(JustPatriots.com)- The financial meltdown on both sides of the Atlantic has been halted in part thanks to a $30 billion rescue plan funded by deposits from a group of prominent American banks to the struggling First Republic Bank.
According to a statement, 11 institutions, including Citigroup, Bank of America, and JPMorgan Chase, are participating in the rescue package.
Reports show the agreement is a response to the recent failures of Silicon Valley Bank (SVB) and Signature Bank and is designed to head off the widespread panic that would result from the fall of any more banks.
The Dow Jones Industrial Average rose as much as 400 points in after-hours trade on the news of the bailout agreement. In tumultuous trading, First Republic’s stock managed a near 10% gain by the day’s end, according to reports.
When news of the bailout plan spread, the stock price jumped as high as 40% from its lows earlier in the day. Unfortunately, First Republic stock has dropped by more than 65% this month.
According to a report, Standard & Poor’s downgraded the bond rating of First Republic, a bank with a clientele comparable to that of the defunct SVB, to “Junk.”
First Republic saw its credit rating drop from A- to BB+ from the rating agency S&P. Last Friday, the rating agency Moody’s joined the ranks of others who downgraded the bank to junk status.
S&P explained that First Republic’s rank remains on CreditWatch at negative. This means that they could decrease the rating even more if the bank can’t show improvements in bolstering deposits and regaining the value that, in their opinion, has probably gone down.
The S&P analysts said they did not consider the 120-day initial maturity of the influx of deposits to be a long-term answer to the bank’s financing concerns. The difficulty of attracting substantial deposits will hinder the bank’s ability to operate.
Goldman Sachs raised its prediction of a US recession within a year to 35% from 25% last week.
