First Republic Bank (FRC) saw some relief Tuesday after closing at a record low Monday. In a speech before the American Bankers Association, Treasury Secretary Janet Yellen assured that the government can step in and backstop more deposits if necessary, giving First Republic shares a boost. Alexander Yokum, CFRA Research Equity Analyst joined Yahoo Finance to talk about First Republic. Yokum says that the bank's location is a key factor in some of the issues it has faced since Silicon Valley Bank's (SIVB) collapse. He told Yahoo Finance "I truly believe if they were based in a state like Alabama they would not be struggling like they are now. So, the fact that they are only 50 miles away from Silicon Valley Bank, their headquarters, and nearly half of all of their deposits are in that Silicon Valley." Watch the full interview with Seana Smith and Dave Briggs here. Key video moments: 00:00:19 On First Republic's location 00:00:58 "There was long lines in front of First Republic offices in the Silicon Valley." 00:01:23 On banking crisis being an emotional response
Expectations on the Fed’s next move for interest rates have been a mixed bag in recent weeks. From bets on a 50-basis point hike, to no hike at all, to a view of a 25 basis point rate hike. The expectation whiplash kicked into high gear after the sudden bank failures- sending a wave stress throughout the banking system. “The Fed is going to have to be really careful about forward guidance here and potentially not give a whole lot of it because they're not omnipotent. They don't know what's coming down the pike,” says Chris Konstantinos, RiverFront Investment Group Chief Investment Strategist. Markets will be eager to see the Fed’s tone as they face tensions on financial stability and the risk of inflation. “They have to strike a balance. I think if their message is too far towards price stability, or to much towards financial stability, or inflation stability- too much in either direction- I think is going to be tough for the market to take,“ says Konstantinos Yahoo! Finance's Julie Hyman and Brad Smith speak with Chris Konstantinos in a full interview here. Key video moments: 00:00:14 Fed guidance 00:00:52 Fed striking a balance 00:01:21 Rate hike pause
In an interview with Yahoo Finance's Rachelle Akuffo, Columbia Business School Professor of Real Estate Tomasz Piskorski said that in a scenario where 50% of depositors are uninsured, "you have about 190 banks in a precarious position meaning the remaining value of assets is not enough to cover the face value of the insured deposit obligation," of course these bank runs can become more pronounced. Piskorski adds that in a scenario where 100% of depositors are uninsured, "almost more than 1,600 banks deemed potentially insolvent."The Federal Deposit Insurance Corporation said shortly before Silicon Valley Bank's collapse that the market value of U.S. banks’ long-term assets had dropped $620 billion in 2022. New research co-authored by Columbia Business School's professor of real estate Tomasz Piskorski finds that the banking industry’s unrealized losses are now more than three times that, with the system accumulating $2.2 trillion in unrealized losses over the past year. These paper losses across the U.S. banking sector suggest that other banks with high levels of uninsured depositors and large losses are also prone to solvency crises that could trigger bank runs. In an interview with Yahoo Finance's Rachelle Akuffo, Piskorski said that in a scenario where 50% of depositors are uninsured, "you have about 190 banks in a precarious position meaning the remaining value of assets is not enough to cover the face value of the insured deposit obligation," of course these bank runs can become more pronounced. Piskorski adds that in a scenario where 100% of depositors are uninsured, "almost more than 1,600 banks deemed potentially insolvent." Key video moments: 00:01:19 U.S. bank capitalization 00:03:19 Systemically important banks 00:04:22 Risk in the banking system Watch our full conversation with Tomasz Piskorski here.