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FDIC Investigating First Republic Bank Amid Bank Run Concerns: BrightScope CEO

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Mike Alfred, the co-founder and CEO of BrightScope, said the Federal Deposit Insurance Corporation (FDIC) is currently on-site at First Republic Bank, working to determine the best course of action to protect depositors as a bank run has reached a tipping point. 

Alfred confirmed that First Republic Bank started limiting outbound wires on Saturday, and eventually stopped processing wires altogether by the end of the day.

"The previous wording when trying to wire out of First Republic on Saturday is 'wire will be sent first thing Monday'. Now the wording changed to 'thank you for your transaction we'll get back to you'". Alfred mentioned in another tweet.

The bank's business model relies on a "gentleman's agreement," where customers deposit close to 30% of the loan value in a deposit account with a 0% interest rate in return for large (mostly) real estate loans at below market interest rates. However, with higher interest rates, this dynamic has flipped, and there is little incentive for customers to tie up large deposits at zero interest.

Full thread:

BREAKING: The FDIC is already on site at First Republic Bank trying to determine the best path forward to protect depositors. Things are moving way faster than expected given the accelerating bank run that has already reached a tipping point.

Confirmed just now that First Republic started throttling outbound wires today.

Also by the end of the day today (Saturday) they stopped processing wires altogether.

The previous wording when trying to wire out of First Republic on Saturday is "wire will be sent first thing Monday". Now the wording changed to "thank you for your transaction we'll get back to you"

FRC's business model depends on a gentleman's agreement. Essentially, you deposit close to 30% of the loan value with FRC in a deposit account with a 0% interest rate in return for large (mostly) real estate loans at below market interest rates. This dynamic flipped with higher rates as there is little incentive to tie up large deposits at zero interest.

There is no way for FRC to legally enforce this gentleman's agreement when the customer wants to suddenly move their deposits after the real estate loan is already in force.

And so we're 100% clear, I have no position long or short in $FRC equity or options. I am simply sharing the corroborating evidence from several good sources. We will all learn a lot more about how this plays out on Monday morning.FDIC Investigating First Republic Bank Amid Bank Run Concerns

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