A plan led by Treasury Secretary Janet Yellen and JPMorgan Chase’s chief executive led to a $30 billion infusion by 11 of the largest U.S. banks.
In an extraordinary effort to stave off financial contagion and reassure the world that the American financial system was stable, 11 of the largest U.S. banks came together on Thursday to inject $30 billion into First Republic Bank, a smaller peer on the brink of collapse after the implosion of Silicon Valley Bank last week.
Hatched on Tuesday during a call between Treasury Secretary Janet L. Yellen and Jamie Dimon, the chief executive of JPMorgan Chase, the plan has each bank depositing at least $1 billion into First Republic. It is meant as a show of support for First Republic and a signal to the market that the San Francisco lender’s woes do not reflect deeper trouble at the bank.
Ms. Yellen believed that such a move by the private sector would underscore confidence in the health of banks. Mr. Dimon, whose bank saved several rivals during the 2008 financial crisis, was on board.
In 48 hours, the deal was done.
The arrangement was without precedent in decades, and an indication of how dire the banking sector’s predicament had become within a week. With its echoes of the 2008 financial crisis, the collapses of Silicon Valley Bank on Friday and Signature Bank on Sunday sparked a panic that appears unlikely to subside immediately.
The four banks that put the most money into the effort — JPMorgan Chase, Bank of America, Wells Fargo and Citigroup — said in a joint statement that the action “demonstrates their overall commitment to helping banks serve their customers and communities.”
The four banks will each deposit $5 billion. Goldman Sachs and Morgan Stanley are putting in $2.5 billion each. PNC Financial, Truist, BNY Mellon, State Street and U.S. Bank are each depositing $1 billion.
Shares of First Republic, which had lost three-quarters of their value in recent days, rallied on the announcement, which was made during market hours. But numerous other bank stocks, mainly those of small and regional banks, continued to be pummeled. The banking sector has also been under pressure from Credit Suisse, which was fighting for its life before Switzerland’s central bank stepped in to provide a backstop early Thursday.
Before Thursday’s announcement, First Republic had hired advisers to explore options to save the bank, including a possible sale to a larger rival or a rescue that could include a quick injection of cash to ensure that it had enough to pay out customer withdrawals.
The lender had also tried to shore up its finances last weekend with up to $70 billion in emergency loans from the Federal Reserve and JPMorgan.