Democratic Representative Ro Khanna said the Federal Deposit Insurance Corp. should be seeking the “lowest-cost alternative” to rescue First Republic Bank as the regulator reviews final bids.
(Bloomberg) — Democratic Representative Ro Khanna said the Federal Deposit Insurance Corp. should be seeking the “lowest-cost alternative” to rescue First Republic Bank as the regulator reviews final bids.
“That’s their mandate,” Khanna, whose district includes part of Silicon Valley and the Bay Area, said on CBS’s “Face the Nation.” “And right now they may need to work with banks and private capital to save First Republic. That is the state we’re in.”
US authorities are stepping in after the San Francisco-based bank’s stock plunged last week, leaving it down 97% this year. The FDIC has asked banks including JPMorgan Chase & Co., PNC Financial Services Group Inc., US Bancorp and Bank of America Corp. for bids, according to people with knowledge of the discussions.
Bids were due by around noon in Washington, with a result expected Sunday evening.
Khanna, a progressive Democrat, was asked whether big banks should be prevented from stepping in to rescue First Republic in the name of avoiding a further concentration of deposits away from smaller institutions. He signaled now wasn’t the time, while repeating a call for unlimited FDIC deposit insurance.
A possible option for First Republic is for regulators to use a bid for a so-called open-market solution that avoids formally declaring First Republic a failure and seizing it. The stock’s drop — leaving the company with a $650 million market value — has made such a takeover somewhat more feasible.
A bidding process could avoid the messy drawn-out auctions that followed the failures last month of Silicon Valley Bank and Signature Bank.
Gary Cohn, a former economic adviser to President Donald Trump and current IBM vice chairman, said he would expect an announcement before markets open Monday morning in Asia.
“What will most likely happen is the FDIC will seize control and then simultaneously resell the asset to the successful bidder,” he said on CBS.
Cohn, a former chief operating officer at Goldman Sachs Group Inc., said he doesn’t agree there should be “unlimited FDIC insurance.”
“I think that to me is a bit of a race to the bottom,” he said.
(Adds expected timing in fourth paragraph.)
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