Regulatory Failure 101: What the Collapse of Silicon Valley Bank Reveals
ProPublicaDec 23, 2022
First Republic Secures $30B Rescue From 11 Banks
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Image copyright: Bloomberg/Getty Images [via Fox Business]
The Facts
First Republic Bank on Thursday received a lifeline from 11 of America's largest banks, who pledged to deposit $30B in order to shore up lenders' concerns at a time of crisis for the US banking industry, including the collapse of Silicon Valley Bank and Signature Bank last week.
Following the two collapses, and over fears First Republic could be next in line because many of its deposits exceed the Federal Deposit Insurance Corporation (FDIC) threshold of $250K – meaning they’re uninsured – First Republic said it secured $70B in liquidity Sunday. However, that did little to calm the nerves of investors or creditors.
The Spin
Pro-establishment narrative
A joint effort between the federal government and the US's largest banks has done well to avoid a run on banks with this lifeline for First Republic and other swift measures. The US banking sector, however, isn’t out of the woods yet, and it’ll take more government action to prevent a wider crash.
Establishment-critical narrative
Amid the precarious financial environment, banks should have taken proactive measures to mitigate their losses, such as selling off their long-term bonds when they had a chance. It wasn’t a secret that the Fed intended to raise the yields on treasury bonds, yet many banks — such as Silicon Valley Bank — did nothing to shore up their vulnerable balance sheets.
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