Conference Tidbits

Well, consider that a bullet dodged. You’ve likely heard by now that President Biden signed the “Fiscal Responsibility Act of 2023” into law this past weekend. Among other things the bill suspends limits on federal borrowing until January 2025. We can debate if not having a debt ceiling is fiscally responsible but it’s a big win for the markets and the broader economy at least in the short-term.

I was following these developments while at another conference last week. This time it was the Financial Planning Association’s “NorCal” conference at the Palace Hotel in San Francisco. Attendance was high at this in-person event and the educational content was outstanding, broad in topics, and appropriate for the times.

I still want to bring you some tidbits from the other conference I attended earlier in May, but the debt ceiling debate got in the way. Since that’s in the rearview mirror, over the next few weeks I’ll share takeaways from speaker sessions at both conferences.

Stephanie Kelton – You may recall from early in the pandemic that I wrote a post about The Deficit Myth, a book by Stephanie Kelton, a PhD economist at the forefront of a movement to reset how we think about government debt and deficits. Her book was published as the pandemic started raging and governments around the world were hastily preparing massive spending programs. At the time the book and its ideas seemed to offer cover for limitless government spending. But of course it’s always more complicated than that.

Back then I participated in a study group based on the book and comprised of financial planners. We met virtually with Kelton and others in the Modern Monetary Theory cohort and got a crash course in MMT. Fascinating and timely for sure.

The years since have come to be seen as a real-world test for MMT theories, so it was a great opportunity to hear directly from Dr. Kelton. Essentially, the idea is that the federal government issues its own currency and, because of this, has the power to do so indefinitely at any amount that can be absorbed by the economy. Too much too fast and we have inflation. Too little or with too many constraints and we have an unnecessary recession. CPI rising faster than it had in decades and peaking at over 9% a year ago illustrates the first point and, fortunately, with the debt ceiling deal we won’t have to worry about the second point for a while.

There’s a lot more to MMT and Kelton was quick to remind conference attendees that the theory wasn’t (and still isn’t) meant to be prescriptive. Instead, MMT is a different lens to look at our monetary policy and economy through, she said. For example, the federal government doesn’t need to manage it’s spending as if it were a household, but we continue to pretend it does and this limits our potential.

There’s more about all this in her book. I’m still willing to buy it for you if you’re interested, not as a political statement or anything like that. Instead, this is foundational information to have on hand when listening to and thinking about our debates around the complexities of government spending.

Liz Ann Sonders –

Liz Ann is Schwab’s Chief Investment Strategist and, say what you will about her employer, she’s the bomb! I always try to make time to read Liz Ann’s commentary, and I definitely make time to hear her speak live.

Liz Ann had some interesting thoughts to share during an hour+ conversation with a moderator that served as a breakfast keynote. She’s constructive on where we are in the economy and markets but mentioned, as we’ve discussed in other posts, how we may actually be in recession now although it may not be “called” until later. This could end up being a so-called soft-landing where the economy, on average, experiences a mild recession while some sectors get hit harder.

Liz Ann also talked about how stocks are up so far this year but a relative few are holding up the market. This outperformance is being driven by multiple forces but the upsurge of interest in AI is paramount. The players in this space are often referred to as “tech companies” while, technically speaking, the companies are found in sectors like Communication Services, Consumer Discretionary and, of course, Technology. She talked about how investors often buy the label when buying investment funds and sometimes chase tech and other aspects of the market without realizing they’re not getting the exposure they intended.

On AI specifically, Liz Ann offered the destabilizing force as an example of how change and volatility are likely to be heightened for a while, and the rate of change is faster than we’ve experienced in a long time. This is uncomfortable for most of us but much about AI should prove beneficial. She isn’t overly concerned about the technology’s threat to humanity and hyperbolic stuff like that, but she did mention being taken aback by a recent report from BCA Research suggesting there’s a 50/50 chance that AI wipes out all of humanity. Sobering talk over breakfast, for sure.

Here’s a link to a short CNBC interview with the BCA analyst: https://www.youtube.com/watch?v=9VOuCcEORsM

But the rise of ChatGPT, Bard, and Midjourney as a Terminator movie wasn’t Liz Ann’s main point. She was optimistic (correctly, as it turned out) about the debt ceiling debate, the economy, and markets even while expecting a mild recession and prolonged volatility. And she was optimistic about investing. Liz Ann has long been a proponent of keeping a level head during turbulent times and remembering how the process of investing is like running a marathon and not a sprint. That’s always good advice.

