Wall Street banks will put $30 billion into teetering First Republic
Eleven of the nation’s largest banks announced Thursday that they would deposit a total of
$30 billion into First Republic Bank as Wall Street and U.S. officials staged an emergency intervention aimed at quelling tremors in the financial sector.
The San Francisco-based commercial bank has three offices in South Florida, each in Palm Beach County. The bank caters to highnet-worth individuals with its 93 offices in 11 states.
Bank of America, Citigroup, JPMorgan Chase and Wells Fargo announced infusions of $5 billion each to First Republic, while Goldman Sachs and Morgan Stanley will each deposit $2.5 billion. The Wall Street move, which was coordinated in part by Biden administration officials, is aimed at stabilizing First Republic and sending a signal to depositors and global markets that the U.S. financial system is secure despite the failures last week of Silicon Valley Bank and Signature Bank.
“This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” said a joint statement by Treasury Secretary Janet L. Yellen, Federal Reserve Chair Jerome H. Powell, and Federal Deposit Insurance Corporation
Chairman Martin J. Gruenberg and Acting Comptroller of the Currency Michael J. Hsu.
BNY Mellon, PNC Bank, State Street, Truist and U.S. Bank all also announced deposits at First Republic of $1 billion each.
Yellen discussed the idea of an injection of private capital for First Republic on a phone call with JP Morgan CEO Jamie Dimon, who went to work getting the banks to agree on the concept, said two people who were familiar with the matter and spoke on the condition of anonymity to describe private deliberations. Yellen and Dimon both phoned CEOs over the next few days as the plan cohered.
Federal officials held an additional phone call with CEOs and regulators on Thursday morning to confirm the details of the plan, and Yellen met in person with Dimon at the Treasury Department shortly before the measure was formally announced, the people said. Yellen closely coordinated on the stabilization measure with White House Chief of Staff Jeff Zients and White House National Economic Council Director Lael Brainard.
While the money for the deposits is coming from private firms, U.S. officials were closely involved in coordinating between the large banks, aiming to stabilize the system without increasing the burden on taxpayers, according to two people who were familiar with the matter and also spoke on the condition of anonymity to reflect private deliberations.
“They’re trying to create a firewall to protect themselves from further angst about the banking systems and continued bank runs,” said Mark Zandi, an economist at Moody’s Analytics. “It’s about shoring up the weakest links in the banking system, and in so doing, inoculating themselves from the fire getting to them.”
Financial experts said the intervention represented one of the most sweeping moves in the modern history of U.S. banking — and coming just on the heels of last weekend’s move by the government to backstop deposits at SVB, it reflected the extent of concern both among senior federal officials and Wall Street executives about the stability of the industry.
“This is as large of a bank-tobank intervention that we have seen, where you have one institution stepping in to help another institution,” said John Sedunov, a professor of finance at Villanova University. “We have not yet reached total failure meltdown stage, and this is an attempt to stop the bleeding before things get worse and you have more widespread panic.”
The move was announced shortly after Yellen faced questions on Capitol Hill about the crisis measures already approved by the government. She told lawmakers the financial system is sound.