Mis Priced Risk
Updated: May 1
Trillions in MisPriced low yielding assets on the books of so many banks daunts regulators.
Once agin the First Republic Bank is back in the focus of the financial news media and the regulatory authorities.
First Republic fell 11.7% to $7.16 a share on heavy volume of 8.4 million shares. First Republic faced doubts about its viability on Tuesday as analysts sifted through a difficult first-quarter update. Bloomberg reported that First Republic is currently considering the sale of $50 billion to $100 billion of long-dated mortgages and securities as part of a rescue plan, the news service said, citing people with knowledge of the company. A spokesperson for First Republic did not comment.
Separately, the pension fund for police officers in Hollywood, Calif., filed a lawsuit against First Republic and KPMG alleging that executives misled investors about the health of the company.
The wealthier customers that banked with FRC had no loyalty to any particular financial advisor. First Republic was one of several consultants and service providers to their wealthy clients, who were drawn to products like interest-only mortgages. Similar arrangements helped the bank preserve assets during normal times, but when there was a liquidity issue, wealthy clients left.
As of this writing the New York Stock Exchange has halted trading in shares of First republic Bank.
How did this Mis Priced Risk come to be?
A look back to financial market issues of March 2020 brought on by COVID. The steps taken to provide overall system liquidity that included interest rate manipulation and massive quantitive easing have created serious consequences that must be dealt with now in order for inflation expectations to be contained.
Moving forward in the process of repricing these liabilities we will see more banks having difficulty. The US financial markets need to absorb Trillions of dollars (some estimate $5 Trillion) in order for banks and leveraged investors to reprice their funding costs and reconcile their balance sheets.
We've made news!
The Epoch Times
by Andrew Moran Apr 26, 2023
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, on April 14, 2023.
Gold is another safe-haven asset put forward by financial experts.The yellow metal has trended higher since November on a weaker greenback and the Federal Reserve’s easing monetary policy prospects. Year to date, gold prices are up nearly 10 percent and recently flirted withthe August 2020 record high of $2,069.40.
Gold is typically sensitive to interest-rate movements because they canaffect the opportunity cost of holding non-yielding bullion. The buck’sperformance can make dollar-denominated commodities more expensiveor cheaper for foreign investors.
The other factor has been weakening economic data, says Stephen Akin, a “The primary fundamental event that propelled gold well above $2,000 registered investment advisor at Akin Investments.was weaker U.S. economic data,” he told The Epoch Times. “This data suggest that the Federal Reserve could certainly consider slower rate hikes and a pause of rate hikes sooner.” Read the full article:
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