Bite-Sized Business Law Special Episode: Richard Squire on the Collapse of First Republic Bank
First Republic has become the latest victim of the banking crisis. In this episode, Richard Squire, Professor of Law, business law scholar, and the Fordham Corporate Law Center director, explains why. Richard provides insights into what led to First Republic's collapse and how it differs from what happened with Silicon Valley Bank. He also discusses the true nature of the riskiness of interest-only mortgages, how interest rate hikes play into this, and the irony of creating greater risk when big banks like JP Morgan purchase insolvent banks like First Republic. Richard also provides insight into the relationship between the Federal Reserve and the banking sector, what discount window borrowing is, and how this relates to the fact that there was a temporary period when it looked like First Republic was going to make it. Don't miss this thought-provoking episode that explores the hidden complexities of the banking industry, how First Republic has been bailed out, and why this bailout has been so well-camouflaged.
Key Points From This Episode:
- What led to First Republic’s insolvency.
- How this differs from the problems faced by SVB.
- The true nature of the riskiness of interest-only mortgages.
- How other big banks tried to rescue First Republic, eventually culminating in the JP Morgan deal.
- Why the government sets aside concerns about bank mergers.
- The irony of creating a greater risk when a big bank like JP Morgan purchases an insolvent bank like First Republic.
- What fractional reserve banking is and why it’s so risky.
- Insight into the relationship between the Fed and the banking sector when the Fed brokers this deal.
- Why there was a temporary period when it seemed as though First Republic would survive.
- Discount window borrowing: What it is and the intention behind it.
- Looking back at SVB in light of what’s happened to First Republic and whether or not a lack of diversification caused this.
- Why this run of failed banks is unlikely to be over and who might be next.
- Thoughts on the Federal Reserve report on their own shortcomings.
- Whether or not this is a bailout and who will be affected.
- Why this bailout has been so well-camouflaged.
Links Mentioned in Today’s Episode:
Richard Squire on Google Scholar