$30 billion rescue of First Republic Bank announced by major banks
Jack Birle
Video Embed
A group of banks announced a $30 billion rescue of First Republic Bank on Thursday afternoon as part of efforts to stabilize the market.
The rescue includes uninsured deposits ranging from $1 billion to $5 billion from 11 different banks, the institutions confirmed in a joint statement.
FIRST REPUBLIC BANK IN TALKS WITH MAJOR BANKS FOR RESCUE: REPORT
The banks working to stabilize First Republic Bank include Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, BNY Mellon, PNC Bank, State Street, Truist Bank, and U.S. Bank.
“Bank of America, Citigroup, JPMorgan Chase and Wells Fargo announced today they are each making a $5 billion uninsured deposit into First Republic Bank. Goldman Sachs and Morgan Stanley are each making an uninsured deposit of $2.5 billion, and BNY Mellon, PNC Bank, State Street, Truist and U.S. Bank are each making an uninsured deposit of $1 billion,” the banks announced.
“The actions of America’s largest banks reflect their confidence in the country’s banking system. Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most. Smaller- and medium-sized banks support their local customers and businesses, create millions of jobs and help uplift communities. America’s larger banks stand united with all banks to support our economy and all of those around us,” the joint statement continued.
First Republic Bank executives expressed their gratitude for the support from the larger banks. Jim Herbert, founder and executive chairman of the bank, and Mike Roffler, president and CEO of the bank, said in a joint statement that the support was a “vote of confidence” from the banking world.
“We would like to share our deep appreciation for Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, PNC Bank, State Street, Truist, and U.S. Bank. Their collective support strengthens our liquidity position, reflects the ongoing quality of our business, and is a vote of confidence for First Republic and the entire U.S. banking system. In addition, we want to share our sincerest thanks to our colleagues, clients, and communities for their continued and overwhelming support during this period,” the statement said.
The bank also announced that it had suspended its common stock dividend and is “focused on reducing its borrowings and evaluating the composition and size of its balance sheet going forward.” First Republic Bank also announced that the number of daily deposit outflows had slowed “considerably.”
Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell, Federal Deposit Insurance Corporation Chairman Martin J. Gruenberg, and acting Comptroller of the Currency Michael J. Hsu welcomed the news from the banks in a joint statement.
“Today, 11 banks announced $30 billion in deposits into First Republic Bank. This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” the joint statement said.
A Bloomberg report from earlier Thursday suggested the rescue was being coordinated by the federal government after the regional bank saw nearly 71% of its value evaporate this week.
The Biden administration has maintained throughout the week that “the banking system is safe,” with Treasury Secretary Janet Yellen testifying before the Senate Banking Committee that the banking system “remains sound and that Americans can feel confident that their deposits will be there when they need them.”
Earlier reports of the planned rescue caused First Republic Bank’s stock to shoot up after it had been decreasing in value all week. The bank’s stock appears to have leveled as reaction to the reports cool but has remained above Wednesday’s market close. Trading for the stock on Thursday began with an immediate 35% crash after a continued bleed of value throughout the week.
First Republic Bank had attempted to quell concerns on Sunday by announcing it had “diversified its financial position through access to additional liquidity from the Federal Reserve Bank and JPMorgan Chase & Co,” along with saying it had $70 billion in unused liquidity. The Sunday announcement came the same day Signature Bank was seized by regulators and days after Silicon Valley Bank failed.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
Market uncertainty in the aftermath of the collapse of Silicon Valley Bank has caused panic at regional banks, including First Republic Bank, and other financial institutions, such as Swiss lender Credit Suisse.
Credit Suisse also saw its shares collapse amid concerns over its liquidity, with its stock value tanking after its largest lender, the Saudi National Bank, said on Wednesday it would not give the bank any more assistance. On Thursday, Credit Suisse announced it would be receiving $53.7 billion from the Swiss National Bank. The bank confirmed the additional capital caused shares of Credit Suisse to rebound after two days of decline.