NEW YORK — While Treasury Secretary Janet Yellen offered firm, upbeat reassurances to rattled bank depositors and investors Thursday, 11 of the biggest banks in the country announced a $30 billion rescue package for First Republic Bank, in an effort to prevent the California-based institution from becoming the third bank to fail in less than a week.
A television screen displaying financial news is seen inside one of First Republic Bank's branches Thursday in the Financial District of Manhattan.
First Republic serves a similar clientele as Silicon Valley Bank, which failed Friday after depositors withdrew about $40 billion. It appears that First Republic, which had deposits totaling $176.4 billion as of Dec. 31, was facing a similar crisis.
In a statement, the group of banks confirmed that other unnamed banks had seen large amounts of withdrawals of uninsured deposits, which are those that exceed the $250,000 level insured by the Federal Deposit Insurance Corp. First Republic's shares dropped more than 60% Monday, even after the bank said it had secured additional funding from JPMorgan and the Federal Reserve.
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On Thursday, the bank’s shares were down as much as 36%, but rallied after reports that the rescue package was in the works, and closed up nearly 9%.
JPMorgan Chase, Bank of America, Citigroup and Wells Fargo agreed to each put $5 billion in uninsured deposits into First Republic. Morgan Stanley and Goldman Sachs would deposit $2.5 billion each into the bank. The remaining $5 billion would consist of $1 billion contributions from BNY Mellon, State Street, PNC Bank, Truist and US Bank.
“The actions of America's largest banks reflect their confidence in the country's banking system,” the banks said in their statement.
The nation's banking regulators also issued a statement in support of the bank rescue package.
“This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” said Treasury Secretary Janet Yellen, Acting Comptroller of the Currency Michael Hsu, Federal Reserve Chair Jerome Powell and FDIC Chairman Martin Gruenberg.
Treasury Secretary Janet Yellen testifies before the Senate Finance Committee about President Joe Biden's proposed budget request for the fiscal year 2024, on Thursday in Washington.
The news could help calm the nerves of bank investors after the collapse last week of Silicon Valley Bank, which was the second biggest bank failure in U.S. history after the demise of Washington Mutual in 2008.
The shuttering of Silicon Valley Bank Friday and of New York-based Signature Bank two days later has revived bad memories of the financial crisis that plunged the United States into the Great Recession of 2007-2009.
Over the weekend the federal government, determined to restore public confidence in the banking system, moved to protect all the banks' deposits, even those that exceeded the FDIC’s $250,000 limit per individual account.
At a hearing Thursday on Capitol Hill, Yellen told senators that the U.S. banking system “remains sound” and Americans “can feel confident” about the safety of their deposits.
Her remarks came against the backdrop of deepening concerns about the health of the global financial system.
By the time her testimony was over, First Republic had received the emergency infusion of $30 billion in deposits from 11 banks. And in Europe hours earlier, Credit Suisse, Switzerland’s second-largest lender, got a promise from the Swiss central bank of a loan of up to $54 billion.
Republican senators laid a big part of the blame for the problems on Democratic President Joe Biden's administration.
“The reckless tax and spend agenda that was forced through Congress” contributed to record high inflation that the Federal Reserve is having to compensate for through increasing interest rates, said Sen. Mike Crapo of Idaho. And those surging rates have caused banks — as well as regular citizens — problems.
The Republicans also questioned Biden's assurances that taxpayers won't bear the brunt of the commitment to make depositors whole.
Yellen resisted that scenario, though she said, “We certainly need to analyze carefully what happened to trigger these bank failures and examine our rules and supervision" to prevent them from happening again. She defended the government’s argument that taxpayers will not end up paying the cost of protecting uninsured money at Silicon Valley and Signature.
The Treasury secretary was the first administration official to face lawmakers over the decision to protect uninsured money at the two failed regional banks, a move some have criticized as a bank “bailout.”
“The government took decisive and forceful actions to strengthen public confidence” in the U.S. banking system, Yellen testified. “I can reassure the members of the committee that our banking system remains sound, and that Americans can feel confident that their deposits will be there when they need them."
The week has been a whirlwind for markets globally on worries about banks that may be bending under the weight of the fastest hikes to interest rates in decades, increases intended to quell rising inflation on consumer goods.
