Biggest banks — such as JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — agree to prevent First Republic from collapsing and becoming the third American bank to fail in less than a week.
Eleven of the biggest banks in the United States have announced a $30 billion rescue package for First Republic Bank, in an effort to prevent the California-based bank from becoming the third bank to fail in less than a week.
In a statement on Thursday, the group of banks confirmed that other unnamed banks had seen large amounts of withdrawals of uninsured deposits, which are those that exceed the $250,000 level insured by the Federal Deposit Insurance Corporation.
First Republic's shares dropped more than 60 percent on Monday, even after the bank said it had secured additional funding from JPMorgan and the Federal Reserve.
On Thursday, the bank’s shares were down as much as 36 percent, but rallied after reports the rescue package was in the works, and closed up nearly 9 percent.
JPMorgan Chase, Bank of America, Citigroup and Wells Fargo have agreed to each put $5 billion in uninsured deposits into First Republic.
Meanwhile, Morgan Stanley and Goldman Sachs would deposit $2.5 billion each into the bank.
The remaining $5 billion would consist of $1 billion contributions from BNY Mellon, State Street, PNC Bank, Truist and US Bank.
"The actions of America's largest banks reflect their confidence in the country's banking system," the banks said in their statement.
The nation's banking regulators also issued a statement in support of the bank rescue package.
"This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system," said Treasury Secretary Janet Yellen, Acting Comptroller of the Currency Michael Hsu, Federal Reserve Chair Jerome Powell and FDIC Chairman Martin Gruenberg.
The rescue effort was initiated by banks but had strong backing and encouragement from the government, according to a person with knowledge of the matter.
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The idea of getting a group of lenders to prop up First Republic Bank was born on Tuesday, a source familiar with that discussion tells me.— David Gura (@davidgura) March 16, 2023
Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell discussed it with J.P. Morgan Chase's Jamie Dimon and others then.
Shadows of 2008
First Republic serves a similar clientele as Silicon Valley Bank, which failed on Friday after depositors withdrew about $40 billion.
Founded in 1985, First Republic, which was facing a similar crisis to SVB, had $212 billion in assets and $176.4 billion in deposits as of the end of last year, according to its annual report.
The news could help calm the nerves of bank investors after the collapse last week of Silicon Valley Bank, which was the second biggest bank failure in US history after the demise of Washington Mutual in 2008.
The shuttering of Silicon Valley Bank on Friday and of New York-based Signature Bank two days later has revived bad memories of the financial crisis that plunged the United States into the Great Recession of 2007-2009.
Over the weekend the federal government, determined to restore public confidence in the banking system, moved to protect all the banks' deposits, even those that exceeded the FDIC's $250,000 limit per individual account.
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