nside the $30 billion rescue of First Republic Bank
The $30 billion rescue of First Republic Bank began with a series of phone calls Tuesday between JPMorgan Chase CEO Jamie Dimon, Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen.
Dimon was in Washington, according to a person familiar with the events, and he wanted to discuss some issues that concerned bank capital. The subject soon turned to the fate of the nation's 14th-largest bank.
Shares in the San Francisco lender had been sliding since last week's failure of Santa Clara-based Silicon Valley Bank, and $70 billion in financing from JPMorgan Chase and the Federal Reserve announced Sunday night failed to alleviate the pressure as this week began. The stock dropped 62% on Monday.
The CEO of the nation's biggest bank, the Fed chair and the Treasury secretary started brainstorming, according to people familiar with the discussions, with input from another powerful regulator: Federal Deposit Insurance Corporation Chair Martin Gruenberg. Their idea? JPMorgan could give First Republic some deposits.
Such an infusion could help solve a major concern. Deposit withdrawals are what put pressure on Silicon Valley Bank and made it impossible to continue standing on its own. Last Thursday, customers withdrew $42 billion in just one day, leaving the bank with a negative cash balance, and regulators seized the bank Friday. The concern was the same could happen to First Republic.
