Because They Can Get Rich Before the Bottom Drops Out

Why would a bank executive look at the implosion of First Republic and think, "I gotta get me some of that?"

Because banking executives are motivated by political gain, and setting up an under-capitalized section catering to wealthy clients will make them lots of money, and when the music stops, they will have already purchased their own private musical chairs:

Regional lender Citizens Financial Group opened a new private bank for wealthy customers last month. Its inspiration: First Republic Bank, which collapsed earlier this year in the second-largest bank failure in history.

Citizens, based in Providence, R.I., is spending tens of millions of dollars hiring former First Republic staffers. It hopes the strategy will help it crack a market it has long coveted. Executives say they plan to copy only the good parts of First Republic, such as its beloved customer service. “We scooped up the very best talent,” Citizens consumer banking head Brendan Coughlin said. “Our goal is going to be to build the pre-eminent private bank in the United States for high-net-worth individuals.”

Banks are in an arms race for rich customers, and lots of other, bigger players have a head start. Snagging such customers can lead to a bounty of fees, loans and deposits, something that particularly appeals to regional banks such as Citizens eager to prove their viability after First Republic and two other peers failed this year.

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First Republic attracted wealthy customers by offering them a bureaucracy-free banking experience and extremely low rates on loans such as big mortgages. (Mark Zuckerberg once got one at a starting rate of 1.05%.) It seemed like a winning approach: The San Francisco-based bank became one of the 15 largest in the U.S.

But the business didn’t hold up when the Federal Reserve started raising interest rates, prompting rich customers to move their deposits out of no-interest accounts. The bank’s profits also started to get squeezed by its low-rate loans. A March run on peer Silicon Valley Bank prompted panicked First Republic customers to pull about $100 billion in deposits, mortally wounding the lender.

There is nothing to worry about here though:

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There are some parts of First Republic that Citizens plans to leave in the past, such as 1% mortgages in a higher-rate world. The bank is, however, considering bringing back the fresh-baked chocolate-chip cookies and high-end umbrellas that First Republic was known for.  

Yeah, umbrellas and cookies.  That's what makes a bank work.

Citizens has hired about 60 top First Republic bankers and about 100 support staffers. The bankers were largely in roles where they were the main point of contact for customers. Customers would call them up if they needed yen delivered before a trip to Japan or a bespoke mortgage for a new vacation home. These staffers were largely paid based off the business they generated and could earn seven figures in a good year.

So these pople were incentivized to do risky shit, and then the maniacs blew it all up, but Citizens will do just fine, because ………

It will be different this time.

It won't be different this time, it's never different.

Until the banksters are subject to personal jeopardy, it will stay the same, because they make out like raped apes even as the taxpayers take it on the chin.