First Republic’s issues were evident since its 1Q earnings call revealed a catastrophic level of deposit flight. JP Morgan’s purchase of the bank now raises questions about a conflict of interest.

“Why would JP Morgan or any bank want to bail out First Republic when they can get it out of receivership with loss sharing and sweetheart financing as the alternative?” asks Josh Steiner in this clip from The Call @ Hedgeye. “This creates powerful disincentives for pre-receivership bailout.”

First Republic may or may not be the final bank felled by liquidity issues, but Steiner expects many more to be affected during the credit phase of the banking crisis.

“The credit phase is a slower burn,” Steiner adds. “That's the thing about liquidity – it's acute, whereas credit is chronic. It goes slowly but it feeds on itself.”

Watch the full clip above.

Steiner: Chronic Credit Problems Loom for Banks - Call Banner