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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 t

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 depositors. - First Republic in some ways is in worse shape that SVB. SVB had all their assets in medium duration (10 year) treasuries. First Republic has a lot more 30 year mortgages they gave people at ultra low 2% interest rates. Today 30 year mortgages are 6%, which means if they tried to resell these loans they'd get more than 50% off. - Personally, I know of at least a couple of HNWIs who pulled funds other than $250K today. Who can blame them -- what's the upside if you have more than $250K in? First Republic relies on wealthy deposits, and these are not insured. [1] https://archive.is/QuOSD#selection-335.147-335.315 https://archive.is/QuOSD#selection-335.147-335.315

resource0x 4y ago
> 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".
- metacritic12 4y ago
  Exactly, they're basically changing the subject to distract from the elephant in the room.
- dannyw 4y ago
  Tech businesses tend to have more direct access to information (e.g. Twitter, emails), and listen to VCs and investors. Regular people and businesses don't hear about these things. Today, only 1 other person in my friend group of 6 heard about SVB.
  - ketzo 4y ago
    I have to imagine that if you have enough money in First Republic for your withdrawal to actually be a problem for them… you at least have a dim awareness of, say, the WSJ front page.
  - vkou 4y ago
    That's not why there's a tech bank run. The reason there's a tech bank run is because VCs, and the companies they own are like geese. They fly in a triangle. Thiel tells his startups to bank-run SVB, and they bank-run SVB, and all the other VC start telling their firms to follow suit. It's all herd mentality among an undiversified group of customers (startups all of which are hit hard by raising interest rates), which is perfect for a bank run.
  - gnicholas 4y ago
    > Today, only 1 other person in my friend group of 6 heard about SVB. Really? My mom knew about it, and she's a retired teacher who doesn't live in the Bay Area.
  - gault8121 4y ago
    There are three articles about this on the front page of the New York Times right now. It’s going to be widespread knowledge very soon.
  - deleted 4y ago
    [deleted]
  - TechBro8615 4y ago
    It's currently the top article on CNN, Fox News, NYT, WSJ, and Twitter Trending. Your friends must live under a rock.
- digitaltrees 4y ago
  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.
  - loopdoend 4y ago
    Which legal system has a claw back period on withdrawals? Can you imagine rolling back wire payments 90 days old!
    - mediaman 4y ago
      It’s not always 90 days, but the American federal bankruptcy system does allow for clawbacks on payments made immediately leading up to a filing. Meaning, the bankruptcy administrator will absolutely file and get a judgment on your assets, which will be forcibly collected, if you received a payment from a bankrupt entity within the window established by the court.
      - bombcar 4y ago
        This is mainly but not limited to trying to prevent a bankrupt entity from “getting rid” of all its assets. I don’t know if it would apply to a bank wire transfer of “your own money” unless it was a literal fraud situation (pyramid scheme).
        WWLink 4y ago
        I can't imagine that going well. "No we're taking your $50k life savings back so we can give it all to a client that had $5mil and deserves your $50k life savings more than you do"
        bombcar 4y ago
        Well up to $250k wouldn’t be touched, but yeah, doing a clawback for a bank could cause a run on all banks.
- beefield 4y ago
  >If everyone knows this, why keep your money there? Because that applies to literally every single operative bank, and given FDIC insurance and other refulation, the risk of deposit losses for average joe is so small that they do not need to care.
fairity 4y ago
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, and all the panic subsides.
- dannyw 4y ago
  SVB was only able to borrow $15B from their FHLB debt facility, before they got cut off. The FHLB total capacity is ~$60 billion. Is First Republic stating actual numbers they are guaranteed to have access to? Their shareholders are already panic selling (FRC down 36%), their bonds appear to be sinking, and few private parties wants to throw good money after bad. When you have to put out an emergency statement to reassure everyone of your creditworthiness, it's already gone. I do agree that First Republic is in a much better situation relatively to SVB, but illiquidity and insolvency risk is real. I don't really see a reason why any business or individual with more than $250K shouldn't be wiring funds out ASAP, unless you're feeling extra charitable and want to be the bail-in to those who run before you. There is nothing to lose, other than setting up new accounts.
  - zzleeper 4y ago
    Off-topic but it really BAFFLES me why people don't pay more attention to FHLBs. It's like we don't learned anything from the last 10 crises...
    - colechristensen 4y ago
      Everybody got bailed and and essentially nobody went to jail. Of course no lessons were learned. SVB though sounds like nobody should go to jail it was just really bad investment decisions.
      - WatchDog 4y ago
digitaltrees 4y ago
Why would they sell the mortgages now? Why not just hold them. When they originated and funded the loan they did it with deposits or fed funds, why not just hold and collect the payments? If there is a run, then selling is actually the worst thing to do because theoretical losses become irreversible actually losses. It’s highly likely interest rates will go down in a year or two but.
- xeromal 4y ago
  I assume they sell these loans if the amount withdrawn outpaces what they have cash on hand. Since their mortgages are mostly mortages from the low interest era, they're less valuable to buyers.
- prottog 4y ago
  > Why not just hold them > If there is a run If there is a run, they become forced sellers, because they don't have enough cash on hand to meet withdrawals. That's the whole story. They must prevent a bank run.
  - eastbound 4y ago
    Can’t they just not honor the run, so that they can honor it in the long term, rather than selling at a loss and not being able to honor 20% of them?
    - salawat 4y ago
      No. That's theft. That's not how deposits work. You lend out on shorter terms than you figure your depositor will need and pray they don't need it back. If they all do though, you're screwed. It's statistical multiplexing as applied to piles of other people's money.
      - tome 4y ago
        Are there some legal terms preventing limiting withdrawls? If not it seems like there should be, exactly to cope with the risk of runs! [EDIT: corrected "limiting withdrawls" to "preventing limiting withdrawls"]
deleted 4y ago
[deleted]
twblalock 4y ago
> - 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.
- dannyw 4y ago
  Institutions deemed relatively safer (e.g. JPM Chase) are the banks that people withdraw to. Nobody is taking out $20M in cash, they're moving it to the "too big to fail" banks.
  - lordnacho 4y ago
    That got me wondering why anyone leaves amounts over 250k anywhere else. If you have 5m are you going to open 20 bank accounts? If there's a wobble you'll need to dig out a lot of credentials to move your money, and you'd end up moving it to a TBTF anyway.
    - twblalock 4y ago
      If you have that kind of money in cash you pay someone to do that for you. If you want access to your money you don't juggle credentials, you call your banker and ask. Actually even if you don't have millions you can use sweep accounts that automatically spread money across multiple bank accounts. Fidelity has one that anyone can use.
    - bradleyjg 4y ago
      If you have $5 million why do you need it in demand accounts? Treasuries (notes, etc) are backed by the full faith and credit of the USG and are available in effectively unlimited amounts.
      - Terretta 4y ago
        About that 'full faith and credit' thing ... you have to have full faith in congress to give that credit. https://www.cnbc.com/2023/01/13/us-will-hit-its-debt-limit-thursday-start-taking-steps-to-avoid-default-yellen-warns-congress.html https://www.cnbc.com/2023/01/13/us-will-hit-its-debt-limit-t...

