“We would expect this lifeline that First Republic received from these large financial institutions to give them time to look at their strategic options,” said Lawrence Glazer, managing partner at financial consulting firm Mayflower Advisors.
The gesture comes just days after the Federal Deposit Insurance Corporation (FDIC) took over Silicon Valley Bank. SVB fell apart last week.
Financial experts say First Republic has a large economic footprint in Boston, and especially the technology sector. They believe that the fear surrounding First Republic is causing consumers to pull money out of smaller banks and place it in larger, more stable banks. The result could mean less credit to go around.
“Small businesses rely on the local banks to extend credit, so the local pizza place around town that just recovered from COVID could see unintended problems because of this bailout. There will be fewer choices for the consumer and less credit available,” Glazer explained. “The Boston area has far more community and community banks than any other part of the country.”
Glazer believes the rush to move cash from smaller to larger banks is a result of the Treasury Department not saying whether uninsured deposits in small or regional banks will be protected. Last week, President Joe Biden announced that the FDIC would protect uninsured customers of Silicon Valley Bank.