![]() The FDIC estimates that American banks have $620 billion in unrealized losses on their balance sheets. The broad worry is that smaller regional banks, which hold large amounts of Treasuries and mortgage-backed securities, may be forced by investors to revalue those bond portfolios. Investors sold off banking stocks this week with most of the damage focused on smaller regional banks such as Zions Bank, Fifth Third, Huntington Bank and Comerica. Analysts at Keefe, Bruyette & Woods said the rescue and dividend cut “paint a grim outlook for both the company and shareholders.” Its shares are down nearly 70% this week alone. Shares of First Republic fell more than 30% Friday after the bank cut its annual dividend as part of the rescue package. The Wall Street banks have been flush for years, and deposits are one of the cheapest forms of capital a bank can get. First Republic needed money to replace any deposits that were being pulled out. This rescue would be simple compared with the 2008 crisis. He then proceeded to build a coalition of banks willing to place deposits with First Republic. “We have our marching orders,” Dimon reportedly said after the call with Yellen. There may have been a sense of déjà vu: Back in 2008, Dimon was the go-to banker for Washington to find private solutions for that banking crisis. Together they concluded that some sort of private rescue package was needed to prevent the crisis from worsening.Īmong the first calls made by Yellen and other policymakers was to Jamie Dimon, the chairman and CEO of JPMorgan Chase & Co. Treasury Secretary Janet Yellen discussed the idea of supporting First Republic with other bank regulators - the Federal Reserve, the Federal Deposit Insurance Corp. But after Silicon Valley Bank and Signature Bank failed and were seized by the federal government, the industry’s overseers worried about more dominoes falling. The recent turmoil in the banking industry isn’t on par with the crisis that sparked the Great Recession from 2007 to 2009. Regulators hope it also bolsters confidence in the health of the broader banking system. The money gives First Republic a lifeline while it reportedly seeks a buyer. With Washington greasing the wheels, a coalition of lenders put $30 billion in uninsured deposits into the California-based bank as a show of support. The result was a swift agreement among the nation’s leading banks to lay aside competitive instincts to come to First Republic’s aid. Now the bank was reeling after some of those customers withdrew billions of dollars.Īs early as Tuesday, it became clear to policymakers that First Republic needed to be rescued or it could fail, two people briefed on the matter told The Associated Press, speaking anonymously because they were not authorized to discuss details. ![]() The anxiety this week centered on First Republic Bank in San Francisco, which was once the envy of the banking sector, with its wealthy and well-traveled clientele. The scene was reminiscent of the last financial crisis, nearly 15 years ago: Faced with a blossoming emergency in the banking sector, worried regulators and policymakers in Washington turned to Wall Street for help. ![]()
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