First Republic Bank bailout will have impact on Boston area
BOSTON -- Eleven of the largest banks in the country are bailing out a bank with numerous branches in the Boston area. They are giving $30 billion to First Republic Bank to keep the company from collapsing.
"We would expect that this lifeline that First Republic received from these large financial institutions to buy them time to look at their strategic options," said Lawrence Glazer, managing partner at the financial consulting firm Mayflower Advisors.
The gesture comes just days after the Federal Deposit Insurance Corporation (FDIC) took over Silicon Valley Bank. SVB fell apart last week.
Financial experts say First Republic has a large financial footprint in Boston, and in particular the tech sector. They believe fear around First Republic has consumers pulling money from smaller banks and placing it in larger more stable banks. The result may mean less credit to go around.
"Small business relies on those local banks to provide credit, so the local pizza place around town just recovering from COVID may see unintended problems because of this bailout. There will be less choice to the consumer, and less credit available," explained Glazer. "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 to larger banks is a result of the US Treasury not saying if uninsured deposits in small or regional banks will be protected. Last week, President Joe Biden announced that the FDIC would protect uninsured clients of Silicon Valley Bank.
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