Add First Republic Bank to the growing list of financial institutions getting bailed out as the contamination for the collapse of Silicon Valley Bank spreads.
A group of financial institutions has agreed to deposit $30 billion in First Republic Bank in what’s meant to be a sign of confidence in the banking system, the banks announced Thursday afternoon.
Bank of America, Wells Fargo, Citigroup and JPMorgan Chase will contribute about $5 billion apiece, while Goldman Sachs and Morgan Stanley will deposit around $2.5 billion, the banks said in a news release. Truist, PNC, U.S. Bancorp, State Street and Bank of New York Mellon will deposit about $1 billion each.
“This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes, and it demonstrates their overall commitment to helping banks serve their customers and communities,” the group said in a statement.
The deposits would be obligated to stay at First Republic for at least 120 days, sources told CNBC’s David Faber. Regional bank stocks initially fell on Thursday but reversed higher after reports from Faber and others about the development of the deposit plan.
The news comes after First Republic’s stock has been pummeled in recent days, sparked by the collapse of Silicon Valley Bank last Friday and Signature Bank over the weekend. Both of those banks had a high number of uninsured deposits, as did First Republic, leading to concern that customers would pull their money out. The new deposits from the major banks are uninsured.
First Republic’s stock, which closed at $115 per share on March 8, traded below $20 at one point Thursday. The stock was halted repeatedly during the session and rose to $40 per share at one point, up more than 20% on the day.
These banks are saving First Republic for their own good, they are a competitor. They're not even doing it to save their own skin to try to halt the chaos. No, they're doing it because the Biden administration gave them something in return, and that's going to be the White House dropping their insistence on stopping "junk fees" on US bank account holders.
I guarantee you that the Junk Fee Prevention Act is now going to die a quiet death in the weeks ahead.