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The biggest banks in the U.S. are stepping in to save First Republic Bank


Some of this country's biggest banks are sending money to a bank in trouble.


First Republic Bank is headquartered in San Francisco. That's not far from the headquarters of Silicon Valley Bank, which failed a week ago. And although First Republic appears healthier, it's been facing some of the same pressures and a lot of anxiety. So other banks passed the hat, and it's a fairly large hat - $30 billion.

INSKEEP: NPR's David Gura joins us now.

David, good morning.

DAVID GURA, BYLINE: Good morning, Steve.

INSKEEP: How did their fellow bankers come to rescue First Republic?

GURA: Well, this is a pretty extraordinary deal, and it came together over just 48 hours as a result of the incredible volatility that we've seen on Wall Street in shares of some of America's small and mid-sized lenders after regulators closed Silicon Valley Bank and also Signature Bank.


GURA: First Republic Bank has been caught up in that. It faced an exodus of customers as they moved their money to other, larger banks. And while that happened, the lender's stock got hammered. Driving this, Steve, was worry that first Republic could find itself in the same boat as those two failed lenders, that it could also face a bank run. The way this is going to work is four of the big banks, including Citigroup and JPMorgan Chase, are each going to put up $5 billion and the seven other lenders are going to put up the rest.

And effectively what they're doing here is opening up a bank account or bank accounts at First Republic, and they're putting their money in, just like you might or I might, Steve, except it's $30 billion. And that money is going to replenish those coffers that have been emptied out over the last week. And the hope is it'll both shore up confidence in First Republic, and it will bolster confidence in banking more broadly.

INSKEEP: Just so I know, David, if they open a new account and deposit $30 billion, do they get free checking with that?

GURA: (Laughter) I think that could be arranged.

INSKEEP: Hopefully that could be arranged. OK, so you said some customers were taking money out, and that was part of the pressure here. Why would they be panicking?

GURA: This is a lender that in some ways does have a similar profile to Silicon Valley Bank and Signature Bank. It has a lot of wealthy individuals as customers and businesses as clients. What's quite remarkable here, Steve, is, like many lenders that have come under pressure this week, it was not known to have any big underlying problems yet it was caught up in the selloff. Tim Coffey is a bank analyst with the brokerage Janney.

TIM COFFEY: From a credit perspective, it's a very safe institution. They don't do a lot of risky loans. The majority of the portfolio is single-family residential mortgage loans. And those loans are to high net worth individuals who deposit large sums.

GURA: You know, what First Republic does have, Steve, is a lot of deposits that are large - too big to be insured by the FDIC. And like many other banks, it's invested in government bonds that are now less valuable because the Federal Reserve has been raising interest rates aggressively over the last year. First Republic is facing potential losses because of that.

INSKEEP: OK. So their investments lose money. They've got less resources. Depositors say, I'm not fully insured, so they start taking out money. And suddenly I guess it would be like that scene in "It's A Wonderful Life." You have to pay every deposit or every dollar they ask for or you close.

GURA: Yeah, and also these two bank failures have made Wall Street very nervous. There is widespread worry that regardless of a bank's profile, how healthy its balance sheet is, another bank could suffer a similar implosion. And that Janney analyst, Tim Coffey, says a lot of this fear is being driven by emotion, not by data.

COFFEY: What we have right now in the banking industry is a crisis of confidence.

GURA: And this new deal, Steve, is designed to tackle that head on.

INSKEEP: So is it going to succeed then?

GURA: Well, the hope is that, but things are so volatile right now, we don't know for sure. We don't know how many customers left First Republic over the last week or how much money they took with them when they left. Tim Coffey told me he thinks that $30 billion is going to be, as he put it, an adequate amount. The regulators certainly say they appreciate the deal. In a joint statement that's just two sentences long, the Treasury secretary and the Federal Reserve chair, the heads of some other agencies, said the banks' show of support is, as they put it, most welcome, Steve, and that it, quote, "demonstrates the resilience of the banking system."

INSKEEP: NPR's David Gura.

Thanks so much.

GURA: Thanks, Steve. Transcript provided by NPR, Copyright NPR.

Steve Inskeep is a host of NPR's Morning Edition, as well as NPR's morning news podcast Up First.
Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.