As I mentioned, barring major developments in the coming weeks I’ll plan to share more conference tidbits with you. Those include a couple interesting sessions about aging in America, our healthcare system, and the outlook for assisted living in our country.

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Should You Refinance Your Mortgage?

Should I refinance my mortgage now? That’s a question I’ve heard a few times lately so I’ll address it here too in case it might be helpful. Deciding to refinance can be complicated and too much analysis can lead to paralysis, so let’s walk through some of the steps.

First you’ll want to find your note. This document lays out relevant details like the term of your mortgage, the interest rate, prepayment penalties, if any terms are adjustable, and when payments are due. Logging into your current loan provider’s website is good, but reviewing the note is best.

Once you have a handle on the relevant details, jump online to quickly see what’s available.

Bankrate.com is a great resource for this. As of yesterday, their site listed the national average for a 30-year fixed rate loan at 7.14%. The Wall Street Journal is often the go-to source for this type of data, but Bankrate is free and a little more user friendly.

In general, mortgage refinance rates are a tad higher than rates to buy a home, but both are twice as high as they were a year or two ago. So, in a sense the answer to the “should I refinance now” question is simple: no! You shouldn’t refinance if your current mortgage interest rate is less than 7%. And if you refinanced or bought a home within the past few years or so your rate is likely to be very low already. Actually, you could think of any long-term fixed rate below, say 4%, as being like an asset even though it’s technically a liability.

That part of the answer seems obvious, but what if you need to refinance? Maybe you have an adjustable loan that has been resetting higher as rates have risen and you’d prefer to lock it in. Or maybe you need extra cash and see your home’s equity as the answer.

Assuming one or both are true, here’s some thoughts on evaluating your options.

Expectations are all over the place in terms of whether rates rise from here, stay about the same, or go down. There are so many variables that, frankly, it’s simplest to just go with what we know today.

We know that rates are high compared to recent history but, according to government-sponsored-entity Freddie Mac, the 30-yr mortgage rate has averaged about 7.5% since the entity was created by Congress and tracking began in the early 1970’s. Rates hit their modern-era highs in 1981 with an average of nearly 17%. And I recall buying our first home in 1999 and borrowing at, coincidentally, the long-term average. Maybe that historical perspective makes today’s rates a little easier to swallow, but probably not by much.

Assuming you’re pushing ahead, an important next step is trying to guesstimate the appraisal value of your home. Sites like Zillow and Redfin are good starting places but focus on recent comparable sales in your area while looking at your “Zestimate”. I suggest being conservative.

Once you’ve looked at current rates and have done some market research on your house, you’ll want to talk with perhaps two different mortgage providers. You can start with your bank or credit union, or even your current lender. I like Rocket Mortgage because their website is straightforward, they’re fast, and they have access to a wide range of loan programs. Then reach out to a local independent mortgage broker for comparison because brokers sometimes have access to more loan programs than a larger lender can.

During these conversations you’re trying to get beyond the hypothetical and understand what you qualify for. This will primarily be based on your house’s value (again, be conservative), your current debt load, your income and, of course, the mortgage person will need to check your credit. Let them because that way you can talk specifics. Just don’t run around all over town having a variety of mortgage companies checking your credit. One or two are fine and won’t impact your credit score much, if at all. At this point you’ll know what your options are, and you’ll have a good idea about costs, both upfront and monthly.

Maybe your financial situation allows for rates and terms that are better than the national average, or it could be the opposite. Either way, pay close attention to the various fees involved with refinancing as some loans can be very expensive. The simplest approach is to evaluate the annual percentage rate, or APR, of a particular loan offer. The APR bakes in lender fees, points, various closing costs, and is usually higher than the interest rate because of this.

For example, Bankrate shows the lowest rate option for a 30yr fixed rate refinance at 5.5% and an APR of 5.74%. How is that possible when average rates are nearly 2% higher? Points. This lender requires you to pay about two percentage points of the loan value as an upfront fee to “buy down” the interest rate. Another lender offers a rate of 5.99% and an APR of 6.174%. Paying points buys this down too and the jump in APR includes additional closing costs of around $6,000. I’m generally against paying points unless you can easily afford it and you plan to own the home for a long time (at least to the breakeven point that your mortgage person can help calculate). So try to look for programs that don’t require points, or maybe a fraction of a point would be okay; just try to keep a lid on costs.

