US authorities are now weighing an expansion of an emergency lending facility which could help boost First Republic bank after its stock plunged more than 90% this month amid the banking crisis.
Earlier this month customers lined up at a First Republic to withdraw their cash after Silicon Valley Bank collapsed.
I’ve never seen a bank run in Brentwood Los Angeles in over 40 years — this is at first republic bank branch. People standing in rain pic.twitter.com/k31PqqpyO3
— pjb.eth (@Dr_PhillipB) March 11, 2023
This is just one of the options the Federal Reserve is weighing as regulators navigate a stressed banking sector, Bloomberg News reported.
Bloomberg reported:
US authorities are considering expanding an emergency lending facility for banks in ways that would give First Republic Bank more time to shore up its balance sheet, according to people with knowledge of the situation.
Officials have yet to decide on what support they could provide First Republic, if any, and an expansion of the Federal Reserve’s offering is one of several options being weighed at this early stage. Regulators continue to grapple with two other failed lenders — Silicon Val ..
Even short of that step, watchdogs see First Republic as stable enough to operate without any immediate intervention as the company and its advisers try to work out a deal to shore up its balance sheet, the people said, asking not to be named discussing confidential talks.
So who gets bailed out?
According to Treasury Secretary Janet Yellen, the US government is going to pick the winners and losers.
During her testimony last week, Secretary Yellen admitted that smaller regional banks across the country will not be bailed out by the US government. Only larger banks will be bailed out like Silicon Valley Bank and their depositors from China connected to the Chinese Communist Party.
Senator James Lankford (R-OK), last week grilled Yellen on who will be bailed out by the federal government and who will not. Lankford pointed out that the Biden-Yellen plan will force Americans to take money out of smaller banks and deposit it in the chosen banks the government has deemed worthwhile of protecting.
“Will the deposits in every community bank in Oklahoma, regardless of their size, be fully insured now? Are they fully recovered? Every bank, every community bank in Oklahoma, regardless of the size of the deposit, will they get the same treatment that SVBP just got or Signature Bank just got?” Senator Lankford asked.
“A bank only gets that treatment if a majority of the FDIC board, a supermajority, a supermajority of the Fed board, and I, in consultation with the president, determine that the failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences.” Yellen said.
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