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First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

ir.firstrepublic.com

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Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#191

Post by scotty79 »

nemo44x wrote: post #29
scotty79 wrote: post #20

Earlier quoted context omitted.

Why are banks even allowed to buy assets? Every asset is a risk. Banks should have right to do exactly two things. Keep their customers saving and issue loans. There's plenty of risks even in that activity. Every other thing bank does is just piling up risk to unreasonable levels.

I think this was a weird thing where deposit demand was so much greater than loan demand. They had too much money and thought they were doing a safe thing. But failed to consider the time aspect and how rapid interest rate increases nuke them. Banks do provide a valuable service and having them reject deposits isn’t a solution.

Investing money is never a safe thing. They should just sit on it.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#192

Post by tome »

alistairSH wrote: post #186
tome wrote: post #183

Earlier quoted context omitted.

Are there some legal terms preventing limiting withdrawls? If not it seems like there should be, exactly to cope with the risk of runs! [EDIT: corrected "limiting withdrawls" to " preventing limiting withdrawls"]

[simplified explanationfollows] No, the inverse. Banks are required to keep a % of deposits available in cash, another % in easily sellable assets, etc (lots of regulations here, esp post 2008 crisis, though the US exempted community banks from the new rules, which contributes to the current crisis) in order to reduce the risk that a bank run puts them out of business. But a big run can exceed those safeguards, as ap…

Sorry, I meant is there a law preventing limiting withdrawls. If not, I don't see why banks don't just do that, when subject to a run, so I guess there must be. In other words, the government says that deposits must be always withdrawlable immediately on request, which seems like a surefire recipe for runs.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#193

Post by scotty79 »

klipt wrote: post #36
scotty79 wrote: post #20

Earlier quoted context omitted.

Why are banks even allowed to buy assets? Every asset is a risk. Banks should have right to do exactly two things. Keep their customers saving and issue loans. There's plenty of risks even in that activity. Every other thing bank does is just piling up risk to unreasonable levels.

"Issuing a loan" and "buying debt" are the same thing in different words. Issuing a loan is still, in effect, buying an asset.

The difference is, who created the risk. When you buy asset from someone else you are buying the risk someone else has created. So you have more risk. Banks are very unique institutions that are allowed to do things no other business is allowed to do. They also should be equally severely restricted so they can't acquire any additional risk they themselves didn't create.

Banks are risk sources in the economy, the risk of "what if borrower doesn't pay in full or at all", the law should do everything to prevent banks from being risk sinks in the economy. Because in current setup banks just buy more an more risk and they eventually collapse one way or the other when risk is en masse converted to cost to the people and the economy.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#194

Post by mFixman »

nemo44x wrote: post #35
braingenious wrote: post #31

Can someone ELI5 what this is about? I know that another bank is going through some trouble and I’m assuming this is somehow connected? Or not? I am unfamiliar with this bank or this form.

Contagion. People are nervous that other banks are as insolvent as SVB. And even if those banks aren’t, nervous people making a bank run could replicate this. And if another bank falls, then another it would increase velocity and spread more rapidly until every bank is wiped out.

I have an account with First Republic. Should I panic and desperately try to withdraw all my money?

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#195

Post by odiroot »

whatever1 wrote: post #18

Hopefully the panic will not spread. Multiple people were calling me to ask whether they should get their money out of their bank. But keep in mind that people also went through a pandemic, where panic was the go-to option.

That's gonna spawn some hot season for burglars!

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#196

Post by patrick451 »

bloodyplonker22 wrote: post #173
cortesoft wrote: post #119

Earlier quoted context omitted.

Of course it is lower than 100%. Our whole modern banking system is built on this fact. https://en.wikipedia.org/wiki/Fractional-reserve_banking

FYI, all major banks switched off of fractional reserve banking more than a decade ago and have moved to another system that uses a multitude of different variables.

What is this other system called?

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#197

Post by patrick451 »

digitaltrees wrote: post #85
resource0x wrote: post #71

Earlier quoted context omitted.

> If there was a bank run, First Republic probably would not be able to meet all depositors. If everyone knows this, why keep your money there? Tech exposure has nothing to do with it. "In a bank run, he who runs first, runs best".

Not really the money can and will be clawed back if a bank is placed into bankruptcy or receivership. The legal system disincentivizes runs on the bank by enforcing a 90 day look back period where withdrawals have to be repaid so that funds can be distributed more broadly and fairly.

It really isn't your money is it. I used to think these "get your money out of banks" folks were kooky we-didn't-land-on-the-moon conspiracy nuts. The more I read this thread, the more I think they are right.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#198

Post by Terretta »

bradleyjg wrote: post #182
lordnacho wrote: post #169

Earlier quoted context omitted.

That got me wondering why anyone leaves amounts over 250k anywhere else. If you have 5m are you going to open 20 bank accounts? If there's a wobble you'll need to dig out a lot of credentials to move your money, and you'd end up moving it to a TBTF anyway.

If you have $5 million why do you need it in demand accounts? Treasuries (notes, etc) are backed by the full faith and credit of the USG and are available in effectively unlimited amounts.

About that 'full faith and credit' thing ... you have to have full faith in congress to give that credit.

https://www.cnbc.com/2023/01/13/us-will-hit-its-debt-limit-t...

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#199

Post by techlover14159 »

mediaman wrote: post #104
loopdoend wrote: post #92

Earlier quoted context omitted.

Which legal system has a claw back period on withdrawals? Can you imagine rolling back wire payments 90 days old!

It’s not always 90 days, but the American federal bankruptcy system does allow for clawbacks on payments made immediately leading up to a filing. Meaning, the bankruptcy administrator will absolutely file and get a judgment on your assets, which will be forcibly collected, if you received a payment from a bankrupt entity within the window established by the court.

Bank insolvency is not handled by courts. FDIC has sole and complete control of bank insolvencies. FDIC is the receiver or conservator for handling bank insolvencies by law.

FDIC doesn't claw back bank transactions that have "settled". So if you wire cleared, you are good for the money.

Search for "FDIC Discretion Without Ongoing Judicial Oversight" in the document below

No ongoing judicial oversight Pursuant to Section 11(d)(13)(D) of the FDI Act, except as otherwise provided, no court has primary jurisdiction over any claims or action for payment from, or actions seeking a determination with regards to, an institution for which the FDIC has become a receiver. Further this provision also limits courts’ ability to engage in a review of any claims relating to acts or omissions of the institution or the FDIC as receiver. Under Section 11(d)(13)(C) of the FDI Act, no court may issue an attachment or execution over the assets that are in the possession of the FDIC as receiver.

https://corpgov.law.harvard.edu/wp-content/uploads/2008/10/0...

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#200

Post by akiselev »

Terretta wrote: post #198
bradleyjg wrote: post #182

Earlier quoted context omitted.

If you have $5 million why do you need it in demand accounts? Treasuries (notes, etc) are backed by the full faith and credit of the USG and are available in effectively unlimited amounts.

About that 'full faith and credit' thing ... you have to have full faith in congress to give that credit. https://www.cnbc.com/2023/01/13/us-will-hit-its-debt-limit-t...

Thankfully, worshipping at the altar of the US Dollar is the only unshakably bipartisan activity in US politics.
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