I see no reason why FRC couldn't have just gone on...shown a quarterly loss from time to time, lose and/or gain depositors, shrink or grow...
its as if it was "decided" that this bank will be sold off for literally 1 penny on the dollar
when the crisis deepens, The Fed will lower rates and all of FRCs bonds will be in the green again...and JPM got them for free
The fed and regulators have to provide their current receivership terms (depositors will be made whole) to prevent banks runs and a liquidity collapse. Without these terms FRB would have collapsed long ago, as would have many other regional banks in the panic that would ensue as everybody takes their money to a TBTF bank.
The fed can only let you use those terms when you’ve failed, because otherwise they’d be massive money printers and accelerate inflation greatly (for the part that’s not funded by existing insurance terms, or bank fees, which btw are gonna have to go up each time this happens). And the Fed can’t let banks like FRC continue to operate after receivership because it’s essentially bailing out shareholders and execs with public money.
If, then when.
This is the gamble. With JPM getting them for free, the bonds pay out on a long enough time horizon OR if the federal reserve slows or changes direction.