Reportedly, troubled regional lender First Republic may receive a government boost as officials look to sweeten the deal for a potential rescuer.
Feds and top Wall Street bosses are in talks about possible actions the government could take to make First Republic a more attractive asset to outside investors or buyers, Bloomberg reported Tuesday, citing people familiar with the situation.
Some of the ideas floated in behind-the-scenes conversations, the report added, include the possibility of the feds removing harmful assets from First Republic’s balance sheet, providing liability protection or easing restrictions on ownership stakes.
Representatives for the Federal Reserve, Treasury Department and First Republic declined Bloomberg’s request for comment for the story.
The FDIC did not immediately return a request for comment.
Concerns about the First Republic’s survival have grown in recent days following the collapse of Silicon Valley Bank and Signature Bank of New York.
Unrealized losses lingering on First Republic’s balance sheet “have been a sticking point” for potential investors, Bloomberg noted.
The Feds stepped in to guarantee all deposits at SVB and Silicon Valley Bank – a move intended to stem contagion in the banking sector.
This week, Treasury Secretary Janet Yellen indicated that similar measures could be taken to prevent further bank collapses.
First Republic shares were down about 3% in early trading on Wednesday.
The bank’s stock has fallen 90% since the beginning of the year.
The regional lender struggled even after the country’s biggest banks, including JPMorgan Chase, Bank of America, Citigroup and Wells Fargo, stepped in with a $30 billion cash infusion aimed at averting the collapse of the First Republic.
The $30 billion bailout allegedly came to light during a call between Treasury Secretary Janet Yellen and JPMorgan’s Jamie Dimon as federal officials and bank chiefs scramble to boost confidence in the sector.
Former Goldman Sachs CEO Lloyd Blankfein has been a vocal critic of the arrangement, arguing that it provides no silver lining for the big banks.
“I don’t find that confidence-inspiring, because I don’t think they’re really doing an analysis and deciding on good credit or a good investment,” Blankfein told CNBC on Wednesday.
They do not do this out of a commercial analysis or the prospects of that enterprise. They do it because they are required to,” Blankfein added.
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