Another Bay Area bank was affected Monday by uncertainty in the financial markets following the failure of Silicon Valley Bank on Friday.
Stock in San Francisco-based First Republic Bank sank nearly 62% Monday and shares of other regional banks suffered losses, reportedly. First Republic has 86 locations across the country. Its Midpeninsula offices include two in Menlo Park and one each in Los Altos, Mountain View, Palo Alto and Redwood City.
On Sunday, regulators seized Signature Bank in New York after it failed.
But a San Jose State University professor of finance and accounting does not see the failure of Silicon Valley Bank and Signature Bank as signs of a coming crisis.
"I don't think it is a huge contagion issue," said assistant professor Matthew Faulkner. "It's more toward an isolated incident."
Over the weekend and Monday, top federal officials including President Joseph Biden appeared to be getting ahead of the issue.
Biden sought to ease American's fears by making all deposits held by Silicon Valley Bank customers available regardless of the amount of their deposits, federal officials said over the weekend.
That includes businesses who must pay their employees and their bills, officials said.
"Americans can have confidence that the banking system is safe," Biden said Monday morning. "Your deposits will be there when you need them."
Investors will not be protected, Biden said. According to the president, they took a risk and "that's how capitalism works."
Taxpayers will not be on the hook for the losses. Money to cover the losses will come from fees that banks pay into the deposit insurance fund, Biden said.
In California, state Treasurer Fiona Ma said Monday that her office has no exposure to Silicon Valley Bank and state and local government funds are safe.
Additionally, companies that did business with Silicon Valley Bank won't have to pay any penalty if they must file their payroll taxes late, according to the California Employment Development Department, which collects payroll taxes.
Employers can request a waiver online at edd.ca.gov or in writing.
Silicon Valley Bank failed Friday after depositors and investors tried to withdraw $42 billion from the bank on Thursday. The bank had $175 billion in deposits at the end of last year. The withdrawals left the bank with a negative cash balance of nearly $1 billion Thursday.
On Monday, First Republic Bank said it widened its financial position with liquidity from the U.S. Federal Reserve Bank and JP Morgan Chase and Co.
First Republic now has more than $70 billion to fund operations, the bank's officials said. Additional liquidity is available through the Bank Term Funding Program, which the Federal Reserve announced Monday and ensures banks can meet the needs of their depositors.
"First Republic's capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks," said Jim Herbert, founder and executive chairman, and Mike Roffler, president and CEO, of First Republic Bank. "First Republic continues to fund loans, process transactions and fully serve the needs of clients."
U.S. Senate hopeful Rep. Barbara Lee, D-Oakland, blamed the failure of Silicon Valley Bank on the rollback of federal financial regulations by former President Donald Trump.
"Federal oversight over large corporations and our economy is crucial and regulators must once again step in and ensure we do not repeat the mistakes made in 2008," Lee said in a statement.
Silicon Valley Bank was the 16th largest bank in the United States as of March 10, Faulkner said.
Faulkner suggests depositors open another account, if they have one with more than $250,000 in it, to protect themselves.
Silicon Valley Bank was focused on serving startups, Faulkner said, which was probably part of the reason it failed. But Faulkner said the public only knows part of the story.
on Mar 14, 2023 at 3:55 pm
on Mar 14, 2023 at 3:55 pm
This headline is terrible. "First Republic Bank, others affected by failure of Silicon Valley Bank."
The failure of SVB is not CAUSING the failures of other banks. SVB is like the canary in the coal mine. The death of a canary does not CAUSE the death of miners, it is merely an indicator that helps the miners become aware of the danger.
SVB fell as a side effect of rising interest rates. That's the core issue: rising interest rates. We have essentially been living in loony-town for years, with interest rates being absurdly low in an attempt to revive the economy after the crash of 2008. When interest rates rise, it has a predicable and negative effect on bond prices and the stock market. This day was always going to come. SVB fell because it had big positions in bonds.
"Investors will not be protected, Biden said. According to the president, they took a risk and "that's how capitalism works."" This is bull-pucky. THE BANKS ARE ALLOWED to take risks, and when they fail, the government bails them out.
""In 2015, SVB President Greg Becker submitted a statement to a Senate panel pushing legislators to exempt more banks — including his own — from new regulations passed in the wake of the 2008 financial crisis. Despite warnings from some senators, Becker’s lobbying effort was ultimately successful."" - Web Link
The crash of 2008 came about because bankers successfully pressured Congress to remove "the wall" that had been constructed after 1929 to prevent mortgages from being used by bankers like casino money. When safeguards are removed, BANKS FAIL.
As long as politicians (on BOTH sides of the aisle, mind you) are swayed by bank lobbyists to remove SAFEGUARDS, we shall always be vulnerable to bank failures. Bankers get saved, but ordinary workers lose their homes and life savings, because politicians care most about fat campaign contributions. Been there, done that, got the T-shirt.