The banking system continues to falter in the United States. Victim of a crisis of confidence of investors and its customers, First Republic Bank will receive $ 30 billion from several major US banks that are trying to avoid a domino effect after the bankruptcy of several banks last week.

In an unusual bailout that several sources say was orchestrated earlier this week by JPMorgan CEO Jamie Dimon, Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell, 11 Wall Street banks announced Thursday that they were depositing $30 billion in First Republic.

These include JPMorgan, Citigroup, Bank of America Corp, Wells Fargo, Goldman Sachs and Morgan Stanley.

The announcement allowed First Republic to close up 10% on Thursday on the New York Stock Exchange. But the stock fell 14.8% Friday in off-day trading on Wall Street, the bank having declared a dividend suspension.

The bank also said it had a cash position of about $34 billion, not including the $30 billion injected, and borrowed up to $109 billion from the Fed between March 10 and 15 and an additional $10 billion from the Federal Home Loan Bank on March 9.

Investor nervousness

Investors were surprised by these belated revelations and the fact that First Republic and other banks relied on the Fed this month for support.

According to data released Thursday by the Fed, U.S. banks have borrowed a record $152.85 billion in recent days, increasing the size of the central bank's balance sheet after months of contraction.

The decline in First Republic shares in pre-market trading underlines the extent of investor nervousness, despite attempts by US and European authorities to restore confidence in the long term.

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Jason Ware, chief investment officer at Albion Financial Group, said the First Republic intervention was a "breath of fresh air for the system" but probably needed more. "It's not important enough," he said.

Founded in 1985 and headquartered in San Francisco, First Republic held $212 billion in assets and $176.4 billion in deposits at the end of 2022, according to its annual report.

Its stock tumbled about 70% following the collapse of Silicon Valley Bank.

With Reuters and AFP

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