I suggest being skeptical about the lowest APRs because they sometimes aren’t even possible for your situation. The overpromised/underdelivered feeling can be a real pain when it comes to refinancing. In my experience it most often occurs when using overly optimistic assumptions about your home’s appraised value and working with an indulgent (or willfully naive) broker. Again, be conservative and try to understand what value range you need for a given loan program. A good mortgage broker should help here, especially since they often need the loan to close in order to get paid.

Ultimately, deciding to refinance is a tough decision that’s often made simpler by your circumstances. But once you’ve decided, carefully evaluate which loan program is right for you and your family. Look at APRs while reminding yourself that the lowest may not be the best. Think about complexity. I’ve left out discussion of adjustable mortgages and other options because they’re usually not a good idea. Keep your refinance process and all your debts, for that matter, as straightforward and inexpensive as possible.

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A Few Quick Updates

There’s truly never a dull moment, whether in life or in the financial markets. As we look ahead to summer there’s a short but weighty list of issues to follow: the debt ceiling, the banking “crisis”, the Fed, interest rates and recession risk. All this is playing out at the same time and demands our attention.

You’ve likely been wondering about these issues and many of you have been asking, so here are some thoughts pertaining to each.

The debt ceiling debate –

Treasury Secretary Janet Yellen recently said that Congress not raising our government’s borrowing limit would be a “catastrophe". I doubt she used that word lightly. As we’ve discussed previously, our debt ceiling is an arbitrary dollar amount that Congress has for years typically raised or suspended for a time. It’s been this way for over 100 years since the debt limit was created and, at least in modern times, has usually been subject to vigorous and often nerve-racking debate. This makes sense, of course, because all this deals with how much we borrow and that’s a sensitive topic for most people. (Even though the federal government isn’t a household and prudent borrowing standards we teach to our kids don’t necessarily apply, but I digress…)

So, while experts tend to agree that Congress failing to raise the debt limit, leading to missed payments and a technical default by the US Treasury, is not likely to actually happen, the same experts all expect political brinksmanship to take us down to the wire again. This is important as we’re nearing the so-called X Date when current “extraordinary measures to fund the government” dry up because the debt limit needs to be raised, not because we’re actually out of money. Our government can easily borrow more from domestic and global markets at any time.

President Biden and a variety of others are meeting on this later today. Both sides agree that the debt limit should be raised but fundamentally disagree on the means of raising it. That sounds about like a game of chicken where both sides agree they shouldn’t hit each other but neither is willing to veer away. Again, never a dull moment.

But how are the markets likely to respond? Here’s a good piece in this vein from PIMCO, the noted fund manager.

https://www.pimco.com/en-us/insights/viewpoints/debt-ceiling-debate-examining-risks-around-the-x-date/

And here’s a recent press release from the Treasury department regarding this issue. There’s no shortage of cash and access to more, we just lack Congress’s permission to keep the wheels in motion.

https://home.treasury.gov/news/press-releases/jy1460

The banking crisis –

I put the word crisis in quotes earlier because the problem’s depth is a matter of perspective. An interesting take on this comes from Gallup. The polling company recently measured how worried Americans are about the banking sector and the results were about the same as during the Great Financial Crisis, even though we’re not in the midst of that, thank heavens. And the poll was conducted last month before First Republic got swallowed up by JPMorgan!

We’re used to thinking of banks as solid and safe, even boring institutions, so it’s interesting to see how worried we tend to get about them. More educated and affluent Americans are less worried though, as are Democrats. This is flipped around from the GFC and presumably has something to do with who’s in the White House at the time. For example, in 2008, 55% of Democrats were “very or moderately worried” about banks, but as of last month Republicans held that same percentage spot.

Here’s the Gallup article.

https://news.gallup.com/poll/505439/half-worry-money-safety-banks.aspx

Whatever the reasons and political affiliations, people are concerned about how safe their cash is. This is entirely reasonable given all the news and hyperbole about the financial system lately. We’re all now probably well aware of the basics of FDIC and NCUA insurance, so I won’t bore you with that again here, but please ask if you have questions.

Instead, it’s news this week that the banking system has been functioning much better after several weeks of uncertainty. According to my research partners at Bespoke Investment Group, banks are lending to each other again and deposits are on the rise, both for the top 25 banks by assets and smaller banks as well. This is good news after the huge drop in deposits at regional banks in mid- to late-March. Loans are also on the rise, especially at the smaller banks.

