Something Wicked This Way Comes

Another US Bank has succumbed to events.

Republic First of Pennsylvania will not be the last US Bank failure in 2024.

You didn’t read that incorrectly — this bank is different to First Republic… who failed last year.

Recall that last year Silicon Valley Bank & Signature Bank disintegrated, too.

We’ve been documenting why the markets are in trouble - this article dives into the monetary and fiscal dangers:

Things have devolved rapidly since that piece was published in March 2024.

The Federal Reserve's emergency program (BTFP), designed to help banks weather losses from declining bond values, has expired. This leaves many banks with substantial unrealized losses vulnerable to collapse, as demonstrated by the failure of Republic First.

The problem is systemic: huge losses from bonds plague the whole banking sector. These losses originated when the Fed's actions to fight inflation inadvertently drove down bond prices, hurting banks that had invested heavily in those bonds.

The BTFP temporarily …