They believe the books are sound, but people (depositors and investors) are a bit jumpy / skittish currently.
No bank - and that is no bank - can survive a majority of its depositors all withdrawing their funds rapidly. Even the big banks can't survive that.
The $250k backstop for the FDIC should prevent the regular depositors from doing a bank run, but when the depositors are more single sector business oriented then that is a more real fear.
By putting in $30B into the bank it provides a few things. First, it is $30B of money that the big banks aren't going to be moving out soon. It is liquid money that can be used so that First Federal doesn't have to sell securities at a loss to close out depositors accounts (this is what got SVB). Secondly, it is a statement from the banks that they trust (with their money where their mouth is) that the bank will not fail - because if it does, they're way about that $250k FDIC insurance number. Those deposits are very much like yours and mine - just with a few more zeros on the end. They are deposits - not bond sales or other financial instruments, but rather cash in the bank.
No bank - and that is no bank - can survive a majority of its depositors all withdrawing their funds rapidly. Even the big banks can't survive that.
The $250k backstop for the FDIC should prevent the regular depositors from doing a bank run, but when the depositors are more single sector business oriented then that is a more real fear.
By putting in $30B into the bank it provides a few things. First, it is $30B of money that the big banks aren't going to be moving out soon. It is liquid money that can be used so that First Federal doesn't have to sell securities at a loss to close out depositors accounts (this is what got SVB). Secondly, it is a statement from the banks that they trust (with their money where their mouth is) that the bank will not fail - because if it does, they're way about that $250k FDIC insurance number. Those deposits are very much like yours and mine - just with a few more zeros on the end. They are deposits - not bond sales or other financial instruments, but rather cash in the bank.
From yesterday: https://www.marketplace.org/2023/03/16/first-republic-bank-3...
From this morning: https://www.marketplace.org/shows/marketplace-morning-report...