Will My Bank Fail?

[+ augustus]

On 4/26/2024 at 8:08 PM, BuffaloKyle said:

Philadelphia based Republic First Bank was shut down today by Pennsylvania state regulators. All customer accounts will become Fulton Bank accounts and all funds up to $250,000 are fully covered by the FDIC. All Republic First Bank branches will also become Fulton Bank branches immediately as well. This is the first bank failure since Nov. 2023.

And this bank failure (not a large one at $6 billion) will cost the FDIC $667 million.

[Frequentflier]

As long as depositors keep balances within FDIC limits they don't have to be concerned. There are even banking services now that automatically move excess balances to other FDIC institutions and back as needed - I have a couple of business clients that do that now post Silvergate (I believe that was the name). I use a couple of local / regional banks because the service is great and I prefer to give them business and avoid the Wells / Chase / B of A bankster run operations  Others are free of course to love those if they like.

[rvwnsd]

On 6/19/2023 at 8:17 AM, Charlie said:

I have had a small account for years with Union Bank of California, which has just been taken over by U.S. Bank. So far, everything in the changeover has gone smoothly for me.

I'm very, very happy to hear this. I retired/was laid off from them in 2021 (a month before they announced the sale to US Bank) and know several people who were involved in the migration, including the person who led it from the UBOC side. When I heard she was in charge, I knew it would go well. Very happy to hear my instincts were right.

PS: US Bank was the right acquisition partner and wanted to buy UBOC for more than 25 years. Patience paid off!

On 4/26/2024 at 5:08 PM, BuffaloKyle said:

Philadelphia based Republic First Bank was shut down today by Pennsylvania state regulators. All customer accounts will become Fulton Bank accounts and all funds up to $250,000 are fully covered by the FDIC. All Republic First Bank branches will also become Fulton Bank branches immediately as well. This is the first bank failure since Nov. 2023.

FDIC says Republic First Bank is closed by Pennsylvania regulators | CNN Business

WWW.CNN.COM

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The Federal Deposit Insurance Corporation on Friday said that Republic First Bank has been closed by Pennsylvania state regulators.

 

The problem with many of these start-up banks is their size outpaces their leadership's ability to manage the bank. I'm sure their leaders had previously run small banks that sold out to a larger bank. Problem is, the bank grew to be a relatively large bank and leadership didn't grow along with it.

On 4/27/2024 at 2:02 PM, marylander1940 said:

When it comes to banks in this era the bigger the better.  I keep it simple and I only have 2 accounts at Bank of America and Wells Fargo.

 

While I agree in principle, the only super-large banks I'd bank at are Chase, Bank of America (which is where I bank), US Bank, and maybe Truist. As a former banker (see above) who worked for two of the world's largest banks (Chase and MUFG, prior parent of Union Bank), I think the Wells Fargo of today needs to be sold branch-by-branch, loan-by-loan, and account-by-account to other institutions that don't have the deep-running rot that they have. I mean, even Charlie Scharf can't fix them. Essentially, Norwest was the surviving entity that took the Wells name and San Francisco HQ. The worst of Norwest's over-the-top sales culture infected Wells and here we are today.

PNC is simply incompetent, and I'd love to see US Bank buy them and ditch their leadership. I still haven't forgiven them for the BBVA fiasco. 

Back to the topic, I don't see a slew of bank failures on the horizon, as was the case in 2008 when three large banks (BofA, Citi, and WaMu) failed and several others (like National City) were acquired before they failed.  SVB and Signature were in over their heads and had a too-high risk tolerance. Some banks are risk-averse, they appeared to be averse to recognizing and managing risk. IMO, First Republic Bank's demise was an unfortunate consequence of SVB and Signature, the coverage they received, and the "pundits" who were gunning for them, Pac Western, and Western Alliance to fail. They got their wish. Well, part of it, anyway. Pac Western was acquired by Banc of California and Western Alliance seems to be flourishing. Pac Western got too big too fast and made a few ill-conceived acquisitions that d,id not work out. 

The moral of the story for customers is to spread deposits across multiple institutions and/or title the accounts such that your FDIC insurance is maximized. You can have five accounts totaling >$250K, but if you do something as simple as titling them as "Your Name P/O/D Name of Beneficiary 1", "Your Name P/O/D Name of Beneficiary 2" and so forth you have created multiple informal trusts, each of which has its own $250K in deposit insurance. For bankers, it is to know when growth is too much and when leaders should step aside. 

