Did First Citizens Bank Yellow Yellen?

Was First Citizens treated like royalty in FDIC’s “sweetheart bank deal for SVB” as the deposit insurance fund “takes a $20 billion hit"? As WSJ says, “It’s good to be a banker at the remainder counter, esp when feds help w/purchase.

Notes the editors: “First Citizens BancShares on Sunday night was the lucky winner of the bidding to buy the assets of Silicon Valley Bank & what a deal it is. Rather than minimize the cost to the deposit insurance fund as required by law, the FDIC seems to have chosen the best political match.” How so? The North Carolinian bank acquired all of SVB’s deposits, loans & branches but left “$90 billion in securities and other assets with the FDIC.” Not unimportantly, the $72 billion in loans it bought comes at a $16.5 billion DISCOUNT & a sharing of any future losses (or gains) with the FDIC. “How sweet it is for First Citizens,” the editors marveled. Not surprisingly, First Citizens’ shares rose 45.5% on the news.

Not that Citizens isn’t taking on a lot of risk here, given SVB’s heavy investment portfolio in risky startups and other West Coast woke pipe dreams. Yet, the WSJ warns, “in addition to the loss-share agreement, the FDIC will finance the deal with a 5-yr $35 billion loan plus a $70 billion line of credit to cover [any further] deposit flight.” As a result, First Citizens “will have $219 billion in assets – double what it had at the end of last year. “What’s not to like for Citizens then? Maybe the WSJ calling it & the FDIC out for their obvious bedroom arrangement at taxpayers’ expense. With “negotiating” skills like this, will the Biden Administration next agree to a trade deal with a near-bankrupt UK that’s so generous it makes the US a vassal state of a resuscitated British Empire?

Davd Soul