Another US Bank Has Failed - Now What?
Vložit
- čas přidán 30. 06. 2024
- 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).
Thank you for being my "designated boring finance Internet guy," Richard.
Plain & simple!
@@JoeOvercoat Just like a bagel! 🥯
@@TheVirtualObserverba dum tss 🥁
Is that a back handed compliment or a back handed insult? 🤔
@@myscreen2urs he literally says it in the video
Having two-recording breaking bank runs being the 2nd largest under 90 days is insane
What's insane is that banks knew this was coming and did nothing.
Welcome to the Great Depression 2.0, electric boogaloo.
And yet there's no contagion effect happening. Each bank supposedly is unique in what made it fail
@@ricseeds4835 there is contagion. JP stopped some of the bleeding by purchasing First Republic.
@@ricseeds4835 Four major banks fail in the first third part of the year. Wether you like it or not, that is the definition of a contagion, as the more banks fail, others will also experience problems, and not to mention the fall of confidence in the markets by both investors and the regular people that might be tempted to withdraw any money they have stored, especially those who have uninsured deposits.
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.
Yeah Ray Dalio's changing world order comes to mind.
No wonder the US bans investment in China. The capital outflow would be catastrophic and they know the US is no longer competitive. Much like how the US banned Chinese smartphone companies like Huawei because their own products are inferior and overpriced.
It's a sad day when we have to fly to Asia (anywhere from Singapore to Hong Kong) to cross the border to buy advanced affordable smartphones. At least now some can get them online but with a markup in the US. I feel like an east German citizen, sneaking across to border to west Germany to buy advanced affordable consumer products
@@slslbbn4096 you can literally buy a dozen different Chinese smartphone brands. The issue is that they suck😂.
you have to understand that these banks did not fail because people mistrust them. Ponzi schemes don't fail BECAUSE people withdraw money, they fail WHEN people withdraw. They fail because math always wins out in the end, and these banks could not mathematically sustain themselves with the raising rates combined with long duration, low yielding debt.
It’s called inflation. Sterilize yourself.
Just remember: There are over 4000 banks in the US and only about two dozen got credit rating downgrades due to rising interest rates.
Remember there is just one bank that controls the central banks in switzerland the Bank of International Settlements. It is there that the house of cards is collapsing.
You have to remember that this could affect another bank and create a domino effect. In fact that the FRC bank collapse is linked to SVB collapse
Is this supposed to increase my confidence in the banks, or my distrust in the credit ratings?
@@jeronimo196 Hopefully your knowledge in the true workings of the financial system.
There is nothing in the credits rating that says you can pay back based on how it's designed since credit rating is meant to be made for each time a loan is made to provide data to the bank on income, expenses and assets. This is why interest do not change anything, it would increase the credit since interest increases income from debts. The debts are valued based in the trust on the people in debt have assets to sell. That's why to loan you technically need the money being loaned to prevent bankrupt. It's still a 100% profit to loan money where cash is 2x increases, the issue is that being a millionaire by increasing wealth from 1/2 to 1 doesn't mean you're able to do anything, the cash loaned need to be invested. This is why how loans are made need to ve changed where cash loaned are their own currency.
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.
You are wrong
@@IndexInvestingWithCole how so?
@@jeffshackleford3152 ask him. How does the Fed lowering rates mean they aren’t serious about inflation?
@@IndexInvestingWithCole from my understanding, the failing banks are glut, cutting the fat off our economy: IE: removing high leverage, high risk, and highly inflationary practices from the market. Is that wrong? I legitimately want to know.
@@IndexInvestingWithCole Lower interest rates increase inflation. You don't need to look further than the real estate sector. Lower interest rates mean more people in the market bidding up properties and the costs in that sector rapidly inflate.
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.
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!!
That never happened and you're asking for castration if you say otherwise.
I agree. The politico-bankers preach their dogma, but never live up to the ideological reasoning themselves.
@@samsonsoturian6013lol suck on economic decapitation
Stuff like this make crypto seem inevitable.
