by John Hugh DeMastri
The U.S. government is considering backing a potential deal to rescue the struggling First Republic Bank, in a bid by U.S. officials and Wall Street executives to head off the chance of a third major bank failure, Bloomberg reported, citing people with knowledge of the discussions.
Wall Street investors have expressed an interest in helping stabilize the struggling San Francisco-based bank, which has been selling assets — which lost value amid the Federal Reserve’s aggressive campaign of interest rate hikes designed to combat inflation — to pay out a surge in customers pulling their funds from the bank, according to Bloomberg. While the extent of government aid has not yet been decided, the government could cover the cost of First Republic’s losses or offer liability protection to companies involved in a deal.
The bank, which is popular with wealthy tech executives, has seen its stock price fall 89% this year and its aggressive losses have caused investors to balk at rescuing the bank without government assistance, Bloomberg reported.
The possibility of government assistance comes weeks after the Federal Deposit Insurance Corporation (FDIC) took over both Silicon Valley Bank and Signature Bank and guaranteed the deposits of all clients, even those over the statutory limit of $250,000, citing the possibility of a “systemic risk” to U.S. banking. The pair of banks collapsed under similar circumstances to those First Republic currently faces, becoming the second and third largest bank failures in U.S. history, according to the Associated Press.
Sweden's biggest pension fund, Alecta, sold all of its shares in struggling US lender First Republic Bank at a loss of 7.5 billion kronor ($728 million), per Bloomberg.
— unusual_whales (@unusual_whales) March 21, 2023
First Republic’s customers had pulled out roughly $70 billion since Silicon Valley Bank collapsed on March 10, prompting a coalition of 11 major banks — including JPMorgan Chase, Citi, Bank of America, Wells Fargo, Morgan Stanley and Goldman Sachs — to deposit $30 billion with the struggling lender, according to The Wall Street Journal. CEO Jamie Dimon of JPMorgan Chase is reportedly leading efforts by larger institutions to shore up First Republic, and is working closely with U.S. government officials on the matter, the WSJ reported separately, citing people familiar with the discussions.
JPMorgan investors have reportedly been hired to advise First Republic, and federal regulators and Wall Street executives have considered the possibility of buying out the bank, the WSJ reported.
The FDIC and First Republic Bank did not immediately respond to a Daily Caller News Foundation request for comment.
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John Hugh DeMastri is a reporter at Daily Caller News Foundation.
Photo “First Republic Bank” by Can Pac Swire. CC BY-NC 2.0.