That said, I’d be surprised if there wasn’t news in the coming weeks of other smaller banks getting absorbed by their larger brethren. Just be prepared for that news and try to keep your balances within federal insurance limits just in case. It’s the prudent thing to do even though risk is low.

Interest rates and recession risk –

The Fed raised rates again last week by another 0.25%, bringing its benchmark rate to 5.25%. Markets are expecting that this will be the last rate bump for awhile and even that rates could start going down later this year. Why would they go down after going up so much in recent months? Recession.

This might take longer to materialize than some analysts were expecting even weeks ago. Unemployment is incredibly low, and wages are up while slowing consistently from a high point a year ago. Housing remains strong across much of the country and the consumer is still out there buying. Inflation is still high while coming down steadily. But employers are reporting fewer job openings and they seem to be prepping for a slowdown. There’s also an assumption that recent banking issues will put a dent in lending and demand, although that hasn’t shown up clearly in the numbers yet. That’s an example of the mix of economic data coming out lately, but the overall trend seems to be softening.

So that’s where we’re at right now and mixing it all together seems to indicate a banking sector that’s dodged a bullet, and a strong economy losing momentum that, in a perfect world, would only need to dip its toe into a recession. The 800-pound gorilla in the room is the debt ceiling debate and potential default, so let’s hope that cooler heads prevail in those fancy meeting rooms in DC.

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A Deal Reached?

Good morning and I hope you enjoyed Memorial Day. Since the late-1860s it’s been a day to remember those who died defending our great country, and sometimes while defending it from itself. Originally known as Decoration Day, the holiday honored Union soldiers who fought and died during the Civil War. It wasn’t until the early 1970s that Congress adopted Memorial Day in its place and the rest, as they say, is history. See, Congress can get stuff done when it wants to…

Fast forward to this past weekend when it was announced that Congressional leaders and the White House had actually hammered out a debt ceiling deal. That’s great news but much work remains in terms of whipping up votes needed to pass the bill. My understanding is that voting will take place this Wednesday evening so that members of Congress have time to read what they’ll be voting on. So we still have to wait a bit for final resolution to the current debt ceiling issue, but so far all this is good news.

What’s in the bill?

I’m attaching a link below to a Wall Street Journal article that does a good job of summarizing the details. To summarize further, it’s being reported as the debt ceiling deal nobody wants, but that gets the job done by kicking the can down the road until January 2025. Federal spending will be cut a bit for a time, with caps/cuts to military and non-military spending, the IRS’s proposed budget, a claw back of unspent Covid relief money, and other spending reductions. Work requirements were also extended for some federal unemployment benefits, and certain senators got the skids greased for their pet projects.

Here's the link I just mentioned.

https://www.wsj.com/articles/whats-in-the-debt-ceiling-deal-461b9822

There’s been lots of talk of specific X-dates for when the true deadline is for all this, and that date has been moving around a lot depending on the source. The most recent estimate is June 5th, but others suggest it could be later. Whenever it is, Congress should have enough time to get the deal passed and then, presumably, it would be signed promptly by the president, and we can all move on.

Here’s an interesting info-graphic from Barron’s on how a technical default might play out.

https://www.barrons.com/visual-stories/debt-military-pay-medicare-default-ff52b0e3?mod=article_inline

And here’s some information about the X-date taken directly from the Wall Street Journal for the sake of simplicity.

What happens on June 5?

If the so-called X-date arrives and Congress hasn’t raised the debt ceiling, the Treasury will have a series of bills it might not be able to pay.

For example, roughly $1 billion in Medicare payments and $1 billion in payments to military contractors are due on June 5, according to projections from the Bipartisan Policy Center. The government pays billions in bills every day.

Treasury has started working with federal agencies to adapt its payment systems in case it has to start delaying payments. The department hasn’t disclosed its exact plans, but one option it has discussed with other agencies would be to delay payments until the Treasury has enough cash for a full day’s bills.

Yellen had previously warned that the U.S. could run out of cash as soon as June 1. In a letter to lawmakers last week, she said the Treasury would be able to pay the roughly $130 billion due on June 1 and June 2, but she warned the department wouldn’t likely be able to make the roughly $96 billion in payments due the week of June 5.

Would the U.S. be in default?

It depends.

The Treasury won’t have to make any debt payments until June 6, when about $136 billion in securities mature, according to the BPC. Normally, the Treasury would simply roll over those debts by selling new debt. That is a routine process, but if it ran into problems and investors weren’t paid back on time, the U.S. would default on its debt.