@@Default0102 over investing in crypto collapse is one of the reasons for SVB to collapse..
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.
yes, it would be nice if he would trace who benefits financially from this. did the elite recently have a meeting and decide they can't squeeze any more money out of taxpayers through covid relief? is this the newest scam? why would they scam us in such a similar way to 2008? couldn't they think of a new scam?
What do you know? Literally nothing based on your comment
@@IndexInvestingWithCole men attack ideas, boys attack people
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.
So plain and simple . No need for unnecessary introductions, and noise . You're doing a great job 👌
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
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.
“The way you get them is the way you lose them.”
no, it got there bcos the peasants love the smell of my ultra wealthy booty
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.
I'm not sure about that one of the major banks came out on Bloomburg stating it was the small depositor's that were pulling there money's out. Small depositors don't really matter much until you have lots of small's get together. They are using all of their savings to keep afloat with the prices on the rise. When a story hits the regular news programs, they do pay attention and are more likely to panic and pull there money and keep cash. Since they actually have more to loose. If they only have a couple of thousand to depend on, and it took them months to accumulate it, they will be even more guarded about where they keep their money. These smaller people may not understand what is going on, however, they don't really need to all the headlines need to say is bank failure.
How are the banks supposed to do business then? All the mortgages, credit lines, loans, credit cards would disappear without large deposits. The poor wouldn't give enough of a shit to go through the trouble of keeping their pocket change in a bank account either. The banks would collapse and the entire economy would soon follow.
It is all government's fault, they made the banks to lock in their deposit cash in low interest bonds, when the rates began rising, those bonds started losing their value.
How do you think banks make money? Instead of parroting whatever nonsense you read or hear try to do your own thinking.
@@MrSupernova111 government mandated banks into long-term bonds with extremely low yields, anyone with half a brain could have understood what would have happened once the interest rates began rising. Banks on their own, would have never done such a mistake, they would have probably went with short term bonds instead, in that case crisis would have been entirely averted. You are the one, who is a dunce here.
The Collapse of these banks has torn into global markets, with investors ripping up their forecasts for further rises in interest rates and dumping bank stocks around the world. I'm at a crossroads deciding if to liquidate my dipping 200k stock portfolio, what's the best way to take advantage of this bear market?
Scam
Another "investment" lie!!!
You should sell the dip, split your money in 500$ mandat cash and post the numbers here. Karma will pay you back.
Put all of it into Bitcoin and GameStop stock.
Buy puts obviously
Thanks to you, I could have an informed conversation about rate hikes and how the fed is effecting the banking market. Keep them. coming 👍
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.
Capitalism is unsustainable. The collapse of the US dollar is coming soon. In a Republic literally modeled after the Roman one, why would you expect different results?
I appreciate your steady perspective on these things.
To think that being a calm voice could actually separate you from the crowd. Thanks for the content Mr. Bagel.
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.
Thank you so much for these plain and simple vids!! Super helpful. This is the “good side” of CZcams!
Don't worry, banks will just get bigger.
Uh, no. Higher interest rates means less borrowing but fatter profit margins.
Thanks haha
Yep, JP Morgan just got bigger now ...
...or nationalized, and merged into one super-bank entirely ran by uncle sam.
@@Doge_Of_Wallstreet JPMorgan Blackrock Blackstone super company
3:44 this deal is insane. JP Morgan is basically getting FRC for free while the government takes all the losses.
straight up
Privatise profits, socialise losses
All of this makes me wonder: As a bank, just what are you supposed to do? Banks have, in the past, been accused of gambling with other people's money. But SVB held treasuries and First Republic held mortgages. To my mind, these are about the lowest-risk investments in existence (and I'm told First Republic's mortgages were on the safer end of mortgages). Sure, these investments will lose value when interest rates rise - but you're still due your interest/coupon, presumably originally at a significantly higher rate than what you pay your depositors. Is there a safer model than "collect deposits, make safe loans at higher rate" that banks should be following?
