This is after layoffs last year. Imagine how far a billion dollars would have gone if we had invested that into bailing out our customers; given them the tools and resources to become better earners for the bank.
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We'll get paid
This is, in effect, a short-term loan. Banks exist to make loans. If you work at USB, how do you not know this? This deposit to the other bank was made to stabilize the overall banking system which benefits all bank customers nationwide. Also, a bailout is not an investment, so you might want to work on getting some basic concepts straight. Pick up a text book for crying out loud and lay off the victim mentality. This sort of thing is really getting old. The world does not owe you a neverending childhood.
U.S. Bank's deposit of $1 billion is due to be paid back within months, not years, and the entire process was engineered by Jamie Dimon at J.P. Morgan Chase, America's banker, who assembled a consortium of the largest banks in America to deposit funds into First Republic to help stabilize that financial institution and calm the waters of the money migration out of the regional banking networks. The entire $30 billion deposited by the big banks is backstopped by the Fed per Dimon's agreements with the fed to essentially provide a backdoor bailout to First Republic through the big bank's deposits.
If and when First Republic were to fail, J.P. Morgan would be at the front of the list to acquirer the bank's well healed, perhaps a little quick to the trigger clientele, since J.P. Morgan is currently not allowed to acquire other bank businesses given it's current size, scale and scope. First Republic has a niche of sophisticated, well to do investors who have already made billions, not the guys borrowing from Silicon Valley Bank with the hopes of making billions.
First Republic has a branch actually inside Facebook's Menlo Park headquarters and was the lender of record in Zuckerberg's $6 million mortgage at a greatly incentivized mortgage rate.
And with the Oracle of Omaha exiting the bulk of his ownership of U.S. Bank, currently J.P. Morgan Chase and Wells Fargo Bank actually show up in the list of the 10 largest institutional investors in U.S. Bank. Small world.
You do understand that we expect to get paid back? This is liquidity covered by underwater treasuries that WILL mature at par. In other words, worst comes to worst, we get paid back 100% within a few years and if the bank were to go under we would be stuck with only earning 1.75% interest instead of the market rate. Also, this was done to prevent a bank run that could potentially cause a panic that would hurt us and our customers (because we would be forced to curtail lending if we lost a large % of deposits.