A payment on the interest on the debt isn’t due until mid-June. Missing an interest payment would also constitute default. A slug of new tax revenue will also come into the Treasury in mid-June, when quarterly tax payments come due, easing its ability to keep paying bills.

If the U.S. stays current on its debt payments but misses other obligations, it is more complicated. Rating firms such as Fitch Ratings and Moody’s have indicated they would say the U.S. has defaulted if it misses payments on principal or interest on the debt.

Still, Fitch said it could downgrade U.S. debt because of any missed payment even if it hasn’t defaulted on debt.

Yellen has said that even if the U.S. stays current on debt payments, it would be in default if it failed to pay any bills.

“We will default on some obligation, and it’s really not an acceptable state of affairs,” she said last week.

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More on the Debt Ceiling

Another Tuesday and another big meeting about the debt ceiling… President Biden and House Speaker McCarthy are set to meet again today regarding raising the government’s borrowing limit. Both sides seem like those Zax on the Prairie of Prax, foot to foot, face to face, if you’ll pardon my Seussian reference. Life goes on, as they say, and the longer never-budging continues the more dangerous it becomes.

As we’re all painfully aware at this point, not raising the nation’s borrowing limit would likely lead to a host of disruptive issues for the domestic and global economy and would, of course, also make us look ridiculous on the world stage. The bulk of global trade relies on the dollar and the safety and security it implies. That’s not something to mess with.

We discussed this last week, and I don’t want to bludgeon you with negativity or be overly Pollyannish. With all the rhetoric out there, including from government officials, let’s remember that a technical default by the US Treasury is incredibly unlikely. The politicians on both sides are singing to their bases about what is essentially a political issue, and I have to believe that none of them actually wants to bring the financial system to its knees – the fallout would be extreme and many of these politicians are too pragmatic for that, regardless of what they may say to the press.

But don’t just hear it from me. It’s good to have another perspective, this time from the folks at JPMorgan Asset Management.

The gist here is that the best place to hide, or to ride out expected volatility, is in Treasury bonds. Gold and some other commodities can help but are subject to wide price swings and timing them well is extremely difficult. That bonds equal safety might sound strange since those bonds are issued by the government potentially causing all the volatility. But if history is any guide those bonds performed well during the big debt ceiling standoff in 2011 and the financial crisis of ’08 and ’09, for that matter. Performance in 2011 was ironic because the talking heads on TV were suggesting that investors the world over would dump their Treasurys and buy something else, anything other than debt issued by the US. But investors did the opposite. So will that history repeat itself this time around? I hope the current debt limit debate never gets that far but, if it does, time and again investors have shown a willingness to buy government bonds when things get tough in the markets. I’m not suggesting that you put all your money into Treasurys, by the way, just that what you may already hold should act as ballast during potentially rough seas ahead. 

Let me know if you’d like to review your portfolio as it pertains to all this or just talk it through.

Here’s the note I mentioned from JPMorgan...

From the Federal Reserve (Fed) to banking sector weakness, investors already have a long list of risks to consider, to which they can now add heightened concerns around the U.S. debt ceiling. The U.S. reached its debt limit of USD 31.4 trillion on January 19th and has since been relying on funds in the Treasury General Account (TGA) and so-called “extraordinary measures” to fund its obligations. Initial estimates from the Congressional Budget Office (CBO) projected these measures would last until between July and September, but the CBO and Treasury Secretary Janet Yellen now expect the U.S. could run out of funding by early June due to smaller-than-expected April tax receipts.

Still, it is not our base case that the U.S. will default. Lawmakers have raised or suspended the debt ceiling over one hundred times since WWII and under every president since 1959. It is possible that political parties agree to a short-term extension or suspension of the debt ceiling and continue to negotiate over future spending. While budget negotiations may happen given high levels of debt and deficits and rising interest costs, the stakes should not be default.

Some are pondering alternatives to a debt ceiling deal. One option is invoking the 14th Amendment, which states that the validity of U.S. debt shall not be questioned, but that is subject to legal interpretation and could get tied up in the courts. Another option is that debt payments could be prioritized, although it is unclear that operationally the systems and procedures in place are equipped for this. Finally, the Treasury could issue and deposit a trillion-dollar coin at the Fed in exchange for funds in the TGA. This proposal has been largely dismissed by central bankers. Therefore, the path of least resistance is suspending or raising the debt ceiling.