I suppose they could keep the deposits in a big pile of money and only generate income from fees, but I'm not sure I would actually prefer that.
Expand your depositor base? These banks were focused on very specific consumers if I understand correctly (silicon valley/startups/hnw individuals)
Stick your money in a credit union, not a bank. Why? Because with a regular bank, the shareholders are not the same as the depositors. This means that there is an incentive for the people running the thing to take risks (with the depositor's money) in order to deliver better returns to the people they actually work for (shareholders). With a credit union, the shareholders are the depositors. Thus the incentives are not to take stupid risks, because the people they're trying to benefit are the depositors.
Pretty true and you actually get to vote for the board of directors even if really there is usually only one person running for the positions. Technically you could run for the board even if you acquired enough signatures or recommendations from the current board not likely going to happen but it's possible. The only problem is that you have to keep a minimum amount which is not accessible for use in your account maybe $5 or $10. In the end really a better way to store money
@@lostboy8084 And five or ten bucks is not bad to secure a piece of a financial institution that views you as a co-owner rather than an asset to gamble with.
Why anyone didn't abandon and withdraw all funds from say Wells Fargo after all these scandals and fraud is beyond insane.
i love your videos, very informative and current with recent events. however, sometimes it feels as though you are just, say, recording yourself reading headlines off of reuters, whereas i feel as though you could take the information from the current news headlines -> internalize the information -> extrapolate a bit and build off of the main aspects of the event. maybe slowing the pace down (slightly) from the highly condensed news snippet and making it a bit more available to everybody watching. all that being said, i really love your content and will always tune in to your videos :) thanks Richard!
Thanks for the coverage Richard, good stuff as usual.
Thank you for providing calm and reasonable analysis. Hair on fire and yelling the news... really turns me off from content providers, even if the content is the same overall. Thanks again, and keep up the good work.
Nice video. Need more plain and simple content these days. Keep up the good content!
@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.
You don't think inflation is hurting Americans? Would you rather the Fed kept rates low and let inflation grow unfettered? We'd be in far worse territory.
The fed wants the dollar to fail, to usher in the fednow cbdc
Arresting high inflation is always painful, especially for people who work and need a job. I am old enough to remember the 70s and 80s. In the 70s inflation rates got up into the high teens (17-18%). In the 80s inflation was forced lower by raising interest rates to a level higher than that of inflation. This resulted in many loosing their jobs, houses, farms, etc.. Interest rates are currently about half the inflation rate. If the government is serious about lowering inflation it gives me no pleasure in predicting more pain is coming.
00:51 JPMorgan will buy assets of the FRB
01:47 What happened?
Thank-you, sir!
It’s interesting because in Australia (and NZ and probably many other countries) our mortgages aren’t fixed (although you can fix for a period, usually 1-5 years). That means when interest rates are raised the banks can respond straight away. For example, the RBA increased rates today and variable mortgages will likely increase in most cases from next month.
If not mistaken in my country most are variable rates you can choose 3months 6months 12months for Euribor rates, fixed rates I don’t think it as time limits but I’m not sure.
that's just insanity for us. with how much interest affects the bill, a lot of people would lose the house if the price suddenly doubled for no good reason.
honestly I'd rather rent than worry about that. lock in the price one way or another
Euribor for three months is at 3,275%, six months 3,516% and for twelve months is at 3,847%, we come from an environment of zero or negative Euribor.
this was bound to happen 0 to 1 percent interests rates always encourages bad behavior as money becomes to cheap.
What scares me the most, although don’t think it is an immediate threat, is regional banks holding a large amount of commercial mortgages.
while they have not dropped in value yet, they will with companies closing offices because of work at home and small businesses going bankrupt at twice the rate of the pandemic peak. This will lead to a lot of toxic assets for regional banks. When this will hit, hard to say, but I am confident it will at some point.
Where I live (northern Europe) but also for Big Tech, you see companies pushing for office work again. CEOs need to micromanage somehow, right. Furthermore, commercial real estate commonly always has been a market with ups and downs, it hopefully is already a calculated risk.
