BUSINESS

The fate of First Republic bank hangs in the balance as stocks plunge again

Published

1 day ago

March 21, 2023

And news reports that the Biden administration is in talks with Warren Buffett, the chairman of Berkshire Hathaway, who famously provided billions to support Goldman Sachs during the 2008 crisis, only signal that the current panic may be intensifying.

The First Republic is almost becoming a model of these contradictions – the extraordinary efforts to save the creditor seem to worry the markets more, not less.

On Thursday, the country’s 11 largest banks provided First Republic, the country’s 14th largest bank, with a $30 billion short-term loan to bolster its finances as depositors left en masse. The act was intended as a show of support for the First Republic, as the amounts provided by banks including JPMorgan Chase, Bank of America, Citigroup and Wells Fargo were not insured. In other words, the big banks would lose their money if the First Republic collapsed, unless the government agreed to return it.

Several of these banks, including JPMorgan, were involved in further discussions about how to stabilize the First Republic.

In recent days, First Republic’s credit rating has also been downgraded several times. On Friday, Moody’s said it downgraded the bank due to increased reliance on short-term borrowings, including from the Federal Reserve and a consortium of banks. Paying interest on loans can be costly for a bank that is trying to shore up its cash.

“Moody’s believes that the high cost of these borrowings, combined with the bank’s high proportion of fixed-rate assets, is likely to have a large negative impact on First Republic’s underlying earnings in the coming quarters,” the agency said in a statement. Moody’s also said it was not clear how First Republic could return to profitability.

Standard & Poor’s, in its own downgrade on Sunday, said the bank continues to face “significant business, liquidity, funding and profitability challenges.”

Joe Rennison made a report.

Related Topics:balance bank fate hangs plunge Republic Stocks

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Live Updates: Nitin Gadkari’s office received three threatening calls, police say

Published

1 day ago

March 21, 2023

Elizabeth Johnson

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