via wallstreetonparade:
Jamie Dimon, the Chairman and CEO of JPMorgan Chase, has cranked up his public relations machine since March 16 to promote the narrative that he came to the “rescue” of the plunging regional lender, First Republic Bank. The so-called “rescue” consisted of 11 banks, including JPMorgan Chase, dumping a total of $30 billion in “uninsured” deposits into First Republic.
But one of the bank’s key problems was that it already had too many uninsured deposits. (This was like seeing a house on fire and throwing 11 expensive martinis at it.)
According to First Republic’s regulatory filings, as of December 31, 2022, it had total deposits of $176.25 billion, of which $119.47 billion (or 68 percent) were uninsured. The Federal Deposit Insurance Corporation (FDIC) caps federal deposit insurance at $250,000 per depositor, per bank. But banks such as First Republic, that cater to the very wealthy, have a significant number of customer accounts that dramatically exceed the $250,000 cap. In the digital age, those deposits can rapidly move elsewhere when a bank panic sets in.
The stock market was unpersuaded that this Dimon rescue plan was anything more than a hastily thrown together p.r. stunt. First Republic Bank’s stock closed on March 16 – after the news about the $30 billion hit the wires – at $34.27. It has continued to move lower, hitting $14.03 by the closing bell on Friday. That’s a year-to-date decline of 90 percent – not exactly anyone’s idea of a “rescue.”
S&P Global also wasn’t buying the idea of the “rescue” either. Three days after the p.r. news of the 11 banks tossing $30 billion of uninsured deposits at First Republic, it downgraded the bank’s credit rating by three notches, putting it deeper into junk territory.