It's interesting how carelessly introducing incentives without understanding the long-term implications has predictably once again come back to bite people in the ass.
Instead of treating the concept of "too big to fail" as an ominous indicator of a much higher chance of mismanagement, depositors are seemingly (as predicted) interpreting it as a desirable trait, the aspect that I hadn't considered until you and others discussed it was that not only does "too big to fail" status force the Government's hand when it comes to rescues, it apparently incentivizes depositors in smaller banks to treat "NOT too big to fail" status as a big risk, which (perhaps?) may lead to small(er) institutions having severe bank runs DESPITE FDIC insurance covering most deposits in a given bank.
That's a very concerning thought, because it may qualitatively change behavior and neuter the concept of FDIC insurance by removing one of its (at least two) pillars, that it desincentivizes bank runs by strengthening depositor confidence in the bank, the other big one of course being that in the event of bank failure smaller-sized depositors get all their money back, no questions asked.
So as has been discussed, rescuing "too big to fail" banks alone only compounds the incentive, leading to systemic mistrust in smaller banks and increasing the size of already huge banks as people flock to them. You therefore then either save everyone with "exceptional" rescue deals or save no one. If you save no one, big banks (or a bunch of smaller ones) may fail catastrophically. If you save everyone, any time there's a bank run, then suddenly FDIC insurance is in practice supplanted by what we could call "FDIC+ insurance," which puts insane burden on the Government and taxpayers while trying to maintain the illusion there's still a fully private (privatized profits and non-socialized risks) side to the banking sector, and also may result in the concept of "too big to fail" now covering all banking, but perversely although by definition that was always the case and desirable, people may fear anything and everything failing anyway, which leads to recurrent bank runs no matter the insurance, assurances or decisive actions.
Behavior is not what I would call reversible, it's more like the Laws of Thermodynamics, it's easy to destroy confidence and change patterns and takes considerable effort to restore them once systemic perverse incentives are introduced.
Hopefully all this is just my exaggerated nonexpert "the sky may fall" conclusion, at least at the moment, but often times it feels like the "experts" treat "who could've seen this coming" as some sort of "get out of jail free" card and it's starting to feel like the thinly veiled mockery scammers reserve for the suckers who become their marks.
Great breakdown, thanks!
Stupidly averaged down FRC, thinking the fundamental ratios were insane good. But I guess deposits can change on the fly. There were warning signs that made me almost sell break even, but I had a friend that jumped into it too, and there was no way to alert him in far different timezones. In the end 600 shares that were going to be held for a few years, were completely wiped out. It seemed that FRC was going to easily survive even when it was at $4.00. All that investment became a trust fund kid crowd fund. I would have rather lost it all on a biotechnology stock where research and knowledge was gained for the progress of the future.
Yet you didn't.
@@mipmipmipmipmip I actually was wiped out on a biotechnology stock already. FRC was diversifying. I am looking for value stocks, no biotechnology stocks pop up on the stock screener today. Should make shorting a stock easier now that I can tax loss harvest. Made more than 100% on an oil tanker stock this year, so it balances out.
Index funds are probably a better choice for most of us.
It's been four weeks since I last woke up on a Monday morning without a bank failure
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
Great summary as always
I don't believe this First Republic failure was an accident. JPM was one of the original participants in the The Fed. The Fed kept rates at near zero for 15 years allowing so many of JPM's competitors are laden with low yield assets and are susceptible to runs. JPM and others now buying them up is the long play.
You are really ignorant
An interesting idea, but perhaps shortsighted if these runs on banks result in the global market losing faith in US banks. Perhaps they're counting on government enforced taxpayer largesse to prevent that issue.
That's like saying China deliberately created and released a virus that ended up shutting down the world economy including China which was on lockdown until recently. But believe what you want.
Just wait until the U.S. defaults on its debt. Imagine the hell that'll bring to the financial markets, not to mention the general economy....
Thank you for your update.
