US banking crisis continues, 5 failed banks in 60 days, First Republic Bank taken over & sold to JPMorgan Chase

Another troubled US 🇺🇸 bank has collapsed. After the failure of the Silicon Valley Bank, Signature Bank, and Silvergate Bank, the US banks are in deep trouble as the banking contagion continues.

How is it possible that US banks are falling like dominos? 👇

Banks can hide their losses by classifying the bonds they purchased as “Held To Maturity”. Instead of showing true losses due to rising interest rates, if banks claim those bonds will be held on their balance sheet till maturity, banks could appear very healthy and able to satisfy the liquidity needs of their depositors.

For some bizarre reason, the failing banks decided not to hedge their interest rate risks. Instead of protecting themselves by buying insurance that pays out in case of rising interest rates, the banks decided to completely forgo this opportunity and be fully exposed to market risks. The FED has decided to raise interest rates since March 2022 from 0% to 5% today, hence today the US banks have $1.7 trillion in unrealized losses.

The bank failures that began some weeks ago are part of a larger contagion, whose effect has been felt across the world, including in Switzerland 🇨🇭 where the 2nd biggest bank Credit Suisse went under in a matter of days, and was taken over by UBS in a government-orchestrated intervention.

Based on the information from FDIC, this might be a deal of a lifetime for JP Morgan Chase. First Republic Bank had $185 billion in Assets (vs $233 billion in Q1) and $118 billion in Liabilities (vs $214 billion in Q1) and for the take-over JP Morgan Chase got a $50 billion loan at a sub-market rate from FDIC and pays $10.6 billion to them.

What are your thoughts on this? Are we at the end of the dollar and banking as we know it? Write me in the comments!

#fed #firstrepublic #usa #banks #jpmorgan #interestrates