Eleven of the biggest banks in the U.S. have announced a $30 billion rescue package for First Republic Bank, in an effort to prevent the California-based bank from becoming the third bank to fail in less than a week.
shares had been down as much 36% earlier Thursday, but rallied after reports the rescue package was in the works. The stock closed up 10%.
As part of the aid package, JPMorgan Chase, Bank of America, Citigroup and Wells Fargo have agreed to each put $5 billion in uninsured deposits into. Meanwhile Morgan Stanley and Goldman Sachs would deposit $2.5 billion each into the bank. The remaining $5 billion would consist of $1 billion contributions from BNY Mellon, State Street, PNC Bank, Truist and US Bank.
“The actions of America's largest banks reflect their confidence in the country's banking system,” the banks said in their statement. Notably the banks came to the rescue of one of their competitors, while Silicon Valley Bank failed because its closest and most loyal customers — venture capitalists and start ups — fled the bank at the“We are deploying our financial strength and liquidity into the larger system, where it is needed the most,” the banks said.
Over the weekend the federal government, determined to restore public confidence in the banking system, moved to protect all the banks' deposits, even those that exceeded the FDIC’s $250,000 limit per individual account. While the banking crisis started with Silicon Valley Bank, regulators told reporters earlier this week that it became necessary for the government to backstop the banking system because it appeared more runs were possible.
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