The Federal Deposit Insurance Corporation is approaching banks about their interest in buying First Republic (FRC), according to a person familiar with the matter, suggesting to this person that regulators intend to seize the San Francisco lender soon.
The FDIC is approaching some of the same banks that came to First Republic's aid in March with $30 billion in uninsured deposits, this person said. These banks were reluctant this week to provide a second rescue, fearing First Republic would be seized anyway.
Yahoo Finance has learned that JPMorgan Chase (JPM) and Bank of America (BAC), the nation's two largest banks, are weighing potential bids following a government takeover. The FDIC has set a 12 p.m. ET Sunday deadline for offers. The Wall Street Journal reported Friday that Pittsburgh-based PNC (PNC), the nation's sixth-largest bank, is among those considering a bid.
The goal is that "somebody else buys them and hopefully opens them up as soon as possible so there’s not turmoil in the markets," the person said.
Multiple reports Friday suggested that the FDIC would likely place First Republic into receivership.
The FDIC sometimes operates a marketing process for banks it deems are tipping toward failure. And sometimes such a process can take place well ahead of an actual seizure, by as much as 60 to 90 days. And sometimes a failure doesn't happen even after bidding occurs.
The FDIC may be able to find a buyer among the big banks that is willing to take all of First Republic's deposits and perhaps some of its troubled assets, too. Sometimes the FDIC can sweeten such deals by agreeing to share future losses on loan portfolios, for example.
The San Francisco lender first began to fight for its survival in March when panic about the stability of regional lenders cascaded across the country. It tried to weather the turmoil by borrowing from the Federal Reserve and the Federal Home Loan Bank while also taking in $30 billion in uninsured deposits from 11 of the country's largest banks. JPMorgan provided $5 billion of the $30 billion.
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