Fox Business Network reported that the US government is likely to take over First Republic Bank ($FRC), which is failing and suffering from large losses. In the first quarter of this year, the bank lost almost 40% of its deposits, or $72 billion, and its stock price has fallen by close to 50%. Bankers working with the First Republic apparently anticipate an eventual government receivership since private sector options like asset sales and finding a buyer seem challenging.
First Republic Bank has faced significant challenges in recent months, with record drops in its deposits and shareholder lawsuits. The bank lost over $72 billion in deposits in the first quarter of this year, marking a sharp decline in its financial health. Shareholders have also filed lawsuits accusing the bank of concealing the impact of rising interest rates on its business models, which prompted an exodus of deposits.
First Republic Bank’s woes are not unique in the banking industry. Several big banks have also faced challenges in recent times. However, First Republic’s situation appears to be awful, with its shares sinking and private sector solutions proving elusive. The Silicon Valley Bank, which was closed in March, added to the bank’s troubles and accelerated its decline.
Expected Government Seizure
According to Fox’s Charles Gasparino, who cited sources within the bank, First Republic Bank’s eventual government seizure is highly likely. The bank is expected to exhaust all private-sector solutions before the government steps in. Gasparino’s report suggests that finding a buyer or selling assets may not be feasible for the struggling bank, leading to the anticipated government intervention.
If the US government does indeed seize First Republic Bank, it would mark a significant event in the banking industry. Government receivership would mean that the bank would be under the control and management of the government, with potential implications for its operations, employees, and customers. The exact details of the seizure and its impact on the bank and its stakeholders would depend on the specifics of the government intervention.