4 ms·

Why are these putting an uninsured deposit instead of buying equity?

• pjc50 4y ago
  No price risk. It's both a prop up of the bank and a one-way bet on its continuing existence.
  • raphaelj 4y ago
    If First Republic goes bankrupt, it's still the same, isn't it?
    • pjc50 4y ago
      But if First Republic does not go bankrupt, this approach returns exactly their initial deposit, no more, no less. Whereas it's plenty possible for it to continue to exist but at a reduced equity value. (Edited out "yes", because sibling comment is correct: if they made an equity investment, it could go to zero very much more easily than a deposit)
      • eloff 4y ago
        Plus interest mind you, but it’s negligible.
    • stephen_g 4y ago
      No - depositors get priority over creditors and creditors get priority over shareholders. So if it fails, depositors might get 75% or so back, and shareholders zero.
• mwnivek 4y ago
  One factor may be the regulatory caps on the market share of the biggest banks: https://ilsr.org/rule/market-share-caps/ https://ilsr.org/rule/market-share-caps/