resource0x 4y ago

> 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".

metacritic12 4y ago
Exactly, they're basically changing the subject to distract from the elephant in the room.
dannyw 4y ago
Tech businesses tend to have more direct access to information (e.g. Twitter, emails), and listen to VCs and investors. Regular people and businesses don't hear about these things. Today, only 1 other person in my friend group of 6 heard about SVB.
- ketzo 4y ago
  I have to imagine that if you have enough money in First Republic for your withdrawal to actually be a problem for them… you at least have a dim awareness of, say, the WSJ front page.
- vkou 4y ago
  That's not why there's a tech bank run. The reason there's a tech bank run is because VCs, and the companies they own are like geese. They fly in a triangle. Thiel tells his startups to bank-run SVB, and they bank-run SVB, and all the other VC start telling their firms to follow suit. It's all herd mentality among an undiversified group of customers (startups all of which are hit hard by raising interest rates), which is perfect for a bank run.
- gnicholas 4y ago
  > Today, only 1 other person in my friend group of 6 heard about SVB. Really? My mom knew about it, and she's a retired teacher who doesn't live in the Bay Area.
- gault8121 4y ago
  There are three articles about this on the front page of the New York Times right now. It’s going to be widespread knowledge very soon.
- deleted 4y ago
  [deleted]
- TechBro8615 4y ago
  It's currently the top article on CNN, Fox News, NYT, WSJ, and Twitter Trending. Your friends must live under a rock.
digitaltrees 4y ago
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.
- loopdoend 4y ago
  Which legal system has a claw back period on withdrawals? Can you imagine rolling back wire payments 90 days old!
  - mediaman 4y ago
    It’s not always 90 days, but the American federal bankruptcy system does allow for clawbacks on payments made immediately leading up to a filing. Meaning, the bankruptcy administrator will absolutely file and get a judgment on your assets, which will be forcibly collected, if you received a payment from a bankrupt entity within the window established by the court.
    - bombcar 4y ago
      This is mainly but not limited to trying to prevent a bankrupt entity from “getting rid” of all its assets. I don’t know if it would apply to a bank wire transfer of “your own money” unless it was a literal fraud situation (pyramid scheme).
      - WWLink 4y ago
        I can't imagine that going well. "No we're taking your $50k life savings back so we can give it all to a client that had $5mil and deserves your $50k life savings more than you do"
        bombcar 4y ago
        Well up to $250k wouldn’t be touched, but yeah, doing a clawback for a bank could cause a run on all banks.
beefield 4y ago
>If everyone knows this, why keep your money there? Because that applies to literally every single operative bank, and given FDIC insurance and other refulation, the risk of deposit losses for average joe is so small that they do not need to care.

