First Republic Bank rescue may hinge on government support

Troubled regional lender First Republic could reportedly receive government support as officials look to sweeten the deal for a potential savior.

The feds and top Wall Street bosses are in talks about potential measures the government could take to make First Republic a more attractive asset for outside investors or buyers, Bloomberg reported Tuesday, citing people with knowledge of the situation.

Some of the ideas floated in behind-the-scenes talks include the possibility of the feds removing damaging assets from First Republic’s balance sheet, offering liability protection or relaxing limits on ownership stakes, the report added.

Representatives for the Federal Reserve, the Treasury Department and First Republic declined Bloomberg’s request for comment on the story.

The FDIC didn’t immediately return a request for comment.

Concerns about First Republic’s survival have intensified in recent days following the collapse of Silicon Valley Bank and Signature Bank of New York.

Bloomberg noted that unrealized losses lingering on First Republic’s balance sheet “have been a sticking point” for potential investors.

The feds intervened to guarantee all deposits at SVB and Silicon Valley Bank – a move aimed at stemming contagion in the banking sector.

This week, Treasury Secretary Janet Yellen signaled similar actions could be taken to prevent more bank collapses.

First Republic shares were down about 3% in early trading on Wednesday.

The lender’s stock has plunged nearly 90% since the start of the year.

The regional lender has struggled even after the nation’s largest banks, including JPMorgan Chase, Bank of America, Citigroup and Wells Fargo, stepped in with a $30 billion cash infusion aimed at averting First Republic’s collapse.

The $30 billion rescue plan purportedly emerged during a call between Treasury Secretary Janet Yellen and JPMorgan’s Jamie Dimon as federal officials and bank chiefs scramble to bolster confidence in the sector.

Former Goldman Sachs CEO Lloyd Blankfein is a prominent critic of the arrangement, arguing it doesn’t provide any upside to the large banks.

“I don’t find that very 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’re not doing it out of a commercial analysis or the prospects of that institution. They’re doing it because they’re being asked to do it,” Blankfein added.