FDIC is expected to make an announcement it has seized First Republic prior to the Asia opening market according to Reuters.
That will follow a week long bidding process that includes Citizens Financial Group, PNC Financial Services Group, JPMorgan Chase & Co and Bancorp.
They were asked to submit non-binding offers by Friday and have been looking at the books over the weekend with a deal now expected to be announced.
That would make this one of the fastest bank sale in history and the second biggest US retail bank failure ever.
All under the watch of Martin J. Gruenberg who as chair of the Federal Deposits Insurance Corporation (FDIC) is presiding over the fourth bank failure in just over a month.
He has been responsible for the disbursement of tens of billions of dollars, and $20 billion of losses for FDIC so far without including First Republic.
In a testimony to the Senate last month, Gruenberg said there were $620 billion in unrealized losses in the banking system as of December 2022.
Combined with a fall in deposits as investors move to US Treasuries, with $1 trillion withdrawn from banks since last year, this has led to “systemic stress experienced by the broader banking system,” Gruenberg said.
Whether that systemic stress stops with First Republic remains to be seen, but stock investors in banks are experiencing huge losses, which may well include pension funds.
Gruenberg’s approach so far has been to almost punish those investors, with the lightspeed process affording the troubled banks no bargaining power at all.
Their assets are being scooped up on the cheap, in contrast to how the Swiss handled the sale of Credit Suisse, during which there were megaphoned negotiations of bidding amounts as well as back and forth.
For all three US banks so far however, there has only been a final result that gave the buyer all they want and quite a bit more, for the healthy assets.
The process has also come across as politicized with almost nothing known about Gruenberg and his connections, even though he has been chair or at the FDIC board for 18 years and was reappointed by president Joe Biden this November for another five years.
So we’ll have to wait and see just what the buyers have been given this time as this generation experiences the opaque “trust me bro” carving up of another circa $300 billion when you include the wealth management part of First Republic.
The treatment of shareholders with some sort of disdain moreover, where FDIC refused to sell some of Signature’s deposits for example, may also have an effect on investment decisions in the stock market as banks become a very risky asset to hold.
But bitcoin has not reacted much to these developments at First Republic, although initially it did not react to the failure of the Silicon Valley Bank either.
That could well be because it has gained significantly since last month, and the FDIC backstop may be reassuring depositors, but just how much of that $620 billion in losses remains to be cleared is to be seen.
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- Source: https://www.trustnodes.com/2023/04/30/fdic-expected-to-seize-first-republic-imminently
