Natalia Chi
NEW YORK — The 11 largest U.S. banks announced Thursday a $30 billion rescue package to prevent First Republic Bank from becoming the third bankruptcy in less than a week and averting a wider banking crisis.
Based in San Francisco, First Republic Silicon Valley Bank, failed last week after depositors withdrew about $40 billion in a matter of hours.New York’s signature bank Closed on Sunday. First, his Republic, which had a total of $176.4 billion in deposits as of Dec. 31, appears to have faced similar problems.
The banking group behind the relief package has confirmed that other unnamed banks have seen massive withdrawals of uninsured deposits. Federal Deposit Insurance Corporation insures deposits $250,000 increase in individual accounts.
Republic shares fell more than 60% on Monday, even after the bank said it had secured additional funding from JP Morgan and the Federal Reserve.
This relief package brought back memories of the 2008 financial crisis. In the early days of the crisis, banks collectively helped weakened banks. Banks then rushed to make deals to prevent the crisis from spreading further.
The $30 billion uninsured deposit is considered a vote of confidence in First Republic. First Republic’s banking franchise was the envy of the industry until last week. The bank catered to wealthy clients, many of them millionaires, and offered generous financial terms. The Wall Street Journal reported that Facebook founder Mark Zuckerberg got a mortgage through the First Republic.
First Republic shares, which were down 36% on Thursday, rose after reports a bailout package was underway. The stock price he closed 10% higher.
As part of the aid package, JPMorgan Chase, Bank of America, Citigroup and Wells Fargo each agreed to deposit $5 billion in uninsured deposits with First Republic. Morgan Stanley and Goldman Sachs each deposit $2.5 billion in banks. The rest of his $5 billion will consist of his $1 billion donations from BNY Mellon, State Street, PNC Bank, Truist, and US Bank.
“America’s largest bank’s actions reflect confidence in the nation’s banking system,” the bank said in a statement.
Notably, while the bank rescued one of its competitors, Silicon Valley Bank failed because its closest and most loyal customers, venture capitalists and start-ups, were at the first sign of trouble. Because he ran away from the bank.
“We are deploying our financial strength and liquidity to the larger systems where it is most needed,” the bank said.
The country’s banking regulator also issued a statement praising the relief package.
Treasury Secretary Janet Yellen, Acting Comptroller of the Currency Michael Hsu, Federal Reserve Board member Jerome Powell and FDIC Chairman Martin Gruenberg said: It shows the resilience of the Joint statement.
A $30 billion bet on First Republic is seen as a bulwark against future bank runs. Shares of many mid-sized banks took a big hit this week as investors feared depositors would withdraw their cash and run to the country’s biggest banks.
over the weekend, federal governmentdetermined to restore public confidence The banking system now protects all bank deposits, including those above the FDIC’s $250,000 limit per individual account. The banking crisis started with Silicon Valley banks, but regulators told reporters earlier this week that more could be done, making it necessary for the government to boost the banking system. .
