America’s top bankers and key government officials seemed pretty pleased with themselves in the US on Thursday afternoon, when Wall Street came together to rescue First Republic, the struggling San Francisco-based lender seen as a possible next domino in America’s mini-banking crisis.
The country’s largest financial institutions together deposited $30 billion+ with First Republic, $25 billion of which was split between JPMorgan, Bank of America, Citi, Wells Fargo, Goldman and Morgan Stanley. The initial commitment is for at least 120 days.
“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,” a joint press release read.
After the bell, First Republic suspended its dividend and said the collective support strengthens its liquidity and reflects the “ongoing quality” of the bank’s business.
In a statement, Founder and Executive Chairman Jim Herbert and CEO Mike Roffler (both of whom sold shares over the past few months, according to The Wall Street Journal) conveyed their “deep appreciation” for the support.
Not including the $30 billion from Thursday’s joint deposit arrangement, First Republic had $34 billion in cash as of March 15. Borrowings from the Fed ranged from $20 billion to $109 billion from March 10 through March 15, and short-term borrowings from FHLB rose by $10 billion since March 9, First Republic said, adding that insured deposits have been stable, while daily deposit outflows were described as having “slowed considerably.”
As you can imagine, the FDIC, the Fed and Treasury welcomed the arrangement. “This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” a joint statement attributed to Janet Yellen and Jerome Powell said. The Fed reiterated that it “stands ready to provide liquidity.”
If you’re wondering whether Jamie Dimon might’ve been instrumental in putting all of this together, the answer is “Yes.” He met with Yellen on Thursday afternoon in Washington after Yellen pitched him on the idea of a group effort, which he subsequently pitched to Wall Street. Yellen’s original plan was floated during a conference call with Powell on Tuesday, according to Bloomberg.