The Justice Department and the Securities and Exchange Commission have launched investigations into the Silicon Valley Bank collapse, and President Joe Biden has called on Congress to strengthen rules on regional banks.
White House press secretary Karine Jean-Pierre said Thursday, "There are things that we can do in the administration, but in order to really deal with this issue we have to act. Congress needs to act.”
With all eyes on the Big Dance, Wall Street trades slow during March Madness
With all eyes on the Big Dance, Wall Street trades slow during March Madness
There's a reason it's called March Madness.
Much like the Olympics or World Cup, the NCAA Division I men's basketball tournament is a major sporting event that draws significant viewership, even for games played during normal working hours. That makes it difficult for even the most dedicated employees to keep their focus on work.
Last year, college basketball's Big Dance averaged 10.7 million total television viewers for its live game telecasts, with the Kansas Jayhawks' 72-69 championship game victory over the North Carolina Tar Heels pulling an average of over 18 million viewers on TBS, TNT, and truTV. Even nonsports fans get in on the action with office brackets, which arguably take little to no skill to fill out, let alone win, but allow people to have some skin in the game.
"It's hard to find somebody who doesn't know a friend who's filling out a bracket," Rodney Paul, a sports analytics professor at Syracuse University, told Stacker. "It's pretty easy to be able to get involved, especially with something that there's no stakes or low stakes."
To quantify March Madness' effect on productivity, Stacker looked to the stock market, collecting trading volume data from the Chicago Board Options Exchange between 2009 and 2022. We found more often than not, trade volume dipped at the start of the tournament. Trade volume was measured as the sum of shares exchanged during trading hours on all U.S. equities exchanges and trade-reporting facilities during trading hours. Our full findings lay ahead.
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Traders take pause
In 11 of the last 13 years the NCAA Division I men's basketball tournament took place, the number of shares traded during the tournament's first day decreased compared to the day before. This goes against the typical trading pattern.
Usually, the number of shares traded daily steadily rises throughout the week before slouching on Fridays. From Wednesday to Thursday (the typical tournament start day), the number of shares traded increases by 0.8% on average, according to trading data going back to October 2007. During March Madness, however, the trend flips: The number of shares traded on the tournament's first day is an average of 10% lower than the day prior—a nearly 11 percentage-point swing.
Looking at data from the first day of the tournament is especially crucial. Both the opening and second days are March Madness' busiest—there are 32 games played between the first two days, with the earliest tipoffs happening around noon ET. Because so many games take place during work hours, the start of the tournament is when productivity could take the biggest hit.
Explaining the outliers
On the floor of the New York Stock Exchange in Manhattan, it's not uncommon to see traders have at least one of their many screens tuned into the games. Though most traders are used to being in a high-pressure, reactive environment.
Many games are scheduled on or around the Federal Reserve's March meeting, which also happens in mid-March. But usually, their decisions are baked into the market, says Jonathan Corpina, a senior managing partner at Meridian Equity Partners with nearly 25 years of Wall Street experience.
"When you look at the economic calendar, we know there are things coming out. Everyone knows the Fed is going to make an announcement. You probably have your position or bet on what the market is going to do," Corpina said.
That bears out in the data. The two times the number of shares traded bucked the trend during March Madness and increased were after major and unexpected economic events: the 2013 banking crisis in Cyprus, and a surprise decision from the Fed to cut its rate hike outlook in 2016 due to economic headwinds.
Despite dipping data, March Madness brings positives
However, the data doesn't tell the full story. Rodney Paul warns that a drop in trading volume doesn't necessarily equal a loss in productivity across the whole workforce.
"People will project that to a loss of productivity," he said. "We live in a society where you can really shift your time in different ways, so maybe people start earlier, maybe people don't take the coffee break that they would otherwise."
Beyond that, March Madness is an event that can improve workplace dynamics—even if people skip work to tune into games. A 2011 study found that while productivity decreases in the workplace during the games, it's also a way to bring an office together.
"It's just something that gets people talking," Paul said. "It can lead to other things. Because as you're going throughout the day, you start talking about the game, but it might lead to talking about yourself, your family, etcetera, and other things that build up a deeper relationship."
