First Republic Bank will be getting a $30 billion rescue package from other major banks, after two other major banks failed this week.
First Republic Bank is based in San Francisco, and serves mostly venture capital-backed companies and tech startups. Before this week, it had deposits totaling over $175 billion. But like many other similar banks, it has recently seen a major run of withdrawals. Compounding the problem, many of those deposits are over $250,000, meaning they’re uninsured by the FDIC.
On Monday, Republic’s public shares dropped more than 60%, a heavy indicator of something seriously wrong. Under similar circumstances, Silicon Valley Bank and Signature Bank both shuttered this week, buckling under floods of withdrawals. Other midsize banks all over the country saw dips in their share prices as investors feared depositors would run to larger banks.
To keep First Republic Bank from going the same way, eleven other major banks have assembled a substantial bailout package. $30 billion in unsecured deposits will shore the bank up against further runs on the bank.
JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo are each putting in $5 billion, and a half-dozen smaller institutions put up $1 billion each.
“The actions of America’s largest banks reflect their confidence in the country’s banking system,” the banks said in a statement.
Hoping to restore public confidence in the banks, the federal government made a move also – they are taking measures to protect all bank deposits, even above the FDIC’s $250,000 limit per account. The change indicates federal fears of more bank runs, and a repeat of the 2008 financial crisis.
“This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” Treasury Secretary Janet Yellen, Acting Comptroller of the Currency Michael Hsu, Federal Reserve Chair Jerome Powell and FDIC Chairman Martin Gruenberg said in a joint statement.
Photo: Below the Sky / Shutterstock
