Readers of PNG know that Republic Bank got $30 billion from larger banks to help it avoid the fate of Silicon Valley Bank {14.03.23} But the carriage-trade bank is still in trouble. According to The Lever, the Feds are considering extending deposit insurance to cover wealthy depositors as it did for SVB. The San Francisco based Republic was in the front of the industry's resistance to stricter financial regulation. Its board of directors includes Tom Barrak, a major donor and ally of 'Hair' Trumpilini. Two-thirds of its deposit accounts are well over the FDIC insurance limit of $250,000. Republic was third on the list complied by the Financial Oversight Safety Committee for the most uninsured deposits behind #1 Silicon Valley Bank.
Trump rolled back the Dodd-Frank law to exempt mid-sized banks from stricter oversight including requirements that they draft plans annually for safely winding down operations, known as "living wills" in the industry. They were also exempted from stress testing as long as their assets were below $250 billion. That limit was originally set at $50 billion but was increased by the bi-partisan de-regulation. Both banks supported the roll-back. These mid-size banks grew rapidly as part of a wave of consolidation in the banking sector.
Like SVB's clients, Republic's are highly sophisticated investors that can move large amounts of money quickly. One commentator called them "trigger prone". They push buttons--the rest of us stand in line at the window. Republic is using all of what is left of deposits to fund its lending activities, primarily in the risky venture capital arena. This condition increases the risk it will not be able to cover withdrawals unless more capital can be raised. It is facing a $13.5 billion capital gap between tangible book values and deposit liabilities. Perhaps its 1.05% six million dollar mortgage loan to Mark Zuckerberg has something to do with it? This month shares of Republic have lost 87% of their value.
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| credit: T. Tomorrow |