Forth bank to collapse this year I think:
Wall Street titan JP Morgan will swoop in for crisis-hit First Republic Bank, marking the third big American bank to collapse in just over a month and the second largest failure ever, US authorities announced today.
Interest chart on bank failures for the last 20 or so years. While the numbers are low the cost per bank failure is rocketing:
The FDIC has about $40 billion covering potential liabilities of $6 trillion, so presumably the US government would need to start the printing presses if things got bad.
Anyone know if the FDIC itself is in danger?
I think the answer is no. FDIC insured all the deposits of the previous bank failures (to reassure depositors and stop bank runs). FDIC is funded by premiums paid by banks. So the premiums increase to cover the deficit.
They have not said Republic depositors will be insured beyond the usual $250K limit.
Given time to recognize the risk and take steps to refinance most banks should not require rescue. Failure of FDIC seems unlikely.
Meanwhile regulators and bank inspectors are taking a closer look and being more aggressive to make bank management heed their warnings. We hope that will be enough. And more regs of midsized banks are likely to come from Congress.
But as they say, it aint over until its over. A few more bank failures from high interest rates and risky investments would not surprise us.
JPM purchased the deposits so additional insurance is not necessary.
“The Federal Deposit Insurance Corporation (FDIC) confirmed they had accepted a bid from JP Morgan to seize the majority of First Republic’s assets and all of its deposits.”
Yes, deposits are covered. You wonder what might be included in “other assets.” Uninsured CDs? Bonds? Real estate? Mortgage loans?
Considering that 2 huge banks deposited $30B a few weeks ago, I assume all that will be covered one way or another. Probably not by FDIC but rather through whatever deal was reached with JPM this weekend.
It’s all OK now according to Jamie Dimon:
That’s my mind made up then - I’ve just ordered some more gold