Hey "designated boring finance internet guy" i love the vids, theyre super helpful. Just wondering if you can do a video on HSAs. Would love to hear your opinion on them 👍
As long as the FDIC gets an equal cut of the profits for the risk they are taking on with those loans, I am cool with it.
They are probably getting that money back from the financing terms arranged with J.P. Morgan
@@jz4461 The financing is separate from the loans.
The financing is what allows JPM to buy the bank, then you have the loans to generate profit.
FDIC is just a front for the Fed, Fed is the part of gov and the gov were the ones, that caused this mess.
FED simply prints more money and make the mess even bigger.
Once again, the FDIC privatised the gains and socialised the losses
Thats not true , the FDIC charges banks premiums for the insurance coverage. So the money used to bail out depositors was from the banks (all banks) , not tax payer money.
Also while the losses were socialized , there were no private gains. Depositors only got there own money bank
@@johnsamuel1999 The owners and execs of the banks sold long ago, they probably also shorted the stock using an external patzi hedgefund. The taxpayer pays but they made billions.
@@johnsamuel1999 Taxpayers are bailing out way more than the first $250,000 per person.
@@valdomero738 true but the depositors were bailed out through FDIC insurance. FDIC insurance is money charged to banks . So this time taxpayers didn't pay anything
@@teeing9355 but the depositors were bailed out through FDIC insurance. FDIC insurance is money charged to banks . So this time taxpayers didn't pay anything
Hi Richard. Great content, I think you present finance and investment subjects very well - especially to me, an average man on the street. I'm just curious, do you have any favourite current economist(s) that you follow and look forward to their take on finance/economic events ?
±𝟏𝟖𝟎𝟔𝟐𝟎𝟕𝟖𝟕𝟔𝟗⊥👍🏾👍🏾👍🏾👍🏾👍🏾👍🏾👍🏾👍🏾👍🏾👍🏾👍🏾👍🏾
💬💬….
i hadn't heard! thanks for reporting it!
And the banking sector consolidates power even more. Why don't we have any full reserve banks? Seems like something we need considering how wild and loose these fractional reserve banks play. Also, where the heck was the Federal Reserve? I thought they keep tabs on this stuff. They have had 10 years to prepare for digital bank runs. These guys suck at their jobs because something clearly isn't working and CBDCs aren't about to fix the problems we have.
If you want full reserve banking,then you’ll basically have to pay the bank money to hold your money. And you can forget about any interest. Basically you’re paying for a large safe deposit box.
No free coffee or donuts either….or bagel
You're confusing incompetence with corruption.
@@chowsquid . I disagree. The government, at all levels, already borrows from the public in the form of bonds and treasuries.
Please make a video on debt ceiling/default and what happens to investors who still hold T-bills. Thanks!
You get < 100 cents on the dollar for your principle, and perhaps none of the interest depending on the severity of the default.
One would know what kind of bank these risky banks are when you know who are their clients. But it is also interesting while Lehman went liquidating these 2 two banks were rescued by investment banks . Who benefits?
Very helpful thanks
Give the CEO and board their bonuses, of course
11:53 Yeah, blame the depositor behavior not the banks behavior.
Thanks for the update
Just subscribed Good job kid!
As a designated boring finance internet guy, you're definitely giving Patrick Boyle a run for his money, so to speak.
How long do you figure it will take for the first republic name to disappear and for accounts to fully integrate into jpmorgan?
It will take at least 5 mins but not as long as 20 years.
@@Whooshta 😂😂😂😂
I recently saw a Redditer that still had Washington Mutual checks that work. For those who don't know, WaMu went insolvent in 2008.
@@jz4461 those checks will always clear, JPMC took over WAMO's routing number
1 week, just open accounts and send it over and give new cards.
Thank you for the video!
Now all time highs, if I learned anything last month is that bank failures are very bullish for markets.
Always appreciate your factual delivery of the situation. Financial youtubers can be unbearable drama queens pandering to the algo that it gets tiresome man.
