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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%

#201

Post by realjhol »

patrick451 wrote: post #197
digitaltrees wrote: post #85

Earlier quoted context omitted.

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.

Maybe don't be so dismissive of people who think differently

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

#202

Post by akiselev »

tome wrote: post #192
alistairSH wrote: post #186

Earlier quoted context omitted.

[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.

IANAL but my layman’s understanding is no, there is no law preventing them from halting withdrawals and a temporary suspension can on rare occasions stop a bank run. Problem is, clients can sue to get their withdrawals and the judge in charge of the case can force the business into involuntary bankruptcy proceedings (without the protection of voluntary bankruptcy) if they think the bank can’t meet the withdrawals in full, to get a valuation of its assets so that the plaintiffs can be made whole. This won’t happen over the weekend because courts aren’t in session but can happen on a week or two timescale, in which case the business is basically frozen for months while everyone fights over a half dead carcass. It’s a relatively catastrophic outcome for everyone involved.

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

#203

Post by BeFlatXIII »

tome wrote: post #184
digitaltrees wrote: post #90

Earlier quoted context omitted.

The bankruptcy code provides guidance for a 90 day look back period from the date of insolvency where transactions can be clawed back or must be repaid. The FDIC will talk to the recipient bank and get a court order to deposit the funds in to a trustee account so that all available assets can be distributed evenly and fairly.

If this happens then those who took their money out not only caused the bank run but didn't benefit having taken it out anyway!

That's probably the exact reason for the clawbacks.

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

#204

Post by cjbgkagh »

patrick451 wrote: post #196
bloodyplonker22 wrote: post #173

Earlier quoted context omitted.

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?

No reserve banking, like fractional reserve but the fraction is zero. Instead the banks have to be able to pass stress tests which requires that they have reserves which in effect will be a fraction of deposits. It’s more complicated, less transparent, open to gaming, and there is huge incentive not to fail a bank. Also they often allow the use of cash-like instruments which are often riskier and less liquid and probably misrated by compromised rating agencies. The standards were lowered so that the banks would inflate the economy.

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

#205

Post by raywu »

zamnos wrote: post #158
fanzhang wrote: post #58

Earlier quoted context omitted.

Yes -- all the people I know withdrawing from small banks are going to Chase or Morgan Stanley. These largest banks have to mark-to-market their losses and have a lot of cash (short duration) assets, and are literally too big to fail.

Confusingly, the two banks you named are JP Morgan Chase, and Morgan Stanley. JP Morgan Chase is the biggest bank there is, but Morgan Stanley is far smaller (but still ginormious) and doesn't rank in the top 10 banks. The top 3 banks are JP Morgan Chase, Bank of America, and Citigroup. https://www.insiderintelligence.com/insights/largest-banks-u...

Morgan Stanley is for wealth management. Chase for retail.

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

#206

Post by cjbgkagh »

karmicthreat wrote: post #75
cjbgkagh wrote: post #25

Earlier quoted context omitted.

Huh, so at least one quarter of depositors will get 100% on the dollar.

Probably not if the assets are short. The FDIC can claw back withdrawals from what I understand.

It’s possible to void past transactions, but usually due to fraud, favorable preference, or insiders. I think the preference rule only applies if it is the borrower (the bank) who decides who is getting paid. Making good on transaction obligations in the order they occur doesn’t seem like a decision of the bank.

Having a 90 day window before insolvency to void transactions would probably smooth out the insensitive to make a run on the bank and give the bank time to find funding. More people would keep money in on the belief they already missed the window, perhaps enough for the bank to to stay solvent. But if that money was used to pay salaries you’re now forced to extract it from people living paycheck to paycheck. Incurring an instant debt for the depositing company would be worse than losing access to cash and even more companies will be sent insolvent.

Instead I think banks should have to get full deposit insurance, if the risk premium is too high then maybe they should consider restructuring to be less risky. Instead they get a free ride by shunting risk to depositors which incentivize the banks to leverage up to the max risk they can get away with.

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

#207

Post by roflyear »

scotty79 wrote: post #193
klipt wrote: post #36

Earlier quoted context omitted.

"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…

If you can't trust them to buy good assets you sure can't trust them to issue them

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

#208

Post by roflyear »

scotty79 wrote: post #187
digitaltrees wrote: post #99

Earlier quoted context omitted.

Issuing a loan is buying an asset. You give the borrower money and in exchange buy their promise to pay it back with interest. And in fact that’s what SVB did, except instead of originating the loans themselves they bought them from the original lender.

It's creating an asset. Creating and buying are different thing. Creating should be allowed, buying should be forbidden.

Why?

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

#209

Post by mbbbb »

mFixman wrote: post #194
nemo44x wrote: post #35

Earlier quoted context omitted.

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?

Only if you have more than 250k in the account - the first 250k is insured by the government and if the bank fails is typically paid back in less than a week.

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

#210

Post by everybodyknows »

anxman wrote: post #149
alfalfasprout wrote: post #94

Earlier quoted context omitted.

Strangely I’ve heard about a lot of deposits to first republic in the last 24 hours. It’s unclear your assumption is correct.

I can confirm knowledge of this as well

Could those have been deposits of public funds?
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