The US is effectively nationalizing the 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 in recent months (and years), showing why it needs a state-independent monetary system. And the bankruptcy of First Republic Bank and its state-backed takeover by JP Morgan reinforces the case for Bitcoin once again.
At least that is the task of Arthur Hayes, co-founder of BitMEX, and he is not alone. Via Twitter, Hayes wrote: “This JPM/FRC deal means US regulators decided to nationalize the banking system.”
The case for Bitcoin is growing
The analysts at The Kobeissi Letter have drawn attention to the size of the government subsidy to JP Morgan, which under current law should not have taken over FRC at all. JP Morgan was already the largest bank by deposits in the US before the FRC agreement, with over 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. Truist: 3.4%
7. PNC Bank: 3.3%
8. TD Bank: 2.9%
9. Charles Schwab: 2.7%
10. Capital One: 2.6%The top 15 banks control 75% of…
— The Kobeissi Letter (@KobeissiLetter) 30 April 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 over $500 million per year from the deal. All of this is happening while the FDIC covers $13 billion in losses and provides $50 billion in funding.
“You are witnessing the product of a flawed system,” Kobeissi Letter writes. Ultimately, the Fed is afraid that more banks will fail. US regulators want to ensure First Republic’s acquisition goes smoothly to avoid undermining confidence in the banking system (and a confidence boost for Bitcoin).
The big banks like JP Morgan pretend they saved the day. However, JP Morgan’s takeover of First Republic was entirely for their own benefit. They will make $5.1 billion in profits in 5 years. “Why would the big banks ever want the crisis to end?”, the analysts argue.
In that sense, Caitlin Long, founder and CEO of the crypto-friendly Custodia Bank, also offers harsh criticism:
TOO BIG TO FAIL BANKS are getting too big to fail. JPM received state compensation to buy FRC and the share price is up to pre-mkt. Again, see what the federal bank regulators actually do, not what they say. They really love their TBTF banks, despite what they say otherwise.
American regulators “nationalize” the American banking system
And the American banking crisis is far from over. The share prices of several regional banks fell sharply once again yesterday.
US Regional Bank Stocks Today:
1. Valley National, $VLY: -20%
2. Metropolitan Bank, $MCB: -18%
3. HomeStreet Bank, $HMST: -18%
4. HarborOne, $HONE: -11%
5. PacWest, $PACW: -10%
6. Financial citizens, $CFG: -7%
7. Zions Bank, $ZION: -4%
8. KeyCorp, $KEY: -4%
9. M&T Bank, $MTB:…— The Kobeissi Letter (@KobeissiLetter) 1 May 2023
Arthur Hayes believes that more banks will collapse. The big beneficiaries will be TBTF banks, which the BitMEX founder says are effectively nationalized because they have a government lien on their entire deposit base.
“They will not be allowed to fail regardless of decisions they make. Socialized losses, privatized gains, there are many, but…” writes Hayes, who claims that the eight TBFT banks will have to absorb all other banks that cannot cope with the current market environment with too rapid interest rate increases.
According to the BitMEX founder, the government will make other exceptions, just as the OCC lifted deposit concentration limits and the FDIC loaned $50 billion to JP Morgan to push them into the takeover. But a deal will always be struck, predicts Hayes.
If you are not one of the 8 TBTF banks, you are screwed as long as inflation is stuck at these high levels and possibly rising. […]
Because of the US debt ceiling debacle, no banks can be bailed out by the government. This is the perfect point of political paralysis to leverage another probably several non-TBTF banks being killed by the FDIC.
At press time, the Bitcoin price was at $27,998.
Featured image from iStock, chart from TradingView.com