The sky is falling, by the way buy my course😂
Could you discuss td bank ? I'm hearing bad news and I'm Canadian. Id Just as soon switch banks than have my funds in limbo.
so, these bank runs start when people have these thoughts, that maybe they need to pull their money or they'll lose it (if everyone does at once the bank fails). Canada has the same policy as the US, up to $100k is federally insured per account. So unless you're quite wealthy and storing way too much in a single account you should be fine
your funds are insured, you dont need to do anything. if you do do something, then bank failures are your fault.
@@ohiasdxfcghbljokasdjhnfvaw4ehr Not sure I'd go that far but certainly the funds being insured is the important part. I mentioned the bank run process because that's why the government insures them, to prevent these sorts of losess created by fear
If TD bank goes belly up, then there are no safe banks in Canada.
Wow. Scary times we live in.
Worth noting the restriction on acquisitions for the largest banks doesn’t apply when the target is failing. Not a violation of that rule.
Finance and politics, two things that are great when they are boring.
Absolutely
I miss the boring times :(
All these banks going down are banks that most people never heard off. Which makes you wonder what kind of clientele these banks serve. Cause i tell you. They don't serve people in the poor neighborhoods.
i mean that’s true for some of them but also regional banks are a thing
I don’t think that’s really been obscured. He literally said in the video who First Republic’s main clientele was; SVB’s main clientele was widely known and reported; as was Silvergate’s. So I’m not really sure how you missed that, but that’s not really the story here.
They're regional banks, they didn't have a presence in every state. Banks like JPMC are 10x bigger
you do know that not all banks are for the general public, right?
Yeah, I'm not too worried about it. I think the biggest effect is that smaller and regional banks may become nonviable and we'll see a heavy consolidation in the banking sector that, for the most part, leaves us with just a few mega banks. But I think the FDIC will continue to protect depositors and while the monopolization of the banking industry might be a problem long-term, I'm not worried about short-term catastrophe.
Indeed because you will not have dollars from the FDIC you will have CBDC no big deal right? until they tell you what you can buy. Oh and that is exactly what will happen before you know it.
Hang on a minute! JP Morgan paid 10BILLION to the FDIC in return for being handed the collapsed bank by the FDIC..?
Please feel free to correct me if I'm wrong: I'm no financial wazard... but in my day - a 10MILLION payment for an exclusive deal was called a BRIBE!!!
Chase is so corrupt. How does it take a bank in 1 night and others not have a chance? How does it not take liabilities? Bond holders are first entitled to assets of the bank
you realize that there literally was an auction for the bank. with PNC, Citizens, BoFA and JPMorgan being some of the companies who bidded for FRC's assets. Guess who was the highest bidder? JPMorgan.
@@unwantedlinks2730 auction that lasted 10 seconds? They literally decided in the middle of the night. Are the bids and minutes public?
Just waiting for this to affect the S&P so I can jump in and get some shares for cheap. 😁
You are the exact mentality of what’s wrong with the market. And why this stuff happens in the first place.
Thanks for another great video.
Iam so thankful for your content
Much Lov Form Germany
Another day in United States of Freedom where nothing is regulated and you are allowed to do anything and break any rules as long as you (or someone) get rich.
Yep. When the FDIC decided to cover ALL deposits from SVB I knew it would drive people to move deposits out of small banks and into Large ones. The larger the better.
But SvB is a large bank? Shouldn't it be reversed
I don’t understand the US banking system and their treatment of housing loans/mortgage loans. I’m a bank employee in India and here there are two major differences:
1. There are no fixed rate mortgages. Changes in interest rates (increase/decrease) are passed on to borrowers on a quarterly basis.
2. Banks are not allowed to trade in mortgages. They’re not a commodity.
I think these two changes by themselves will make US banks a lot more resilient. Less profitable, sure, but far less likely to fail en masse.
A lot less mortgages doled out. Basically economy grinds to a halt.
Please, please don’t be like India.
