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Major banks are creating a $30 billion bailout package for First Republic


NEW YORK (AP) — Eleven of the country’s largest banks announced a $30 billion rescue package Thursday for First Republic Bank, in a bid to prevent the California-based bank from becoming the third bank to fail in less than a week. go.

First Republic serves a similar clientele to Silicon Valley Bank, which filed for bankruptcy Friday after depositors withdraw about $40 billion. It appears that First Republic, which had a total of $176.4 billion in deposits as of December 31, was facing a similar crisis.

In a statement, the group of banks confirmed that other unnamed banks had taken large amounts of uninsured deposits, namely those amounts exceeding the $250,000 level insured by the Federal Deposit Insurance Corporation. Shares of First Republic fell more than 60% on Monday even after the bank said it secured additional funding from JPMorgan and the Federal Reserve.

Shares of the bank fell as much as 36% on Thursday, but rallied on reports that the bailout package was in the works, closing nearly 9%.

JPMorgan Chase, Bank of America, Citigroup and Wells Fargo have agreed to each place $5 billion in uninsured deposits in First Republic. Meanwhile, Morgan Stanley and Goldman Sachs would each deposit $2.5 billion in the bank. The remaining $5 billion would be $1 billion in contributions from BNY Mellon, State Street, PNC Bank, Truit and US Bank.

“The actions of America’s largest banks reflect their confidence in the nation’s banking system,” the banks said in their statement.

The country’s banking regulators also issued a statement in support of the bank bailout package.

“This show of support from a group of big banks is very welcome and demonstrates the resilience of the banking system,” said Treasury Secretary Janet Yellen, Acting Controller of the Currency Michael Hsu, Federal Reserve Chair Jerome Powell and FDIC Chair Martin Gruenberg.

The news could help calm bank investors’ nerves following last week’s collapse of Silicon Valley Bank, the second-biggest bank failure in U.S. history following the demise of Washington Mutual in 2008.

The closure of Silicon Valley Bank Friday and of New York-based Signature Bank two days later has rekindled bad memories of the financial crisis that plunged the United States into the Great Recession of 2007-2009.

On the weekend the federal governmentdetermined to restore public confidence in the banking system, moved to protect all of the banks’ deposits, even those that exceeded the FDIC’s $250,000 limit per individual account.

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.