 

[KeepItReal]

7 hours ago, rvwnsd said:

 

The problem with many of these start-up banks is their size outpaces their leadership's ability to manage the bank. I'm sure their leaders had previously run small banks that sold out to a larger bank. Problem is, the bank grew to be a relatively large bank and leadership didn't grow along with it.

 

You may find this interesting: https://www.wsj.com/finance/banking/vernon-hill-republic-first-bank-failure-86f5b3b2

Some leaders have a track record of failure.

[rvwnsd]

On 5/9/2024 at 4:30 AM, KeepItReal said:

You may find this interesting: https://www.wsj.com/finance/banking/vernon-hill-republic-first-bank-failure-86f5b3b2

Some leaders have a track record of failure.

Thanks for posting this. Not sure how I missed it! Yeah, gross mismanagement is another thing that brings banks down. 

Funny story: In the early aughts Chase moved several street-level branches in NYC from the first to the second floor of buildings to save on rent. Commerce then leased the former Chase space. A friend wasn't paying attention and walked into what he thought was a Chase branch, when in fact it was a Commerce branch, and opened an account. He was not pleased when he realized what he had done. He wasn't the only one who did this. That nonsense ended when Bank One acquired Chase.

[+ augustus]

On 5/8/2024 at 11:52 PM, rvwnsd said:

Back to the topic, I don't see a slew of bank failures on the horizon, as was the case in 2008 when three large banks (BofA, Citi, and WaMu) failed

BofA and Citi didn't actually fail.  They received TARP money and actually paid it all back with interest.  All the big banks were forced to take TARP money whether they needed it or not, so there wouldn't be a run on the weaker ones like Citi that did receive TARP money.

Edited May 19, 2024 by augustus

[+ augustus]

I am predicting many bank failures over the next couple of years.  The US banking system has $2 trillion in unrecognized bond losses because of the rise in interest rates (and because interest rates were held too low for years).  

[rvwnsd]

10 hours ago, augustus said:

BofA and Citi didn't actually fail.  They received TARP money and actually paid it all back with interest.  All the big banks were forced to take TARP money whether they needed it or not, so there wouldn't be a run on the weaker ones like Citi that did receive TARP money.

Citi received a bailout that was later converted to an equity interest and loan guarantees. According to Citi's "Bank Find" profile, they "maintained operations with open bank assistance," which means they failed and were rescued by the federal government rather than being seized. 

Bank of America also received a bailout, but in early 2009. Like Citi, the FDIC lists them as having "maintained operations with open bank assistance." 

The difference between TARP and an outright bailout is twofold: 1) TARP was intended to help banks avoid becoming insolvent (Citi was already effectively insolvent) and 2) Healthy banks were strongly encouraged (i.e. forced) to take the money regardless of financial condition to avoid bank runs caused by a perception that specific banks were on the brink of failure. That's why healthy institutions like Chase took TARP money. 

Citi was the victim of mortgages going bad. BofA was the victim of good ol' fashioned dick-swinging. After Chase acquired Bear Stearns, the then-chair of BofA had to show Jamie Dimon that his dick was bigger and acquired Countrywide and Merrill Lynch. Sadly, that did not work out very well. 

Both institutions were treated the same as Continental Illinois was back in the 1980's after the Penn Square debacle. Fun fact: Bank of America eventually acquired Continental Bank. 

TARP funds were used to fund at least one bank merger that avoided a failure. National City was in deep trouble and PNC accepted TARP money which was used to acquire them. They were also used by healthy banks as a way of funding takeovers of banks that had failed.  

[+ augustus]

3 hours ago, rvwnsd said:

BofA was the victim of good ol' fashioned dick-swinging. After Chase acquired Bear Stearns, the then-chair of BofA had to show Jamie Dimon that his dick was bigger and acquired Countrywide and Merrill Lynch. Sadly, that did not work out very well. 

Ahhh yes, I forgot about that! Countrywide was a disaster.

