US Effectively Nationalizes Banking System
The beauty of Bitcoin is that it doesn’t need a marketing team: governments, central banks, banks and regulators have been giving Bitcoin free promotion over the last few months (and years), showing why it needs a state-independent monetary system. And the bankruptcy of First Republic Bank and its state-sponsored takeover by JP Morgan bolsters the case for Bitcoin once again.
At least that’s the thesis of Arthur Hayes, co-founder of BitMEX, and he’s not alone. Via Twitter, Hayes he wrote: “This JPM/FRC deal means that US regulators have decided to nationalize the banking system.”
The Case for Bitcoin Grows
Analysts in The Kobeissi Letter drew attention to the magnitude of the government’s subsidy to JP Morgan, which under current law should not have taken control of the FRC. JP Morgan was already the largest bank by deposits in the US before the FRC deal, holding more than 16%.
Percentage of deposits controlled by US banks:
1. JP Morgan: 16.1%
2. Bank of America: 14.8%
3. Wells Fargo: 10.9%
4. Citibank: 5.8%
5. US Bank: 3.4%
6. Truista: 3.4%
7. PNC Bank: 3.3%
8. TD Bank: 2.9%
9. Charles Schwab: 2.7%
10. Capital One: 2.6%The 15 largest banks control 75% of…
— The Kobeissi Letter (@KobeissiLetter) April 30, 2023
Most shockingly, the banking giant has announced that the acquisition of First Republic will generate a one-time profit of $2.6 billion. In addition, they expect to earn more than $500 million a year from the business. All of this is happening as the FDIC covers $13 billion in losses and provides $50 billion in funding.
“You are witnessing the product of a flawed system,” writes The Kobeissi Letter. Ultimately, the Fed fears more banks will fail. US regulators want to ensure the First Republic takeover goes smoothly to prevent the erosion of trust in the banking system (and an increase in trust in Bitcoin).
Big banks like JP Morgan pretend they saved the day. However, JP Morgan’s takeover of First Republic was entirely for its own benefit. They will make $5.1 billion in profits in 5 years. “Why would the big banks want the crisis to end?”, analysts to discuss.
In this regard, Caitlin Long, founder and CEO of Custodia Bank, which accepts cryptocurrencies, also offers harsh criticism:
BANKS TOO BIG TO FAIL. JPM got government buyouts to buy FRC and its share price rose pre-mkt. Again, look at what federal bank regulators actually do, not what they say. They really love their TBTF banks despite saying otherwise.
US regulators “nationalize” the US banking system
And the US banking crisis is far from over. Share prices of several regional banks fell heavily once again yesterday.
US Regional Bank Stocks Today:
1. National Valley, $ FLY: -20%
2. Metropolitan Bank, $MCB: -18%
3. HomeStreet Bank, $HMST: -18%
4. Harbor One, $HONE: -11%
5. PacWest, $PACW: -10%
6. Financial Citizen, $ CFG: -7%
7. Bank of Zion, $ZION: -4%
8. KeyCorp, $KEY: -4%
9. M&T Bank, $MTB:…— The Kobeissi Letter (@KobeissiLetter) May 1, 2023
Arthur Hayes believes more banks will fail. The big beneficiaries will be the TBTF banks, which the BitMEX founder says are effectively nationalized because they have a government guarantee on their entire deposit base.
“They cannot fail, no matter what decisions they make. Socialized losses, privatized gains, it’s a big deal, but…” writes Hayes, who says the eight TBFT banks will have to absorb any other banks that can’t handle the current market environment of very high interest rates.
According to the BitMEX founder, the government will make further exemptions, just as the OCC lifted deposit concentration limits and the FDIC lent $50 billion to JP Morgan to push them towards the takeover. But there will always be a compromise, predicts Hayes.
If you are not one of the 8 TBTF banks, you are screwed as long as inflation is stable at these high levels and possibly rising. […]
Due to the US debt ceiling disaster, no bank can be bailed out by the government. This is the perfect point of political paralysis to capitalize on other likely multiple non-TBTF banks being killed by the FDIC.
At press time, Bitcoin price was at $27,998.
Featured Image from iStock, chart from TradingView.com