity of FRC and potentially impose losses on creditors, could come as soon as this weekend, the WSJ sources said.
And so JPM, which is already the largest US bank is about to get even bigger, by scooping up all the good FRC assets while leaving US taxpayer holdings on to the toxic ones.
That said, it wasn’t immediately clear whether the $30 billion in deposits funneled by JPM and other banks into FRC will be treated as insured funds (why should they should be insured?), nor was it clear how a wipeout of this capital, which would spark a systemic crisis simply because the Fed is now running policy of “monetary tightening through bank collapse”, having failed to contain inflation and tighten policy using conventional means."
Wamu all over again.
In Philly, it’s worth $50
What are the “toxic ones [assets]” referenced here?
Are PNC financial services group and PNC bank the same?
The bank in failure has an extremely large number of low interest loans outstanding that play in its low value and inability to withstand withdrawals.
Petty much. Most banks are owned by a holding company so the banking entity can be snatched by regulators and not deal with individual shareholders that get screwed.
I notice the SEC allowed shares in FRB to be shorted by 30% of outstanding shares. Criminal if you ask me.
Is that a riddle?
If so, I'd answer any mortgages or bonds written or bought over the last 10 years.
Apply that to ALL banks.
“White glove’ customer service
First Republic’s recent struggles amount to a swift comedown for the bank. Over 38 years, it had built a reputation for providing “white glove” customer service. It targeted people, often connected to the tech industry, who were very well off but not so rich that they qualified for top-end service at bigger banks such as Citigroup and Goldman.
In January this year, Herbert told shareholders that customer satisfaction with the bank was at an all-time high. But the more interest rates rose, the more vulnerable the business model became. It had relied on making home loans using cheap funding from customers who were offered lower mortgage rates in exchange for putting large deposits into accounts that paid little or no interest. Two-thirds of deposits were in accounts too large to be covered by US government-backed insurance that maxes out at $250,000.
As competitors wooed depositors with better rates, First Republic came under pressure to match them. Its interest expense shot up 10-fold, to $525mn in the last three months of 2022, from just under $50mn a year earlier, data from the Federal Deposit Insurance Corporation shows. At the same time, it had amassed $5bn of paper losses on bonds bought when rates were lower.”
That would explain why the smaller bank failed, but those are not a “toxic assets.” They are performing exactly as intended. It’s just that their performance relative to the current market doesn’t make them appealing investments. In banking terms, a “toxic asset” is typically a loan in default or a financial instrument for an insolvent entity.
“The PNC Financial Services Group, Inc. (stylized as PNC) is an American bank holding company and financial services corporation based in Pittsburgh, Pennsylvania. Its banking subsidiary, PNC Bank, operates in 27 states and the District of Columbia, with 2,629 branches and 9,523 ATMs.”
Yes it seems exactly. I looked it up. Good call. “Washington Mutual (often abbreviated to WaMu) was the United States’ largest savings and loan association until its collapse in 2008.[5][6][7][8][9]
On September 25, 2008, the United States Office of Thrift Supervision (OTS) seized WaMu’s banking operations and placed it into receivership with the Federal Deposit Insurance Corporation (FDIC).[10] The OTS took the action due to the withdrawal of $16.7 billion in deposits during a 9-day bank run (amounting to 9% of the deposits it had held on June 30, 2008).[11] The FDIC sold the banking subsidiaries (minus unsecured debt and equity claims) to JPMorgan Chase for $1.9 billion, which had been considering acquiring WaMu as part of a plan internally nicknamed “Project West”.[12][13][14] All WaMu branches were rebranded as Chase branches by the end of 2009.[15] The holding company, WaMu, Inc., was left with $33 billion in assets, and $8 billion in debt, after being stripped of its banking subsidiary by the FDIC.[6][7][16][17] The next day, WaMu, Inc. filed for Chapter 11 voluntary bankruptcy in Delaware, where it was incorporated.[7][16]
Regarding total assets under management, WaMu’s closure and receivership is the largest bank failure in American financial history.[6][7] Before the receivership action, it was the sixth-largest bank in the United States.[18] According to WaMu Inc.’s 2007 SEC filing, the holding company held assets valued at $327.9 billion.[19]
On March 20, 2009, WaMu filed suit against the FDIC in the United States District Court for the District of Columbia, seeking damages of approximately $13 billion for an alleged unjustified seizure and unfair low sale price to JPMorgan Chase. JPMorgan Chase promptly filed a counterclaim in the Federal Bankruptcy Court in Delaware, where the WaMu bankruptcy proceedings had been continuing since the Office of Thrift Supervision’s seizure of the holding company’s bank subsidiaries.[20][21]”
See Post #10. Those mortgages or bonds would only be “toxic” if they are in default.
The massive consolidation of banks into giants goes on unabated.
Go find a credit union, folks.
Not sure where your definition is a recognized “definition” of a non-technical term “toxic asset.” The term as used doesn’t mean default. It means assets no one wants. For example government bonds aren’t in default YET. Yet Market Watch states: “Contagion fears triggered by the speedy collapse of two regional banks in less than a week is raising the risk of a crisis in confidence in U.S. banks, one in which government bonds would be the “toxic asset” at the center of it all.” It’s like saying Joe Biden doesn’t have dementia because he hasn’t been formally diagnosed.
Bonds, mortgages etc. keep their face value... until you try to sell them and mark to market. Nobody wants to buy a 2.75% mortgage unless it’s a firesale - which means the seller is failing.
Also, what is actually toxic, as per AV’s definition is *commecial* paper... partucularly class-a office and retail.
Consumer and auto is looking bad as well.
FRC bond holders and FRC stock holders could lose. That sounds like privatized losses.
A bank that holds U.S. government bonds to maturity can carry them on its books at face value no matter how much value they lose on the open market due to rising interest rates. It’s the troubled banks that are forced to sell them to meet depositor withdrawals who consider them “toxic.” In this case, it’s really the BANK that’s toxic, not the asset.
I’m not sure where you get this. You can sell any of these instruments on the open market — though a 2.75% mortgage will certainly be sold at a steep discount under current interest rates.
That makes sense. I think with most of these bank failures isn’t the fed taking on the low interest bonds and letting the buyout bank take the other valuable assets?
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