Another One Down? First Republic Bank FAILS, FDIC Sells It to JP Morgan

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Author of What to Eat When You’re Broke and Bloom Where You’re Planted online course

It was only 6 weeks ago when the nation was briefly paralyzed with concern as we watched three banks go under, with their deposits under FDIC control. At the time, I wrote that one of the next banks to fail could be First Republic Bank.

And today may be the day that it does unless there’s a dramatic last-minute save. If it does fail, it will be the second-largest bank failure in American history.

UPDATE: First Republic has failed. The FDIC has taken control of the deposits and sold the bank to JP Morgan. As per Zero Hedge:

In the end, early on Monday morning, the US unveiled a hybrid solution – after all other attempts at a private rescue effort failed – one where the FDIC would seize the insolvent First Republic, the 14th largest US bank by assetsmaking it the second biggest bank failure in US history, and immediately sell the bulk of its assets and all of its deposits to JPMorgan after a sham but “highly competitive bidding process” had taken place over the weekend (one in which virtually nobody wanted to participate as nobody would buy FRC without explicit government backstops, which in the end is precisely what they ended up getting on FRC’s IO and CRE loan portfolio) while keeping FRC’s toxic Interest-only mortgages to Hamptons’ billionaires.

According to the FDIC announcement, JPMorgan would assume all of First Republic’s $92 billion in deposits — insured and uninsured, including the $5 billion in deposits gived by JPM to First Republic on March 16. It is also buying most of the bank’s assets, including about $173 billion in loans and $30 billion in securities.

And the rich get richer.

If you think that your money is safe in the bank, you may want to reconsider. And you may want to do it quickly because just last month, we saw how rapidly the domino effect could take down one after another. (I hold my savings in precious metals. You can learn more here.)

What led up to it?

First Republic’s problems appear to relate to increasing interest rates. CNBC explains:

First Republic is a regional bank that has focused on high-net-worth individuals and their businesses, including offering mortgages at low interest rates to those customers.

Those mortgages, as well as other long-term assets on the bank’s balance sheet, have fallen in market value since the Fed began hiking rates last year, making investors worried that the bank would have to book a sizeable loss if forced to sell those assets to raise cash.

On Friday, stocks for First Republic Bank tanked by 43%. (That’s not the worst of it – stocks have fallen by 97% this year.)

According to Fortune:

A group of 11 banks that deposited $30 billion into First Republic in March — giving it time to find a private-sector solution — have proved reluctant to band together on making a joint investment. A few proposals that surfaced in recent days called for a consortium of stronger banks to buy assets from First Republic for more than their market value. But no agreement materialized.

Instead, some stronger firms have been waiting for the government to offer aid or put the bank in receivership, a resolution they view as cleaner — and potentially ending with a sale of the bank or its pieces at attractive prices.

But receivership is an outcome the FDIC would prefer to avoid, in part because of the prospect it will inflict a multibillion-dollar hit to its own deposit insurance fund. The agency is already planning to impose a special assessment on the industry to cover the cost of SVB and Signature Bank’s failures last month.

For the past month, the FDIC has been scrambling to put together a rescue deal for First Republic, seeking bids from banks like JPMorgan Chase & Co., PNC Financial Services Group Inc., Citizens Financial Group Inc., Bank of America Corp., and US Bancorp. (The latter two declined to bid.) However, the deadline for acceptable bids came and went yesterday with no resolution.

This makes it likely, according to the experts, that the FDIC will seize control of First Republic’s deposits today, putting the beleaguered institution into receivership.

How will this affect the industry?

If last month is anything to go by, the FDIC is likely to cover deposits, even those larger than the officially insured $250,000. It’s how they averted an even bigger panic in March. However, this outcome is not guaranteed. And even if they cover deposits in First Republic, at some point, if too many banks fail, this apparent government generosity will not continue.

And, once again, the failure of one bank is also likely to cause a ripple of other failures, so we could be looking at a bumpy ride this week.

But while everyday folks could be facing major repercussions, people who are already incredibly wealthy could profit immensely from the downfall of the rest of us. In fact, they’re salivating over the prospects.

The banking and investment sector will still come out on top, regardless of the fate of First Republic and other banks. According to Bloomberg:

Even if another set of banks failed—which is a matter of debate—the repercussions won’t be felt across the economy equally.

