Another US Bank Has Failed - Now What?

With the takeover and sale of First Republic Bank, I wanted to take a moment to review and explain the situation.

DISCLAIMER: Richard does not hold a position in any of the companies mentioned in this video. This channel is for education purposes only and does not constitute financial advice - Richard is not responsible for investment actions taken by viewers. Please seek out a registered advisor if you require assistance (while Richard is a registered portfolio manager at WDS Investment Management, he does not provide advice through The Plain Bagel, which is not affiliated with his employer).

[ajrobbins]

Thank you for being my "designated boring finance Internet guy, " Richard.

[traplover]

Having two-recording breaking bank runs being the 2nd largest under 90 days is insane

[tubewacha]

This is what a correction looks like after a ridiculously loose money supply and low interest rate period. Lowering interest rates now would mean the Fed is not serious about reducing inflation.

[.]

Wonder how public sentiment and the disillusionment towards institutions and politics plays into the erosion and degradation of those institutions. Feels a bit like a vicious cycle of snowball effects starting with mistakes or sometimes full on incompetence and then it just keeps going from there fueled by fear and distrust.
Really appreciate the amazing rational boringness here that‘s not feeding into panic but possible solutions.

[JMurph]

First Republic bore the brunt of the "reputation panic" that SVB caused. Almost everyone I know that had any business with FRB also had accounts at large national banks. FRB's accounts are not that great by the numbers (various other options offered higher interest rates, more depth in their offerings, longer customer service hours, etc), so most people I know were just keeping an account there to have a local bank and because of their great sign-up bonus. The second that this proposition got even slightly sketchy, everyone took flight to their existing accounts at larger institutions.

[raymondcaylor]

I'm surprised Plain Bagel didn't mention it was the attractive rates First Republic offered that caused more than 65% of their Depositors money to be uninsured and it was the natural migration of that money to be withdrawn and placed in higher yielding accounts as rates grew. In other words, what did Bank Officials think was going to happen when they were no longer the highest yield payer in the market? Of course they're going to move to higher yields, that's how it got there to begin with.

EDIT: 6/12/23 The Bank First Horizon FHN is a Bank worth Looking At. It's the SE Regional Bank that agreed to be bought by TD that went to hell. What research I've done it's looks solid functionally with a tremendous amount of talent left from really good buys of smaller Banks over the year's. That's what drew me to it. The smart guys who sold their bank to them were allowed to continue to run their old branches and use the dependable dividends as strategic income and growing their position with reinvestment. Anyway, I think it's an A if you want to add a regional bank and strong B if you're trying to grow your Financial Service's portfolio. It'll be $15 in 24 month's.

[samsonsoturian]

Just remember: There are over 4000 banks in the US and only about two dozen got credit rating downgrades due to rising interest rates.

[henriquematzenbacher]

It is interesting that these dodgy banks can offer uninsured deposits for wealthy people and these wealthy individuals can be completely at ease knowing that the US taxpayer will always guarantee their money back, as banks are not allowed to fail.
Gotta love "free market" capitalism!!

[charactermeringue]

This whole deal is suspicious. It looks like JP Morgan took advantage of what happened to SVB and hyped up the situation to pressure the authorities to allow them to buy First Republic AND assure the loans. I mean, that's what i would do if i were a suit in JP Morgan. I'd want access to First Republic's HNW customer base with little risk. But what do i know, I'm a musician.

[sublyme]

It's a shame too, FRC was by all accounts an amazing bank to deal with, but they couldn't survive the media's onslaught. If they had allowed questions after their 1st quarter earnings report, I wonder if things would have turned out differently. That one decision seems to have eroded any remaining confidence.

[gbpg]

Waiting for the government to step in and help families with medical bills. Only seems right since they’re protecting the rich to stay rich even when it’s against the law.

FDIC needs to increase the min coverage and also require insurance to cover anything above the max they’ll cover. Banks can front this for a small percentage off the top.

[bodeoguns]

So plain and simple . No need for unnecessary introductions, and noise . You're doing a great job 👌

[Cherryblossoms]

I feel like having a customer base primarily consisting of individuals likely to deposit over $250, 000 is a risk factor to a bank failing, rather than a good thing.
People without wealth are unlikely to spend time keeping up with such news, and are even less likely to care about taking their money out when a bank collapses.
Also, FDIC insurance. Wealthy individuals are also more likely to have certain personality types that are more likely to be opportunistic or self-preserving.

[ArchesBro]

9:04 Umm deflationary assuming the government doesnt print money to bail out the banks, which they did... in multiple ways including in the forced sale of First Republic Bank. Not to say inflation wont go down, because lending is much more expensive

[trevinbeattie]

Your video is the first I’ve heard of this news. From what little I’ve gathered from other articles it seems their failure was caused by a run on the bank, so panicking about bank failures is a self-fulfilling prophecy. I feel better about generally ignoring the news.

[pm]

2 things on the video: (1) one mistake which is that only fixed rate mortgages decline if rates rise. Treasuries are fixed rate loans to the government. (some European countries offer floaters). (2) I think it is worth explaining the difference between a bank run and a credit crisis. Would help people understand the situation better and the differences to 2008

[EnglishLerner]

00:51 JPMorgan will buy assets of the FRB
01:47 What happened?

[bharathkurapati]

@Richard. The fed rapidly raising rates is hurting many middle income households in the US. Especially the once who just entered the job market in the last 5 years. Not enough savings to ride out the layoffs and pay-cuts. Fed doesn’t seem to care about this. So in theory, if pulling deposits might make them pause on interest rates and that’s the one tool we have to make them stop. Why not do it? Knowing that Fed won’t let US Financial system fail.

[DD-konn]

To think that being a calm voice could actually separate you from the crowd. Thanks for the content Mr. Bagel.

[allensu]

3:44 this deal is insane. JP Morgan is basically getting FRC for free while the government takes all the losses.