The hidden drama behind bank failures.

Hey there !

Did you hear about the recent collapse of some commercial banks in the US? It's like watching a thrilling drama unfold in slow motion, with each twist and turn more sinister than in The Godfather.

Take, for example, First Republic Bank. Just 18 months ago, they were sitting pretty with their shares at $222 a pop, but now, they're at zilch. Worse than a roller coaster at a carnival, don't you think? Here's the plot twist though - it's not the bank's management that caused this implosion. It's actually the well-intentioned people running our central banks. Talk about an inside job.


You see, the whole saga started when our governments and central banks decided to print money like there's no tomorrow to help us weather the COVID storm. Generous handouts were given to citizens, but when this excess cash flooded the banking system, problems started to arise. Remember those lovely checks each family received from Uncle Sam? When people deposited the money into their bank accounts, banks like First Republic Bank got up to their necks in deposits.

Think of it like an unexpected flood in a desert. Instead of nurturing life, the deluge threatened to cause destruction. So, First Republic Bank was left with a tricky situation: what were they supposed to do with the flood of deposits? After all, the sudden influx of money was like preparing dinner for two, only to find out a party of 100 gatecrashers showed up. Because making more loans was out of the question, this excess cash was invested into government bonds.

At first, it seemed like a savvy move - share prices soared, and the bank's management enjoyed a nice bonus. It was party time in the bank's boardroom. But then, the financial hangover kicked in. Inflation struck harder than Thor's hammer, causing interest rates to skyrocket.

This spelled doom for banks like First Republic Bank, who had to sell those bonds at a massive loss. Ultimately, JP Morgan, our friendly neighborhood trash collector, had to step in and rescue First Republic Bank from the jaws of bankruptcy. A temporary band-aid, if you ask me. The tragic part is that this isn't a one-off case.

Banks across the US are like ticking time bombs, waiting to go off at any moment. Are we headed for another wave of bank failures? Only time will tell.

Bye for now, and keep a close eye on your bank. Financial tsunamis are not just the stuff of Hollywood movies.