“Credit will start crunching but not for everyone,” Goldman Sachs analysts wrote in a note last week. “Owing to their greater financial flexibility, large and highly rated firms can adapt to tighter bank lending standards.” That means the biggest banks are set to get bigger, and smaller borrowers who rely on the smallest institutions will find it much more expensive to get access to money…

…Ares Management CEO Michael Arougheti told me in a phone call this morning that his firm believes that the biggest players will be the ones getting money—but that he’s also trying to lend to midsize companies because there’s a chance for him to seize on outsize returns…

…A conversation this week with Blackstone’s Dwight Scott, the firm’s global head of credit, revealed calmer nerves under the surface than what would meet the eye. Blackstone is leaning into the chance to lend to bigger clients who are looking for fresh cash. “I do think we’ll see opportunities out of the banking world. But most importantly, we’re seeing just amazing opportunities out of the corporate world,” he said in a Bloomberg Television interview.

And this isn’t the only way that the industry will profit. They’ll also get money from the government – billions and billions of dollars. Axios reports:

Bank rescues are often seen as government bailouts, while bank failures are seen as being more punitive.

  • In reality, however, the government invariably ends up being extremely generous to the banking sector whenever there’s a failure.

How it works: When a bank fails and is sold by the FDIC in a fire sale, the government is generally forced to throw in billions of dollars’ worth of sweeteners.

  • In the event that happens to First Republic, those sweeteners are likely to be worth roughly $20 billion to whichever acquirer ends up with the bank’s operations…

…It’s not just First Republic’s eventual acquirer who stands to make billions from the deal.

  • A consortium of 11 banks has $30 billion on deposit at First Republic — all of which is uninsured by the FDIC. That money is theoretically at risk if First Republic fails.

  • Realistically, the government will declare a systemic risk exception and insure all those $30 billion in deposits. Those billions will flow from the government — in the form of the FDIC — to America’s biggest banks: JPMorgan, Bank of America, Wells Fargo and Citigroup ($5 billion each); Goldman Sachs and Morgan Stanley ($2.5 billion each); and a group of regional banks, including Truist and PNC, getting $1 billion each.

In summary, getting a new mortgage or car loan will cost far more for average people, which leads to more profit for banks. As well, it will be more difficult to get the loan in the first place, which limits our options.

Meanwhile, the government will throw money at existing banks, and rich people will get richer. There was virtually no risk for the banks attempting to “rescue” First Republic – it was evident to them their billions would be covered.

There are always two sets of rules, and it couldn’t be more clear than this.

Who’s next?

During the failure of SVB, I found a list of banks that were concerning. First Republic was on that list. Here are the others:

Customers Bancorp Inc. of West Reading, PA

First Republic Bank of San Francisco, CA

Sandy Spring Bancorp Inc. of Olney, MD

New York Community Bancorp Inc. of Hicksville, NY

First Foundation Inc. of Dallas, TX

Ally Financial Inc of Detroit, MI

Dime Community Bancshares Inc. of Hauppauge, NY

Pacific Premier Bancorp Inc. of Irvine, CA

Prosperity Bancshare Inc. of Houston, TX

Columbia Financial, Inc. of Fair Lawn, NJ

But these aren’t the only organizations at risk as per Morningstar. These had some of “the highest ratios of negative AOCI to total equity capital less AOCI.”

Comerica Inc. of Dallas, TX

Zions Bancorporation of Salt Lake City, UT

Popular Inc. of  San Juan, PR

KeyCorp of Cleveland, OH

Community Bank System Inc. of DeWitt, NY

Commerce Bancshares Inc. of Kansas City, MO

Cullen/Frost Bankers Inc. of San Antonio, TX

First Financial Bankshares Inc. of Abilene, TX

Eastern Bankshares Inc. of Boston MA

Heartland Financial USA Inc. of Denver, CO

First Bancorp FBNC of Southern Pines, N.C.

Silvergate Capital Corp. of La Jolla, CA

Bank of Hawaii Corp. of Honolulu, HI

Synovus Financial Corp. of Columbus, GA

I have no idea if these will follow the same pattern, but you may want to look into it further if you bank with these companies.

