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Probably not if the assets are short. The FDIC can claw back withdrawals from what I understand.
Source? That's wild if true.
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> 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.
Counterpoint: This WSJ Article [1] and their latest 10Ks confirm that: - Their actual assets market-to-market (sold on the fair market) is about $26 bln less than the amount they're carried at on their books. This is as of year end 2022, probably more today. - This would wipe out all their equity, loans, and start hitting depositors. - If there was a bank run, First Republic probably would not be able to meet all dep…
That's true for all banks, even JP Morgan Chase. Every single one of them has some withdrawal limit, past which they are screwed. And that limit is definitely lower than 100% of deposits.
The fact that they filed a last minute report on a Friday night speaks volumes about the amount of withdrawals they must be experiencing. This is about as strong as a signal they could put out to stop a possible run.
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How can they claw back withdrawals?
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.
I'd really like to know where people are withdrawing their money from these banks to . They're not taking suitcases of cash, so it must be flowing to some other financial institutions. Is it going to traditional big banks (BofA, Wells, Chase, etc.)?
I’m hoping that’s not naive.
I’m curious about Wealthfront’s strategy of spreading savings across many partner banks to get $2M in FDIC insurance per account though.
Counterpoint: This WSJ Article [1] and their latest 10Ks confirm that: - Their actual assets market-to-market (sold on the fair market) is about $26 bln less than the amount they're carried at on their books. This is as of year end 2022, probably more today. - This would wipe out all their equity, loans, and start hitting depositors. - If there was a bank run, First Republic probably would not be able to meet all dep…
All true, but they have a $60b debt facility to draw down on before they'd consider liquidating their HTM bond portfolio. Given that they have $120b in uninsured deposits diversified across a disparate client portfolio, it seems like they're truly in a much stronger position than SVB. I feel like a very likely outcome on Monday is that the FDIC announces a buyer, SVB depositors realize they're going to be made whole,…
Counterpoint: This WSJ Article [1] and their latest 10Ks confirm that: - Their actual assets market-to-market (sold on the fair market) is about $26 bln less than the amount they're carried at on their books. This is as of year end 2022, probably more today. - This would wipe out all their equity, loans, and start hitting depositors. - If there was a bank run, First Republic probably would not be able to meet all dep…
> - If there was a bank run, First Republic probably would not be able to meet all depositors. That's true for all banks, even JP Morgan Chase. Every single one of them has some withdrawal limit, past which they are screwed. And that limit is definitely lower than 100% of deposits.
I’m not super well informed about this space, but my understanding was that SVB’s issue wasn’t that its depositors were from the tech sector, but rather that it had put a ton of capital into investments that are significantly less valuable (on the open market today) now than they were a year ago due to increasing interest rates. I’m curious how the tech sector matters here specifically?
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.
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Another interpretation is that this is generally how the FDIC likes to do things: take over on Friday and reopen on Monday. Not sure that will happen in this case but the regulators get two days to prepare to reopen, which at least in recorded US history is seamless and without risk for retail depositors.
The 2-day shutdown is hence critical for the functioning of the financial system. Same for reporting earnings afterhours. Those calling for 24/7 trading are aloof of how entrenched systems need change management
(https://www.bloomberg.com/opinion/articles/2020-03-12/the-bu... the section is called "thirty minutes")