[56harrisond]

https://www.businessinsider.com/63-problem-banks-517-billion-unrealized-losses-fdic-interest-rates-2024-6

BUSINESS INSIDER 

Higher interest rates have created 63 'problem banks' and $517 billion in unrealized losses, FDIC says
By Matthew Fox, Jun 4, 2024, 1:32 PM EDT

- High interest rates continue to put pressure on the US banking system. 
- The FDIC said the US banking system has 63 "problem banks" and is sitting on $517 billion in unrealized losses.
- Upward pressure on mortgage rates has significantly hurt the banking sector.

More than a year after the downfall of Silicon Valley Bank, higher interest rates are still putting pressure on the US banking system.

According to the Federal Deposit Insurance Corporation's first quarter report, the US banking system is sitting on a collective $517 billion in unrealized losses and has 63 "problem banks."

Those losses have been sparked primarily by a surge in interest rates over the past two years, which have driven down the price of fixed-income securities held by banks. 

Unrealized losses held by banks increased by $39 billion in the first quarter relative to the fourth quarter of 2023.

"Higher unrealized losses on residential mortgage-backed securities, resulting from higher mortgage rates in the first quarter, drove the overall increase," the FDIC said. 

Mortgage rates have been on the rise since the start of the year, with the 30-year fixed mortgage rate rising from about 6.6% in early January to just over 7% today, according to data from Freddie Mac. 

"This is the ninth straight quarter of unusually high unrealized losses since the Federal Reserve began to raise interest rates in the first quarter 2022," the FDIC said.

From 2008 through 2021, the US banking system's unrealized losses and gains on investment securities ranged from as much as $75 billion in losses to just under $150 billion in gains. 

Meanwhile, the 63 problem banks in the first quarter represent an increase of 11 banks from the fourth quarter of last year. The FDIC categorizes problem banks as banks that have a CAMELS composite rating of four or five.

The CAMELS rating measures the financial strength of a bank through six categories, including capital adequacy, assets, management capability, earnings, liquidity, and sensitivity. 

The rating system ranges from one through five, with one representing a high-quality bank requiring the least degree of concern, and five representing the weakest performance and requiring the highest degree of supervisory concern.

Total assets held by the 63 problem banks in the first quarter was $82 billion, according to the FDIC, suggesting that most of the problem banks are smaller in size. 

While there has been an increase in problem banks due to higher interest rates, it shouldn't be a cause for concern just yet.

"The number of problem banks represent 1.4% of total banks, which is within the normal range for non-crisis periods of one to two percent of all banks," the FDIC said. 

[marylander1940]

 

Republic First Bank closes, first FDIC-insured bank to fail in 2024

WWW.CBSNEWS.COM

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Regulators have closed Republic First Bank's 32 branches in Pennsylvania, New Jersey and New York and they will be taken over by Fulton Bank.

 

From $2 a share to 1 cent... in 2023 the bank cut jobs in order to remain afloat but was too little too late. 

Will "zombie offices" drag banks with them before being converted into housing? 

 

[BuffaloKyle]

41 minutes ago, marylander1940 said:

 

Republic First Bank closes, first FDIC-insured bank to fail in 2024

WWW.CBSNEWS.COM

---

Regulators have closed Republic First Bank's 32 branches in Pennsylvania, New Jersey and New York and they will be taken over by Fulton Bank.

 

From $2 a share to 1 cent... in 2023 the bank cut jobs in order to remain afloat but was too little too late. 

Will "zombie offices" drag banks with them before being converted into housing? 

 

I posted this on the previous page when it happened and you replied right after even. 😅

[Welshman]

HBOS (the banking giant created when Halifax Building Society merged with the Bank of Scotland in 2001) saw its share price fall by 17% in March 2008 when rumours appeared suggesting that it had gone to the Bank of England asking for funding to ensure its survival, and on September 17th of that year the share price swung from as low as 88 pence a share to as high as 220 pence a share,

Lloyds TSB then announced they were seeking to take over HBOS and it was agreed that for every HBOS share owned, 0.83 of a Lloyds Banking group share would be offered, later reduced to 0.605 of a Lloyds Banking group share. Within days of this takeover, Northern Rock suffered a run on its services and collapsed, having been sold by the UK government, Bradford and Bingley collapsed, sold by the UK government and it was reported that even the Bank of England was on the verge of having to stop all interventions.

