Two bank failures of the magnitude experienced by the United States in the early months of 2023 are historically less of a concern when the dollar amounts involved are more manageable.
Not even three bank failures, as we will have by May 2023, have been as problematic as the current situation.
The magnitude of Silicon Valley Bank, the first bank to fail in this collapse, was already making it difficult for regulators to find a buyer to most easily correct the situation, and now we are facing an even greater problem with more problems on the horizon.
Martin Gruenberg, then-chairman of the FDIC, told a Brookings audience in 2019 that there are few financial institutions large enough to acquire a $50 billion-plus regional bank. That was the waterline, and we have long since passed it with the current Bank Collapse.
The combined total assets of Signature Bank and Silicon Valley Bank amount to $319.36 billion.
Looking back, the apex in terms of asset size for bank failures occurred in 2008 with $373,6 billion across 25 banks, while the peak in terms of the number of failing banks occurred in 2010 with 157 banks.
According to Zerohedge, three banks have failed in 2023, with total assets of $548.5 billion.
So, this is a distinct problem than we’ve previously encountered.
Even including the $170,9 billion in assets from insolvent banks in 2009, according to Axios, 2023 is still worse than the two years of the ‘great financial crisis’ combined.
Unfortunately, the 2023 banking collapse is far from over, according to Michael Bostock, who reported the addition of a new and grave concern, commercial real estate:
“We still have eight more months to go before this year is done, and many more banks are currently teetering on the brink of disaster. Executives at those banks are telling us not to worry, but of course executives at First Republic were issuing similar assurances just last week. Personally, I had heard that First Republic supposedly had enough reserves to keep going for months. But that was a lie, and now First Republic is toast. The following comes from the official statement that the FDIC issued when it took over the bank….” adding:
“First Republic Bank, San Francisco, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect depositors, the FDIC is entering into a purchase and assumption agreement with JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all of the deposits and substantially all of the assets of First Republic Bank.”
Bostock then discusses the recovery process for First Republic, who was harmed, who benefited, and what he believes will occur in the future to make the situation worse.
JPMorgan Chase Bank, National Association submitted a proposal for the entire deposit base of First Republic Bank. Today, during normal business hours, the 84 offices of First Republic Bank in eight states will reopen as branches of JPMorgan Chase Bank, National Association. All First Republic Bank depositors will become depositors of JPMorgan Chase Bank, National Association and will have complete access to their deposits.
The government would not permit anyone to acquire the assets of First Republic.
JPMorgan Chase was one of the invited institutions, and they emerged as the clear victors from this process…
JPMorgan receives approximately $92 billion in deposits as a result of the transaction, which includes the $30 billion that it and other large banks invested in First Republic last month. Additionally, the bank is assuming $173 billion in liabilities and $30 billion in securities.
The Federal Deposit Insurance Corporation has consented to absorb the majority of JPMorgan’s losses on mortgages and commercial loans and has also granted the bank a $50 billion credit line.
More on this story via The Republic Brief:
In addition to providing JPMorgan Chase with a 50 billion dollar credit line, the FDIC will also take a loss on this deal of approximately 13 billion dollars. So they are definitely one of the big losers in this deal… CONTINUE READING…