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Facing Collapse, Trump-Linked Bank Fought Regulators

Mar 23, 2023 Rebecca Burns
Only months before its troubles, First Republic pressured bank overseers to preserve the status quo
The Charging Bull sculpture in New York's Financial District. (AP Photo/Richard Drew)
The Charging Bull sculpture in New York's Financial District. (AP Photo/Richard Drew)

After bailing out Silicon Valley Bank last week, the federal government is reportedly considering the rescue of a second struggling institution whose deposits are largely uninsured. But just two months ago, that bank, San Francisco-based First Republic, pressured regulators not to adopt new rules to minimize the risk of government bailouts for insolvent banks, calling such enhanced regulation “unnecessary.”

First Republic Bank is best-known for its role at the center of a major Donald Trump scandal. Its board of directors includes major Trump donor and ally Tom Barrack, who is reportedly spearheading efforts to save the company.

Only months before the rescue talk began, the bank waged a battle to deter federal banking regulators from considering stronger measures to prepare for the potential failures of regional banks like First Republic.

Under laws passed after the 2008 financial crisis, large banks are already required to show that, if they fail, the process of shutting them down will not imperil the broader financial system or rely on taxpayer money.

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A 2018 regulatory rollback reduced many requirements on regional banks, including that they draw up annual plans, known as “living wills,” to safely wind down failing banks. But as those banks rapidly ballooned in size, federal regulators solicited public comment last fall on whether additional precautions were needed to limit the risk of financial contagion in the event of “uninsured depositors suffering loss” at one bank.

That is the very prospect now facing customers of First Republic, about two-thirds of whose deposits are uninsured because they surpass the $250,000 guaranteed by the federal government.

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