This is why today I have 33 shares in Lloyds Banking Group (55 shares in HBOS) which as of the close of trade yesterday were worth £17.82 meaning that I am stuck with them because it would cost more to sell them than they are worth

[mike carey]

40 minutes ago, Welshman said:

This is why today I have 33 shares in Lloyds Banking Group (55 shares in HBOS) which as of the close of trade yesterday were worth £17.82 meaning that I am stuck with them because it would cost more to sell them than they are worth

If they're a reasonable investment in their own right, an alternative would be to buy more so you held a marketable parcel of shares. This thread is directed mainly at the prospect of the failure of a bank of which one was a customer, not one in which one held shares (or about shareholding in general), so this is a tangent from that, which we should best avoid.

[marylander1940]

On 5/19/2024 at 3:53 AM, augustus said:

I am predicting many bank failures over the next couple of years.  The US banking system has $2 trillion in unrecognized bond losses because of the rise in interest rates (and because interest rates were held too low for years).  

Let's hope you're wrong. 

What would you do to protect yourself? Taking your money out of the bank? 

[+ FrankR]

2 minutes ago, marylander1940 said:

Let's hope you're wrong. 

What would you do to protect yourself? Taking your money out of the bank? 

Finding alternative investments is always an option. May I suggest vintage porn?? 😆

[Welshman]

10 hours ago, mike carey said:

If they're a reasonable investment in their own right, an alternative would be to buy more so you held a marketable parcel of shares. This thread is directed mainly at the prospect of the failure of a bank of which one was a customer, not one in which one held shares (or about shareholding in general), so this is a tangent from that, which we should best avoid.

My apologies, I should have noted that I was given £500 of free Halifax shares when the building socirty demtualised as I was a customer with the bank when that happened. The same with Bradford and Bingley

[+ augustus]

15 hours ago, marylander1940 said:

Let's hope you're wrong. 

What would you do to protect yourself? Taking your money out of the bank? 

No, keep it in the bank and under the 250k limit.  Even as some banks fail the government will have no choice but to at least pay the insured deposits.  Otherwise, all hell will break loose.  The Treasury and the Fed will just print the money, even if it's inflationary.  

[+ augustus]

Do you all remember a year ago that Yellen said the rescue of SVB and Silicon Bank would not cost the taxpayers anything because the money would come from the FDIC and assessments on banks?  Well, that was one BIG LIE!  Read the 2nd paragraph of this article:

 

2024 federal budget deficit projection rises to nearly $2 trillion - ABC News

ABCNEWS.GO.COM

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The new projection comes from the nonpartisan Congressional Budget Office,

They will never recover that $70 billion the taxpayers have paid for SVB, Signature Bank and First Republic.  Instead of just covering the 250K limit, they cover everybody including the wealthy, big companies, bondholders, etc., people that should know better and take other measures to protect their large deposits.  

[+ FrankR]

4 hours ago, augustus said:

Do you all remember a year ago that Yellen said the rescue of SVB and Silicon Bank would not cost the taxpayers anything because the money would come from the FDIC and assessments on banks?  Well, that was one BIG LIE!  Read the 2nd paragraph of this article:

 

2024 federal budget deficit projection rises to nearly $2 trillion - ABC News

ABCNEWS.GO.COM

---

The new projection comes from the nonpartisan Congressional Budget Office,

They will never recover that $70 billion the taxpayers have paid for SVB, Signature Bank and First Republic.  Instead of just covering the 250K limit, they cover everybody including the wealthy, big companies, bondholders, etc., people that should know better and take other measures to protect their large deposits.  

