$30 billion rescue of First Republic Bank
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Inside the $30 billion rescue of First Republic Bank
An 11-bank plan to save First Republic began with a brainstorming session between JPM CEO Jamie Dimon, Fed chair Jerome Powell and Treasury secretary Janet Yellen
invest a total of $30 billion
The $30 billion rescue of First Republic Bank began with a series of phone calls Tuesday between JPMorgan Chase CEO Jamie Dimon, Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen.
Dimon was in Washington, according to a person familiar with the events, and he wanted to discuss some issues that concerned bank capital. The subject soon turned to the fate of the nation's 14th-largest bank.
Shares in the San Francisco lender had been sliding since last week's failure of Santa Clara-based Silicon Valley Bank, and $70 billion in financing from JPMorgan Chase and the Federal Reserve announced Sunday night failed to alleviate the pressure as this week began. The stock dropped 62% on Monday.
The CEO of the nation's biggest bank, the Fed chair and the Treasury secretary started brainstorming, according to people familiar with the discussions, with input from another powerful regulator: Federal Deposit Insurance Corporation Chair Martin Gruenberg. Their idea? JPMorgan could give First Republic some deposits.
Such an infusion could help solve a major concern. Deposit withdrawals are what put pressure on Silicon Valley Bank and made it impossible to continue standing on its own. Last Thursday, customers withdrew $42 billion in just one day, leaving the bank with a negative cash balance, and regulators seized the bank Friday. The concern was the same could happen to First Republic.
The next day, Dimon took this idea to some of his peers. At a Bank Policy Institute event, he approached other executives, including Citigroup CEO Jane Fraser, and commitments for $5 billion in uninsured deposits from Citigroup (C), Bank of America (BAC) and Wells Fargo (WFC) soon followed. JPMorgan also agreed to put in $5 billion.
An infusion of $20 billion was considered enough, but these four banks decided to seek more from smaller rivals on Wednesday and Thursday. U.S. Bancorp (USB), Truist (TFC), PNC (PNC), State Street (STT) and Bank of New York Mellon (BK) each agreed to deposits of $1 billion. The last to join, according to the people familiar with the events, were Goldman Sachs (GS) and Morgan Stanley (MS). They each agreed to deposit $2.5 billion.
The Wall Street JournalEleven Banks Deposit $30 Billion in First Republic Bank
Eleven banks have deposited $30 billion in First Republic Bank, according to a joint statement from the heads of the Treasury, Federal Reserve, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.
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