BOSTON — Eleven of the nation’s largest banks are bailing out a bank with many branches in the Boston area. They give 30 billion dollars to Bank of the First Republic to prevent the company from collapsing.
“We would expect this lifeline that First Republic has received from these large financial institutions to buy them time to consider their strategic options,” said Lawrence Glazer, managing partner at financial advisory firm Mayflower Advisors.
The move comes just days after the Federal Deposit Insurance Corporation (FDIC) took over Silicon Valley Bank. The SVB collapsed last week.
Financial experts say First Republic has a large financial footprint in Boston, and particularly in the tech sector. They believe the fear around the First Republic is causing consumers to withdraw money from smaller banks and put it into larger, more stable banks. The result can mean less credit for everyone.
“Small businesses depend on these local banks to provide credit, so the local pizzeria in town just recovering from COVID may run into unforeseen problems because of this bailout. There will be less choice for the consumer and less credit available,” Glazer explained. “The Boston area has far more community and local banks than any other part of the country.”
Glazer believes the rush to transfer cash from small banks to big banks is the result of the US Treasury not saying whether uninsured deposits at small banks or regional banks will be protected. Last week, President Joe Biden announced that the FDIC would protect uninsured customers of Silicon Valley Bank.