Although default is unprecedented, the best point of comparison for markets is the 2011 debt ceiling standoff and subsequent credit rating downgrade. As highlighted in the chart below, equities faced considerable volatility but, interestingly, Treasury yields fell [meaning bonds prices rose]. Some may have anticipated a rise in Treasury yields as U.S. credit quality was in question, but yields dropped 120 basis points (bps) from one month before the debt ceiling agreement to one month following the debt downgrade. Part of this could have been anticipation of a recession as a result of the turmoil; it could also be attributed to safe haven flows. It should be noted that the flight to safety was likely amplified by the coinciding sovereign debt crisis in Europe. Importantly, there are no cross defaults of Treasuries, so even if there were a default, only the Treasuries that mature when the government runs out of money would default. This is why many money market funds have avoided T-bills that mature around the X-date to manage risk.

Traditional safe havens like gold and the U.S. dollar also protected during the 2011 episode. Gold surged 10.8% in the month leading up to the agreement, topping out three weeks later, up another 15%. The dollar lurched 1.4% in the week leading up to the debt ceiling agreement but mostly reversed in the two weeks following the subsequent credit downgrade.

While some investors may choose to hedge debt ceiling risks through the U.S. dollar and gold, high quality core bonds may protect if volatility picks up. If volatility fails to materialize, core fixed income should still be well supported by slowing economic growth and inflation, which are likely to weigh on bond yields in the coming months. 

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Dining in the Dark

Good morning and I hope your day is going well so far. I’m at a conference as I write so this week’s post will be brief. This is the first in-person conference I’ve been to in a few years for obvious reasons and it’s good to be back at it again.

This time it’s the Financial Planning Association Retreat and I hope to bring you some notes from my time here in the weeks ahead.

One tidbit was the opening session last night, Dining in the Dark. Attendees were led to dinner in groups of ten standing in a tight line, with one hand on the shoulder in front of you, because we were blindfolded! I had no idea we’d be doing something like this. I thought the name implied dining by candlelight, or some other “dark” culinary experience, whatever that might be. Instead, it was three courses over what had to have been at least 45 minutes in utter darkness. Apparently about 20% of the room had to remove their blindfolds for various reasons, while your humble financial planner was able to stick it out. I think I cleaned my plates, but I know I didn’t spill anything into my lap, so that’s good.

All this was a prelude to the opening keynote talk about perseverance, optimism, gratitude, and kindness, presented by a blind person. I’ve been to a bunch of these talks over the years and the speaker’s bios are meant to impress, but this speaker was one of the most impressive people I’ve heard by far. Corporate executives ascending high peaks a world away takes planning and fortitude and is certainly an impressive feat. But losing your site as a young adult and then intentionally planning and executing a fruitful life in the decades since has the weekend warrior climbers beat, hands down. Frankly, most of us have no idea what true adversity is and we’re lucky for it. It’s good to be reminded of that from time to time, and to add some more blocks to our gratitude foundation. It’s also good to be reminded of all that is possible if/when we get out of our own way.

Otherwise, I wanted to share a few notes on recent events in the banking sector. As you’re likely aware, this past weekend saw another shotgun banking marriage, except this time it was brokered by the FDIC between JPMorgan and First Republic Bank. JPMorgan, the largest bank in the country (by deposits) was allowed to get bigger by acquiring the deposits and most of the assets of First Republic, the SF-based institution that catered primarily to well off and entrepreneurial clients. I say allowed because JPMorgan’s too-big-too-fail size had technically precluded it from buying another bank, but the bank received special permission to do this deal. Frankly, the mega bank seems to be making out like a bandit here, but that’s just my opinion.

So what does this mean for First Republic depositors? This is a fast-moving situation, but JPMorgan says that all First Republic branches are open for business, the website still works, and current terms of deposits and loans should remain that way for at least a while. JPMorgan executives were understandably nonspecific about many details when speaking to the press yesterday, but this seems like pretty decent news overall for First Republic customers. (I think common stockholders get nothing, by the way.) The alternative was a full takeover and liquidation by the FDIC, which creates a lot of headaches for regular people trying to access their cash.

I mention all this because of what a non-event this seemed to be for the markets and the banking sector as a whole. (That was yesterday - markets are down a bit as I write this morning.) There are other banks with problems like First Republic but, at least at this point, none of them seem poised to tank the financial system or otherwise cause a ton of market volatility as they work through it. This is a good sign for the rest of us in that the banking sector has been able to absorb these issues without creating contagion like during the Great Financial Crisis. Let’s all be grateful for that!

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