BOSTON – The nation’s 11 largest banks are bailing out a bank with numerous branches in the Boston area. They give $30 billion First Republic Bank so that the company does not fail.
“We expect that this lifeline that First Republic received from these major financial institutions would buy them time to consider their strategic options,” said Lawrence Glazer, chief executive of financial consulting firm Mayflower Advisors.
The gesture comes just days after the Federal Deposit Insurance Corporation (FDIC) took over Silicon Valley Bank. SVB broke up last week.
Financial experts say First Republic has a large financial footprint in Boston, particularly in the technology sector. They believe the fear surrounding First Republic is causing consumers to pull money out of smaller banks and put it in larger, more stable banks. The result may be less credit.
“Small businesses rely on local banks for credit, so a local pizza place across town that’s just recovering from COVID could face unintended problems because of this bailout. The consumer has less choice and less credit,” Glazer explained. “The Boston area has far more community and local banks than any other part of the country.”
Glazer believes the rush to move cash from smaller banks to larger ones is the result of the U.S. Treasury not saying whether uninsured deposits at small or regional banks will be protected. Last week, President Joe Biden announced that the FDIC would protect Silicon Valley Bank’s uninsured customers.