US banks launch $30bn rescue of First Republic to stem spiraling crisis
theguardian.comWall Street’s giants moved to end the US’s spiraling banking crisis on Thursday by agreeing to prop up troubled First Republic, a mid-sized bank whose shares have been pummeled amid a wider banking turmoil.
Bank of America, Goldman Sachs, JP Morgan and others will deposit $30bn in First Republic, which has seen customers yank their money following the collapse of Silicon Valley Bank (SVB) and fears that First Republic could be next.
“The actions of America’s largest banks reflect their confidence in the country’s banking system. Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most,” the banks said in a joint statement on Thursday.
The big banks have received billions in deposits from smaller, regional banks as the banking crisis has spooked their customers. US authorities swooped in to take control of SVB and New York’s Signature bank last weekend after frightened customers pulled their deposits.
Banks and regulators are hoping that the action will act as a firewall by protecting First Republic and stopping the crisis spreading to other smaller banks.
Shares in First Republic – a San Francisco-based bank that largely caters to wealthier clients including Facebook co-founder Mark Zuckerberg – had fallen about 70% since the news of SVB’s collapse. They fell another 22% on Thursday before the bailout but ended the day up nearly 10%. In a joint statement, US treasury secretary Janet Yellen, Federal Reserve chair Jay Powell and senior regulators said: “This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system.”
Ahead of the news Yellen assured Congress on Thursday that the US banking system was “sound”.
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