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Hold on a second. I thought the Fed opened a special loan program for precisely this situation after SVB. Why isn’t that program sufficient for First Republic?
by junofan 4y ago
Hold on a second. I thought the Fed opened a special loan program for precisely this situation after SVB. Why isn’t that program sufficient for First Republic?
- danielmarkbruce 4y agoFor at least two reasons: 1) It doesn't help them to borrow money at 4-5% if their loan book is earning less than (or even slightly more, because operating costs). Locking in losses won't save them. 2) The FDIC decided that things had further deteriorated at First Republic (ie, more deposits pulled than they expected) and downgraded their CAMEL rating. The Fed won't lend money once a rating drops to some level (I'm not sure exactly where they draw the line) Their assets are worth less than their liabilities. They are toast.