I really limit what I keep in the bank. I find it incredibly concerning that we’re at the mercy of the FDIC. I keep in enough money for my bills for the month and a small amount of savings but I would never dare to leave in my entire life-savings. My non-expert advice is to manage savings in the following order.

  1. Tangible goods (food, land, preps)
  2. Pay off debt (secured debt like mortgage and car payments in particular)
  3. Invest in precious metals (it’s a good way to hold excess money in a physical format that holds its value regardless of what happens to the dollar)

If you’re looking for more information about holding gold and silver, I recommend ITM Trading. They offer very educational strategy sessions with no pressure to purchase. Even if you choose not to invest in metals at this time, you’ll walk away with solid information, and it doesn’t cost a penny. Go here to learn more. (And I couldn’t wait to book your appointment. The last time banks failed, the option to speak to someone was delayed due to high demand.)

You may have put off making decisions on how to handle this but consider another bank failure to be your wake-up call. The failure of three banks in March was not an anomaly. It was the beginning of a trend and there will very likely be more failures to come.

What are your thoughts?

What do you think will happen with First Republic? Do you expect the FDIC to cover deposits again? Is this really just a giant transfer of wealth? And how are you handling your savings right now? Do you still trust our banking industry?

Let’s talk about it in the comments section.

About Daisy

Daisy Luther is a coffee-swigging, adventure-seeking, globe-trotting blogger. She is the founder and publisher of three websites.  1) The Organic Prepper, which is about current events, preparedness, self-reliance, and the pursuit of liberty; 2)  The Frugalite, a website with thrifty tips and solutions to help people get a handle on their personal finances without feeling deprived; and 3), an aggregate site where you can find links to all the most important news for those who wish to be prepared. Her work is widely republished across alternative media and she has appeared in many interviews.

Daisy is the best-selling author of 5 traditionally published books, 12 self-published books, and runs a small digital publishing company with PDF guides, printables, and courses at SelfRelianceand You can find her on FacebookPinterest, Gab, MeWe, Parler, Instagram, and Twitter.

Picture of Daisy Luther

Daisy Luther

Daisy Luther is a coffee-swigging, globe-trotting blogger. She is the founder and publisher of three websites.  1) The Organic Prepper, which is about current events, preparedness, self-reliance, and the pursuit of liberty on her website, 2)  The Frugalite, a website with thrifty tips and solutions to help people get a handle on their personal finances without feeling deprived, and 3), an aggregate site where you can find links to all the most important news for those who wish to be prepared. She is widely republished across alternative media and  Daisy is the best-selling author of 5 traditionally published books and runs a small digital publishing company with PDF guides, printables, and courses. You can find her on FacebookPinterest, Gab, MeWe, Parler, Instagram, and Twitter.

Leave a Reply

    • Same. But they handcuff us to use their systems because what else is the option?
      I like what Daisy said about leaving enough on for bills and a bit for overage/savings and thats all.

  • I looked up where my bank is in all this and they look OK for now, but I plan to keep am eye on it. I also already own my property and have no plans to move. I’m not sure what else to do at this point.

    • You do not own any property.
      You lease it from the State.

      Stop paying, see what happens to “your” property
      If someone can tell you what to do on “your” property, it is not your property.

  • Great Advice from Daisy as usual. Our bank system is on life support & doubt it will get better. Personal savings, precious metals & … something that appeals to the younger crowd that Globalist Governments are fighting… is crypto. Cuz it interferes with their eventual CBDC which is basically a monitored & controlled version of crypto. It’s more complicated as you can’t leave your money in open platforms but private wallets are essential to store your crypto & provides another layer of asset diversification. There’s a lot of ‘$hitCoin’ out there so it requires some due diligence & homework, that’s why the older crowd is more hesitant. But you can only store so much precious metals & if you put most of it in ?? Depositories you likely to get it confiscated by the Biden ?Cabal when things head further south. There’s precedence in that Roosevelt did it in 1930’s.
    There’s truly No Safe bulletproof option, so multiple layers like everything else in prepping is crucial. My 2c.. retired Financial Advisor.

  • It’s not the banks that are failing but rather the money supply that is failing. In the Scriptures we read.

    Genesis 47:14-16 (King James Version)

    14 And Joseph gathered up all the money that was found in the land of Egypt, and in the land of Canaan, for the corn which they bought: and Joseph brought the money into Pharaoh’s house.

