FRC Falls 26% Day-After 11 Banks’ Rescue Plan of $30 Billion

The George Washington University School of Law professor emeritus pointed out that the market may interpret that this $30 billion in new deposits may have prevented depositors from leaving, but it has not added any new equity capital to the bank, and the risk for shareholders is still very high. "" Wedbush believes that there is an 85% probability that the bank will be taken over and the stock price will be zero, and 15% probability that the bank will recover, but because large loss of asset, it will only be worth $35.

Investor Bill Ackman said that this move to save FRC has brought a more serious danger. Banks bailed out FRC has spreading the risk of FRC to the largest bank in the U.S.

Washington Post pointed out that panic still exists, because everyone does not know which bank will collapse and whether the government will protect it.

Back in the 2008, the government rescued Bear Stearns, but not Lehman, and it was precisely because of underestimating the impact of Lehman that the subsequent collapse occurred. It does not mean another Lehman would happen again but uncertainty about government policy is creating risk for the market. U.S. Treasury Secretary Yellen said in Congress Thursday that not all deposits exceeding $250,000 will be protected.

It is quite obvious that the central bank and the government's backstop have not completely dispelled the concerns of the public, and deposits outflows are still happening. The risk of bank run has not been eliminated. In the short term, this will still bring risks to bank stocks. But in the long run, I think the situation should gradually improve. When the public gradually realizes that the problem is not that serious, the problem of deposit outflow may be gradually resolved.