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NEW YORK –
Eleven of the largest US banks on Thursday announced a US$ 30 billion rescue package for First Republic Bank in an effort to prevent it from becoming the third to fail in less than a week and leave the housing crisis. a great savings.
San Francisco-based National Bank primarily serves such clients as Silicon Valley Bank, which collapsed last week after depositors withdrew about $40 billion in a matter of hours. New York Signature Bank is closed on Sunday. It appears that the first Republic, which has deposits totaling US $ 176.4 as of December. 31, is facing the same issues.
The group of banks behind the rescue package confirmed that other unnamed banks had seen large withdrawals of uninsured deposits. The Federal Deposit Insurance Corporation guarantees deposits of US$250,000 for individual accounts.
Republic shares fell more than 60 percent on Monday, even after the bank said it had secured additional funding from JPMorgan and the Federal Reserve.
The bailout brought back memories of the 2008 financial crisis, when banks collectively came to the aid of weak banks in the early days of the crisis. Banks then bought themselves quick deals to keep the crisis from spreading further.
US $ 30 billion in unsecured deposits is seen as a vote of confidence in the First Republic, whose banking rights before last week have always been the envy of the industry. The bank caters to wealthy clients, many of whom are billionaires, and offers them various financial terms. The Wall Street Journal reported that Facebook founder Mark Zuckerberg was invested by First Republic.
First Republic shares were down as much as 36 per cent early on Thursday, but rallied after reports a rescue package was in the works. The stock closed up 10 percent.
As part of the aid package, JPMorgan Chase, Bank of America, Citigroup and Wells Fargo have agreed to each put US$5 billion in uninsured deposits into the First Republic. Morgan Stanley and Goldman Sachs will put US$2.5 billion each into the bank. The remaining US$5 billion will include US$1 billion contributions from BNY Mellon, Street Street, PNC Bank, Truist and US Bank.
“The actions of America’s largest banks demonstrate their confidence in the nation’s banking system,” the banks said in a statement.
Even banks came to the rescue of one of their competitors, while Silicon Valley Bank failed because the closest and most loyal customers – venture capitalists and startups – fled the bank at the first sign of trouble.
“We’re putting our financial power and our liquidity into the big system, where it’s needed the most,” the banks said.
The country’s banking regulator also issued a statement praising the rescue package.
“This show of support by a group of big banks is most welcome, and it shows the resilience of the banking system,” Treasury Secretary Janet Yellen, Financial Conduct Authority Michael Hsu, Federal Reserve Chairman Jerome Powell and FDIC Chairman Martin Gruenberg said in a joint statement.
The US$30 billion bet on First Republic is seen as a hedge against future bank runs. The shares of several central banks were hit hard this week as investors feared that investors would withdraw their money and rush to the country’s big banks.
Over the weekend, the federal government, determined to restore public confidence in the banking system, moved to protect all bank deposits, especially those exceeding the FDIC limit of US$250,000 per account. While the banking crisis began with Silicon Valley Bank, regulators told reporters earlier this week that it became necessary for the government to stop the banking system because it appeared that more runs were possible.