Your Evening Briefing: First Republic Gets a $30 Billion Lifeline

Another day, another bank. Yesterday Credit Suisse was in the hot seat. But thanks to the Swiss government, the troubled lender has a new lease on life. Today, eyes turned back to the US, where in the span of a week three regional banks (Silvergate, Silicon Valley, Signature) went down for the count. A fourth midsize lender, First Republic, was looking like it might join them, its shares having plummeted in the aftermath of SVB’s implosion. Last night, Bloomberg broke news that First Republic was even exploring a possible sale. But on Thursday, Wall Street rode to First Republic’s rescue as the biggest US banks deposited $30 billion to tide it over. Among them, JPMorgan, Bank of America, Citigroup and Wells Fargo will each contribute $5 billion, while Goldman Sachs and Morgan Stanley will kick in $2.5 billion. “This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” said US Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and other government officials in a statement hailing the deal. One analyst proclaimed, that with the rescue of First Republic, “the banking crisis is over.”

But then again, maybe not. Banks borrowed heavily over the last week from two Fed backstop facilities. Data published by the central bank showed $152.85 billion in borrowing from the discount window—the traditional liquidity backstop for banks—in the week ended March 15. It was a record high and a staggering increase from the $4.58 billion borrowed the previous week. The prior all-time high? It was $111 billion during the 2008 financial crisis.