The Easy-Money Lesson of First Republic Bank

Charles Kindleberger’s classic “Manias, Panics, and Crashes” describes the temptation of too-easy credit through the ages. If the historian were alive today, he might feature First Republic Bank , whose troubled business model is a case study in the bad incentives of easy money.

First Republic’s stock sank another 49.3% Tuesday after it reported an outflow of some $100 billion in deposits during the March bank panic. The San Francisco-based bank’s wealthy clients rushed to withdraw their money after learning the bank was sitting on unrealized losses twice as large as its capital cushion.