Big banks create rescue package for First Republic; stocks surge
NEW YORK — Eleven of the biggest U.S. banks Thursday announced a $30 billion rescue package for First Republic Bank in an effort to prevent it from becoming the third to fail in less than a week and head off a broader banking crisis.
San Francisco-based First Republic serves a similar clientele as Silicon Valley Bank, which failed last week after depositors withdrew about $40 billion in a matter of hours. New York’s Signature Bank was shuttered on Sunday. It appears that First Republic, which had deposits totaling $176.4 billion as of Dec. 31, was facing similar issues.
The group of banks behind the rescue package confirmed that other unnamed banks had seen large withdrawals of uninsured deposits. The Federal Deposit Insurance Corporation insures deposits up $250,000 for individual accounts.
Stocks rallied Thursday on the banks’ move. The S&P 500 jumped 1.8% for its best day in nearly two months.
First Republic Bank rose 10% Thursday after slumping as much as 36% early in the day. In the statement announcing their deposits, the group of 11 banks said the move “reflects their confidence in First Republic and in banks of all sizes.”
First Republic’s shares dropped more than 60% Monday.
First Republic’s banking franchise before the past week was often the envy of the industry. The bank catered to wealthy clients, many of them billionaires, and offered them generous financial terms. The Wall Street Journal reported that Facebook founder Mark Zuckerberg got a mortgage through First Republic.