    15 And when money failed in the land of Egypt, and in the land of Canaan, all the Egyptians came unto Joseph, and said, Give us bread: for why should we die in thy presence? for the money faileth.

    16 And Joseph said, Give your cattle; and I will give you for your cattle, if money fail.

    Why do you think this event made it’s way into the Holy Scriptures?

    Well the money changers got greedy and lend more money they had in their vaults. What we see right now in America the money masters have been doing the same fundamental flawed money management from the times of the Old Egypt. These days it’s called a fancy word “fractional reserve banking”. Out of 100 dollars in deposit the bank will keep 10% in reserve and lend the rest at interests.

    And we know that any expansion of the money supply disregarding real assets value of deposits will fail money the money supply. But Joseph on behalf of the Pharaoh (or the State) of Egypt saw this and gathered all he could in excess of liquidity and made purchases of cattle and corn because he feared famine would arise from the economic turmoil caused by excess lending from the money changers.

    But then we read something really interesting. It’s this passage that is worth gold in terms of money management and public finances. When the money changers went to Joseph they asked for bread, because they were going bankrupt as the rest of the people of Egypt and Canaan at the mercy of famine they too asked for bread. But then Joseph said to the money changers this in wisdom.

    “And Joseph said, Give your cattle; and I will give you for your cattle, if money fail.”

    Joseph said to the money changers basically this. “Recognise your mismanagement and greed that lead to the money failing in the land and you shall receive food but only if you finally realise what you have done. Recognise your responsibility in failing the money”. And other words Joseph asked for guarantees of help from the State in regards to provisions of assets but only if they changed their money lending practices. And to that aim Joseph was willing to purchase their remaining hard assets for money liquidity but only at a fair cost.

    “Give your cattle; and I will give you for your cattle”.

    In other word you will not cheat the State over your wrongdoings. You will only receive from the State in equal value to your assets. That is not what the US. State is doing right now. The US. elites are doing the exact opposite and worse. So the money will continue to fail because the practice of lending money has not changed in the US. The US. is validating what the money masters are doing wrong and are saying “give me your debts and will give you assets regardless of your failed money lending practices.”

    This is a very exciting passage because it is the first bank buyout in recorded history nothing less.

    There is a 4 hours of teachings on money in this documentary.

    The Money Masters

    There is 2 hours of teachings in regards to the “fractional reserve banking” in the following documentary.

    Zeitgeist 2: Addendum (ENG)

    And there is another 2 hours of teachings on “zero growth” and the power of central banking management in this documentary.

    Princes of the Yen | Economic Ascent | Central Banks | Creation of Money

    ps. I know this comment is too long to publish but I wrote this anyway as it mainly helps me in the knowledge of money management and public finances.

  • FDIC should have shut down the banks when the Twitter fueled run started. But that would have spiraled into an even worse mess. Time to go back to putting banks $50B/$50B+ under greater scrutiny. Take a look at who you voted for between 2016 and 2020. Let’s lessen oversight more – next up may be your local recorder’s office and say adios to your property.

  • Thanks Daisy, your non-expert advice is solid.
    1.Invest in tangibles like home/land, preps etc that will sustain you in the near and hopefully long term,
    2. Clear all debts particularly high interest then the rest – “Let no debt remain outstanding, except the continuing debt to love one another, for whoever loves others has fulfilled the law.” Romans‬ ‭13‬:‭8‬
    3. Limit cash in bank putting savings in gold for now. Remember gold does not move according to inflation but represents a confidence in government. As we move towards world war and collapse of the west gold has been predicted to reach US$6000 per Troy oz. Don’t be married to your investment. Also be vigilant against AI scams that can mimic your voice and image to access bank accounts and your identity. If I receive a phone call from an unknown number I don’t answer or speak, they can be to sample you voice for AI synthesised speech.

    One more thing for those who are willing to consider more risk in investment, stocks in companies that have assets to sell and are in good financial shape ie. gold mining companies, other mining companies that demonstrate long term performance and S&P 500 ETF (not Blackrock). This is not a buy and forget as you need to monitor performance.

  • How are you handling your savings right now? American Silver Eagle coins and the bank for paying bills, and for short-term savings. Please ensure you are eternally invested in Jesus and Heaven. Godspeed and Blessings to all.

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