In recent days, the collapse of Silicon Valley Bank, Signature Bank, and First Republic Bank has caused many to question the strength of America’s banking system. In response, America’s largest banks have come together to inject $30 billion in uninsured deposits into First Republic Bank. Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, BNY Mellon, PNC Bank, State Street, Truist, and U.S. Bank each contributed to this effort in order to bolster confidence in the banking system and support their customers and communities.
Despite this injection of funds, fears over the health of First Republic and Credit Suisse remain.[0] First Republic shares tumbled more than 20% on Friday and Credit Suisse shares also sold off sharply on the week.[0] The stock has declined 72% so far this year.[1]
Billionaire investor Bill Ackman took to Twitter to express his criticism of the plan, saying it created a “false sense of confidence” in First Republic.[1] He suggested that a temporary systemwide deposit guarantee should be implemented until an expanded government insurance scheme is widely available.[2]
The University of Michigan’s consumer sentiment index also fell to 63.4 in March, from 67 the previous month, as inflation expectations remain elevated.[3] Today, the U.S. will release economic data, beginning at 9:15 a.m. with February industrial production and capacity utilization. At 10 a.m., the February leading economic indicators index and March consumer sentiment report will be published.[2]
In conclusion, America’s largest banks have come together to inject $30 billion in uninsured deposits into First Republic Bank in order to bolster confidence in the banking system and support their customers and communities. Despite this, fears over the health of First Republic and Credit Suisse remain, and Bill Ackman has called for a temporary systemwide deposit guarantee until an expanded government insurance scheme is widely available.[4] Meanwhile, consumer sentiment remains low as inflation expectations remain elevated.
0. “S&P 500 rides the ups and downs of regional bank failures” Detroit Free Press, 18 Mar. 2023, https://www.freep.com/story/money/business/2023/03/18/sp-500-rides-the-ups-and-downs-of-regional-bank-failures/70011193007/
1. “Ackman says plan to deposit $30B into First Republic is bad policy” Business Insider, 17 Mar. 2023, https://www.businessinsider.com/bill-ackman-first-republic-deposit-plan-false-confidence-bad-policy-2023-3
2. “‘We need to stop this now.’ First Republic support is spreading financial contagion, says Ackman.” MarketWatch, 18 Mar. 2023, https://www.marketwatch.com/story/we-need-to-stop-this-now-frb-support-is-spreading-financial-contagion-says-ackman-37f174c2
3. “Markets Dip, Signaling Pause In Rally As Focus Shifts To Next Week’s Fed Decision: Analyst Says Brace For” Benzinga, 17 Mar. 2023, https://www.benzinga.com/news/earnings/23/03/31394507/nasdaq-s-p-futures-dip-signaling-pause-in-rally-as-focus-shifts-to-next-weeks-fed-decision-analyst–
4. “Billionaire Ackman ‘Extremely Concerned’ $30 Billion Bank Rescue Plan Risks Financial Contagion Spiraling Out Of Control” Forbes, 17 Mar. 2023, https://www.forbes.com/sites/dereksaul/2023/03/17/billionaire-ackman-extremely-concerned-30-billion-bank-rescue-plan-risks-financial-contagion-spiraling-out-of-control