@@chowsquid Look, I’m not saying the Indian banking structure is perfect, but I find the way housing is treated as a commodity in the US, mind boggling. It is a basic human right and if it is recognised as such, it would logically follow that banks immediately refrain from trading in them.
And consider this, India is the fastest growing major economy in the world. Also, India has never had a major financial crisis like the US, with banks failing left and right. And crucially Indian banks have been largely immune from past global financial meltdowns so far.
@ThePlainBagel : Could you kindly cover the bank failure of BBVA USA/Compass?
sweet heart deal for Chase to get this bank's assets without alot of the debt and financed by fdic. not a free market transaction to me.
This hasn't been a free market for a very long time.
Imagine still using a bank instead of a credit union.
I buy t-bills for the interest rates, I have a checking account for the spending.
Not that different at all. Nearly the same thing at this point
@@JohnDoe-ef3wo mine is very different. There’s no fees & we get a dividend proportional to our deposits. It’s member owned and run, was just at our annual meeting to vote. I’m not interested in a bank with a profit motive; incentives should align with depositors to preserve value.
@@chemquests I understand that, but you need to look deeper into the way modern credit unions operate, and you may find something you do not want to see. I'll let you figure it out on your own.
No wonder one of the builders we work for was freaking out. First republic is the main bank they use to finance projects
You had me at "As your designated boring finance Internet guy"
"Good"! Canadian bank stock will drop as well, for no good business reason; meaning a good buying opportunity for anyone who likes Canadian banks.
Nice to gather all again here in another Plain Bagel bank failure video
I followed you because you were mentioned as an information source by Patrick Boyle, a financial commentator for whom I have great respect. I'm certainly glad I did as your analysis of the current banking turmoil is both clear and insightful. It puzzles me that the borrowing window facilities set up by the Fed for this current situation proved inadequate to prevent First Republic's failure. Barring insolvency I thought the ability to borrow against "good collateral" at par would have enabled the bank to meet it's withdrawal requests.
Thanks for the great informative content Plain Bagel, always nice to have such a comprehensive way to start informing myself about recent economic events
this is really interesting, because this is basically a situation where the ultra low loan rates during covid DIRECTLY caused a major bank failure when the rates rose. this is not a situation where the bank was stupid in managing its bond portfolio, they just did a great job lending a lot at regular market values at a time when rates were super low. that makes me think that we may NEVER see 2-3% mortgages again for decades.
Nah, the market never learns from past mistakes. When low rates become feasible again capitalism will capitalism and banks will offer them to get ahead.
@@skeliskull “ capitalism will capitalism”🤣
How much of the money moving in the financial system is people moving to more stable institutions vs moving to higher yields (high yield savings accounts and money market funds). I'm just one individual in the middle class, but I'm trying to reduce the balance of my low yield savings account.
Would you be so kind to estimate if there is a connection with the up coming digital currency?
It strikes me that the winners here are the larger banks, they can swoop in and buy a ton of assets for cents on the dollar. What's to stop them from using their influence to encourage a bank run on these lucrative, regional banks? Are they just so big that the marginal portfolio gains are not that significant?
Not trying to start any conspiracies, I'm genuinely not knowledgable enough in this space and this just kinda stood out to me.
It's not that straight forward. Yes, the banks are gaining assets, but they're also on the hook for the customer deposits too.
You should be trying to start conspiracies, you're in one.
Look up the RTC Scandal.
@@Tyneras That's right. There are lil banks too. In 2010 we had a HUGE number of banks crash. We only have to start to worry when the bigger sectors start to go, like; jpmorgan, bank of america, etc. )
2008: Housing Market Crash
2023: Banking Market Crash
Um, actually...if you look at previous years there has been MORE banks crashing in 2010 then there was in 2008 even. 3 banks bit the dust, oh well. They weren't big banks either. If JPMorgan or Bank of America crashed THEN we would have a problem. :)
@@midnull6009 Ultimately all the US banks went bust. Hence the TARP and the later QE utilization power under Frank Dodd Act was given to the Fed Reserve without the need of congressional authorization.
