The stock market and bank stocks saw some relief today as the worlds biggest banks came together to offer funds for First Republic bank. FRC stock saw massive swings today as news of negotiations between the big banks, the Treasury & First Republic first gained wind. This is what happened in March 2008 as banks came together to try to bail out Bear Sterns, however unlike today, they couldn’t reach and agreement. As a result of today’s deal, banks like JP Morgan, Citi & Bank Of America pledged up to $5B to give as deposits for FRC. The logic is that regional banks are systemically important to the financial system and the big banks wanted to provide that commitment to make sure things keep going smoothly. There are other theories to this, which I explain, but all in all it helped calm nerves of a further bank run 7 days into the whole mess. On top of all this, we learned after hours that the Fed’s discount window has been used more than ever as banks rush to emergency funding in the middle of the crisis. The new bank term facility that was created this week already saw half of its available amount used. Today brought some relief to some bank stocks & investors, but many are waiting for Powell to confirm if this is a real risk or not.
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