U.S. Government Orchestrates Joint Rescue of First Republic Bank

First Republic Bank, a regional lender based in California, is facing immense pressure after its credit rating was downgraded to junk status by S&P Global and Fitch Ratings due to concerns that depositors could pull funds from the lender. On Sunday, First Republic secured additional liquidity from the Federal Reserve Bank and JPMorgan Chase & Co., bringing its total available, unused liquidity to fund operations to more than $70 billion.[0]

Yet, the bank’s stock plummeted another 20% on Thursday to $20.65 per share, a fresh decade low, and is down more than 60% over the past week.[1] To make matters worse, First Republic is also exploring various options, including a possible sale, according to Bloomberg.[2]

In an effort to stabilize the market, the U.S. government has orchestrated a joint rescue of First Republic Bank, which includes JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp., Wells Fargo & Co., Morgan Stanley, U.S. Bancorp, Truist Financial Corp. and PNC Financial Services Group Inc. The group of financials institutions are in talks to deposit $20 – $30 billion in First Republic and attempt to save the company, build confidence, and keep the deposit base solid.[3]

Treasury Secretary Janet Yellen assured Congress that the banking system remains strong during testimony Thursday, saying “I can reassure the members of the committee that our banking system is sound, and that Americans can feel confident that their deposits will be there when they need them. This week’s actions demonstrate our resolute commitment to ensure that depositors’ savings remain safe. Importantly, no taxpayer money is being used or put at risk with this action.”[0]

The U.S. banking system is being tested by the Silicon Valley Bank (SVB) crisis, and First Republic Bank’s uninsured deposits are at risk due to the $250,000 FDIC limit.[4] Credit Suisse shares jumped Thursday after the bank said it would tap a loan from the Swiss National Bank, but there is still a lot of ground to catch up on after investor confidence in the bank crumbled this week.[5]

Those who rely on private equity and venture capital may be most susceptible due to their reliance on single banks to do many of their daily transactions.[6]

0. “What’s happening with First Republic Bank after SVB collapsed” Quartz, 16 Mar. 2023, https://qz.com/first-republic-bank-shares-svb-signature-bank-collapse-1850231778

1. “First Republic Bank reportedly exploring potential sale after credit downgrade” Fox Business, 16 Mar. 2023, https://www.foxbusiness.com/economy/first-republic-bank-reportedly-exploring-potential-sale-credit-downgrade

2. “Bank Crisis: Yellen Speaks To Senate As Big Banks Discuss First Republic Bank Aid” Investor’s Business Daily, 16 Mar. 2023, https://www.investors.com/news/bank-crisis-yellen-speaks-to-senate-first-republic-bank-ponders-sale

3. “A group of banks are in talks to deposit more than $20 billion in First Republic, sources say” CNBC, 16 Mar. 2023, https://www.cnbc.com/2023/03/16/group-of-financial-institutions-in-talks-to-deposit-about-20-billion-in-first-republic-sources-say.html

4. “First Republic Stock Crashes To All-Time Low: What To Know About The Latest Bank On The Brink” Forbes, 16 Mar. 2023, https://www.forbes.com/sites/dereksaul/2023/03/16/first-republic-stock-crashes-to-all-time-low-what-to-know-about-the-latest-bank-on-the-brink/

5. “Stock Market Today: Dow Rises 300 Points; Credit Suisse Breaks Losing Streak” The Wall Street Journal, 16 Mar. 2023, https://www.wsj.com/livecoverage/stock-market-news-today-03-16-2023

6. “Moody’s Flags 6 Additional Banks in Silicon Valley Bank Aftermath” CFO.com, 15 Mar. 2023, https://www.cfo.com/credit-capital/2023/03/moodys-silicon-valley-bank-bank-term-funding-program-federal-reserve