fairity 4y ago

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, and all the panic subsides.

dannyw 4y ago
SVB was only able to borrow $15B from their FHLB debt facility, before they got cut off. The FHLB total capacity is ~$60 billion. Is First Republic stating actual numbers they are guaranteed to have access to? Their shareholders are already panic selling (FRC down 36%), their bonds appear to be sinking, and few private parties wants to throw good money after bad. When you have to put out an emergency statement to reassure everyone of your creditworthiness, it's already gone. I do agree that First Republic is in a much better situation relatively to SVB, but illiquidity and insolvency risk is real. I don't really see a reason why any business or individual with more than $250K shouldn't be wiring funds out ASAP, unless you're feeling extra charitable and want to be the bail-in to those who run before you. There is nothing to lose, other than setting up new accounts.
- zzleeper 4y ago
  Off-topic but it really BAFFLES me why people don't pay more attention to FHLBs. It's like we don't learned anything from the last 10 crises...
  - colechristensen 4y ago
    Everybody got bailed and and essentially nobody went to jail. Of course no lessons were learned. SVB though sounds like nobody should go to jail it was just really bad investment decisions.
    - WatchDog 4y ago

digitaltrees 4y ago

Why would they sell the mortgages now? Why not just hold them. When they originated and funded the loan they did it with deposits or fed funds, why not just hold and collect the payments? If there is a run, then selling is actually the worst thing to do because theoretical losses become irreversible actually losses. It’s highly likely interest rates will go down in a year or two but.

xeromal 4y ago
I assume they sell these loans if the amount withdrawn outpaces what they have cash on hand. Since their mortgages are mostly mortages from the low interest era, they're less valuable to buyers.
prottog 4y ago
> Why not just hold them > If there is a run If there is a run, they become forced sellers, because they don't have enough cash on hand to meet withdrawals. That's the whole story. They must prevent a bank run.
- eastbound 4y ago
  Can’t they just not honor the run, so that they can honor it in the long term, rather than selling at a loss and not being able to honor 20% of them?
  - salawat 4y ago
    No. That's theft. That's not how deposits work. You lend out on shorter terms than you figure your depositor will need and pray they don't need it back. If they all do though, you're screwed. It's statistical multiplexing as applied to piles of other people's money.
    - tome 4y ago
      Are there some legal terms preventing limiting withdrawls? If not it seems like there should be, exactly to cope with the risk of runs! [EDIT: corrected "limiting withdrawls" to "preventing limiting withdrawls"]

deleted 4y ago

[deleted]

twblalock 4y ago

> - 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.

dannyw 4y ago
Institutions deemed relatively safer (e.g. JPM Chase) are the banks that people withdraw to. Nobody is taking out $20M in cash, they're moving it to the "too big to fail" banks.
- lordnacho 4y ago
  That got me wondering why anyone leaves amounts over 250k anywhere else. If you have 5m are you going to open 20 bank accounts? If there's a wobble you'll need to dig out a lot of credentials to move your money, and you'd end up moving it to a TBTF anyway.
  - twblalock 4y ago
    If you have that kind of money in cash you pay someone to do that for you. If you want access to your money you don't juggle credentials, you call your banker and ask. Actually even if you don't have millions you can use sweep accounts that automatically spread money across multiple bank accounts. Fidelity has one that anyone can use.
  - bradleyjg 4y ago
    If you have $5 million why do you need it in demand accounts? Treasuries (notes, etc) are backed by the full faith and credit of the USG and are available in effectively unlimited amounts.
    - Terretta 4y ago
      About that 'full faith and credit' thing ... you have to have full faith in congress to give that credit. https://www.cnbc.com/2023/01/13/us-will-hit-its-debt-limit-thursday-start-taking-steps-to-avoid-default-yellen-warns-congress.html https://www.cnbc.com/2023/01/13/us-will-hit-its-debt-limit-t...