But what should happen is an Iceland and several other countries... you simply nationalize all failed banks under a Governmental controlled set of banks.
Remark to market all the collateral (loans issued and outstanding.... you bought a house that's only $100K now, but bought it for $500K... well it's no originally only a $100K loan, and you paid 1 year of payments which most was interest anyway on a 20 year ammoritization schedule so you own 99.99K left on the loan and your payments were 2K now only 500 a month, can you manage to make that new payment? YES? GREAT. Same with home builders... you F'd yourself buying that land and lumber material for 50% the current market value... borrowing 25 million... your loan is 12 million now... can you continue building homes? Yes? great Get to fing work and continue building homes, the population isn't even close to negative growth and home construction since 1980 to 2017 has been the lowest since the 1950-1970's by 50%. So we need more housing supply. Particularly due to the fact we build mostly cheaply built temp model housing; that quite literally should never appreciate in asset price but depreciate as does essentially all other consumer goods like a car, airplane, boat, etc.
Crash? This only effects about two dozen out of 4200 banks
dear plain bagel I have 200 dollars and don't know whether to invest in stock, boost juice or babysitter fees from the boost juice dealers. thanks for your help in advance!🎉
What happened to the 200 other banks that were said to be at risk just like SVB and signature back in March…
US Government, just like months ago: "Everything is fine. It's all fine. Not a penny of taxpayer money will be used. Banks have never been better!"
False, taxpayer money hasn't been used. Remaining assets from the insolvent banks and FDIC insurance (premiums paid in by member banks) are being used instead.
how can you be so confident in being incorrect?
please research online what "FDIC" is
What do you suggest they say?
So J.P. Morgan Chase takes on all the assets and income, but the U.S. taxpayer takes on all the debts and liabilities. Why don't we just nationalize the entire banking industry at this point?
Why are you making stuff up?
What?
Because the taxpayer hasn't spent a single cent on these recent bank failures. Read up on what FDIC insurance is.
Thank god for level-headed takes.
The world is collapsing but I'm hungry for a bagel now. THANKS.
The banks that will be left standing after this ordeal will be daaaaaamn powerful.
It means they're not addicted to cheap money.
We have over 4,000 banks...
@@jz4461 yet
Every day we have a new problem. It's the new normal. At first we thought it was a crisis, now we know it's a new normal and we have to adapt. 2023 will be a year of severe economic pain all over the nation.. what steps can we take to generate more income during quantitative adjustment?I can't afford my hard-earned $280,000 savings to turn to dust.
@Bill I came to realize that bear and bull markets provide opportunities for high gains, I used to bluff people who boasted of making a fortune in such bear markets until I do it myself. Well, unlike Canada the US stock market has had its longest bull run in history, so the hysteria and mass panic is understandable given that we're not used to such a troubled market. However, there are opportunities everywhere if you know where to look; with the help of an investment advisor who helped me diversify my portfolio, I made over $860,000 in profit the previous year.
@Margaret I have "NICOLE DESIREE SIMON" as my investment advisor. She has a solid reputation in her field and is a true genius when it comes to diversified portfolios, which help portfolios be less vulnerable to market downturns. She may be a name you are already familiar with; a Newsweek piece helped me to do so. She's a Google-able person.
See Roadtoroota. This isn't going to stop. Godspeed.
4:36 jpm hit the lottery. I loved first republic. They have a branch everywhere in San Francisco. Maybe one of the best banks ever.
But situations change. And I had to move my money out. Mostly because they didn’t do international banking very well.
I have nothing but love for frc.
Jpm is getting a smoking deal. I’d buy it if I could.
I applied to a job at FR like two months ago. Guess im not getting that gig 😅
Brother it was 2 months ago 💀 your ass wasn't getting that shit regardless 😩
Even those who are hired are probably unemployed now.
Every cloud has a silver lining.
You dodged that bullet.
@@heroricspiritfreinen38 Do you get responses quicker in USA?