At least the argument can be made that it saved thousands of small businesses that would have been devastated and lost their operating cashflow. What is really shocking is other forms of waste like the billions in subsidies big oil receive every year.

https://www.nytimes.com/2024/03/15/climate/tax-breaks-oil-gas-us.html

[+ augustus]

7 minutes ago, FrankR said:

At least the argument can be made that it saved thousands of small businesses that would have been devastated and lost their operating cashflow. What is really shocking is other forms of waste like the billions in subsidies big oil receive every year.

https://www.nytimes.com/2024/03/15/climate/tax-breaks-oil-gas-us.html

Not even close.  "Subsidies" to the fossil fuel industry in the US amounts to about $10 billion a year, most of which are deductions available to many manufacturers.   

https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/efforts-to-remove-billions-in-us-fossil-fuel-subsidies-face-uphill-battle-75649055

There is NO ARGUMENT to businesses losing their cash flow, when tens of millions of individuals are barely able to make ends meet.  The businesspeople should know better if they're in business, or they shouldn't be in business. 3 medium sized bank failures costing the public treasury $70 billion is outrageous.  Those banks should have been allowed to fail and let the chips fall where they fall.  There are over 5,000 banks in this country and somehow some people believe they should receive preferential treatment. Sure, bail out the hi-tech snobs at SVB in CA and the real estate developers at Signature Bank in NYC, but let hundreds of people in Phoenix die every year from heat stroke because there aren't enough cooling centers.

 

[+ augustus]

It is atrocious that $70 billion of public money should have been spent on just these 3 banks, especially with the size of the National Debt.  If a bank has crap loans on its books it is not the world's fault.  Just liquidate the bank and let the bondholders and those depositors with over 250K eat the loss.  Dodd-Frank was supposed to prevent this but apparently not.  Business can protect its large deposits by investing in money market funds that invest in Treasury paper or having an account at a bank that sweeps all the money into a Treasury money market fund at the end of the day.  

The hedge funds had their money reimbursed with SVB!  

[+ FrankR]

1 hour ago, augustus said:

It is atrocious that $70 billion of public money should have been spent on just these 3 banks, especially with the size of the National Debt.  If a bank has crap loans on its books it is not the world's fault.  Just liquidate the bank and let the bondholders and those depositors with over 250K eat the loss.  Dodd-Frank was supposed to prevent this but apparently not.  Business can protect its large deposits by investing in money market funds that invest in Treasury paper or having an account at a bank that sweeps all the money into a Treasury money market fund at the end of the day.  

The hedge funds had their money reimbursed with SVB!  

Actually no. Dodd-Frank came under fire in 2018 by Congress, the Senate and the Executive branch - which weakened oversight.  They told the regulators to back off…and they did. So why are you surprised?

https://www.newyorker.com/news/q-and-a/the-regulatory-breakdown-behind-the-collapse-of-silicon-valley-bank
 

“When Congress writes a law and gives direction, even if it’s broad direction, to the entities it has created, we want those entities to follow that general instruction. For this reason, it is very appropriate to blame the legislative sponsors of the 2018 law for sending a not-very-subtle message to the Fed to pull back. Congress sent that message, and the Fed heard it.”

[+ augustus]

3 hours ago, FrankR said:

Actually no. Dodd-Frank came under fire in 2018 by Congress, the Senate and the Executive branch - which weakened oversight.  They told the regulators to back off…and they did. So why are you surprised?

From the article YOU cited:

 

"Those are the innovations of Dodd-Frank. The biggest point of all, though, is that, even before Dodd-Frank, and even after 2018, the supervisors retained all of the tools necessary to pursue any question of risk concentrations or risk mismanagement up to and including forcing a bank into liquidation. And that’s what we did not see. We saw the red flags, and Bloomberg’s report says that the supervisor saw those red flags, too. What they didn’t do is act on them. And that’s the question we still don’t have an answer for."   ( Peter Conti-Brown, an associate professor of financial regulation at the Wharton School and an expert on the Federal Reserve.)

Edited June 20, 2024 by augustus

[+ FrankR]

42 minutes ago, augustus said:

From the article YOU cited:

 

"Those are the innovations of Dodd-Frank. The biggest point of all, though, is that, even before Dodd-Frank, and even after 2018, the supervisors retained all of the tools necessary to pursue any question of risk concentrations or risk mismanagement up to and including forcing a bank into liquidation. And that’s what we did not see. We saw the red flags, and Bloomberg’s report says that the supervisor saw those red flags, too. What they didn’t do is act on them. And that’s the question we still don’t have an answer for."   ( Peter Conti-Brown, an associate professor of financial regulation at the Wharton School and an expert on the Federal Reserve.)

You are missing my point. The regulators had the information and enforcement tools. They did not have the willingness to use those tools for enforcement.  They did not act because Washington told then to back off, and so they did.