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All the major US banks have come to the rescue of First Republic Bank, the fourteenth entity in the country by assets, with more than 200,000 million dollars (188,000 million euros) on its balance sheet, whose share has suffered a fall of 80% since the crisis unleashed by SVB began.

The participation of a pool of banks in the purchase of First Republic follows one of the rules of the Joe Biden government in this financial crisis, which is to avoid the use of public money to rescue entities and, at the same time, seek solutions as quickly as possible to avoid contagion. The negotiations are being led by JP Morgan, the largest bank in the US, and also involve the other three large financial supermarkets – that is, integrated banks, in the style of the Spanish BBVA or Santander -: Bank of America, Wells Fargo, and Citigroup.

Other entities involved include investment banking giants Morgan Stanley and Goldman Sachs, and US Bank and Bancorp. The news, revealed by The Wall Street Journal, caused a slight rise in the value of the share by 20%, although in a few minutes the titles returned to a bearish path.

It is, in a sense, a return to the era of subprime mortgages. In 2008, JP Morgan bought, with the help of $19 billion from the Federal Reserve, investment banking giant Bear Stearns and the largest savings and loans (which could be comparable to Spanish savings banks), Washington Mutual. Wells Fargo acquired the commercial bank Wachovia, and Bank of America took over another investment bank, Merrill Lynch.

The case of First Bank reveals how it is virtually impossible for regulators not to end up creating winners and losers with their interventions to stabilize the market. The San Francisco-based bank is in a complicated situation because the special funding window set up by the Federal Reserve on Sunday to help troubled entities — and which is, in all but name, a rescue mechanism for them — is not designed in a way favorable to its portfolio.

This window, which is officially called the Term Bank Financing Program (BTFP), offers financing to banks in exchange for them putting mortgage, Treasury, and agency bonds as collateral. That comes as a ring to Silicon Valley Bank (SVB), since 53% of its portfolio is made up of those assets. Other large regional banks, such as Key Bank, Truist Bank, Zions Bank, and Comerica can also benefit greatly from the BTFP. But that is not the case for First Bank, which only has 3% of its portfolio in those assets.

That is a major problem. In the case of SVB, which was intervened on Friday, it seems that the objective of the authorities is to make the entity resort to the BTFP and get rid of its devalued securities – which, in addition, will be accepted by the Federal Reserve at the price at which it bought them, that is, above its current value – and in exchange obtain liquidity to meet the commitments of its customers and creditors. That will make its purchase by a rival much more attractive. But First Bank, by the very structure of its portfolio, cannot count on that lifeline.

First Bank also has a loan-to-deposit ratio of 111%. That is to say: it has granted more credits than it has in deposits, which feeds the selling pressure. With its debt it has been reduced to junk bond status by two of the three most relevant rating agencies – S&P Global and Fitch IBCA – and its share price seems unlikely to be able to remain an independent company.

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