First Republic is technically insolvent, similarly to SVB. The Bank Term Fund Program (BTFP), provides liquidity at the par value of underwater T-Bonds and Mortgage Backed Securities. This liquidity would allow First Republic to cover any immediate outflows of depositors. However, if there is a protracted run on First Republics deposits then it will be unable to make enough to pay back the borrowed funds from the BTFP and will go into default. Equity markets are a forward looking indicator, and its clear that First Republics balance sheet is under serious duress, and it's unclear how they return to profitability. The bottom line is that even with the BTFP and JPM liquidity offer, if there is a bank run at First Republic, they will go under.
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The problem is that First Republic has $24 billion of off-balance sheet fair value losses, but only $4 billion of that is in securities eligible for the BTFP. $20 billion of losses is in its internal loans book. Even assuming the entire securities hole was patched, the loans losses alone makes First Republic insolvent.
Precisely. First Republic is an extremely weak financial position. Given the aggressive nature of the FDIC, in seizing Signature, I would be very surprised if they aren't forced to take action here. The stock should be worth zero, and bankruptcy declared soon.
FDIC did not seize Signature.
Any bank would go under when run.