WHEN: Today, Wednesday, April 26, 2023
WHERE: CNBC’s “Squawk on the Street
Following is the unofficial transcript of breaking news about First Republic from CNBC’s David Faber on “Squawk on the Street” (M-F, 9AM-12PM ET) today, Wednesday, April 26th.
All references must be sourced to CNBC.
DAVID FABER: Welcome back. We’re keeping a close eye on shares of First Republic at least as a reflection of investors’ beliefs about the ability of that bank to continue as a going concern, essentially, seven bucks a share, not much equity value left. Yesterday, of course, we first reported about a plan that First Republic was was pursuing, hoping to get the government’s help as well and pressuring a number of the nation’s biggest banks to step up and buy loans and securities from its balance sheet at a higher price than they otherwise would get in the market and therefore help it to clean up that said balance sheet in order for it to go out and raise equity. Problem is at this point as best I can tell and as our sources close to CNBC can tell, there does not appear to be a willingness on the part of for example the White House or Treasury to really pressure those banks to try to come to this table to the table to formulate this plan, this asset sale plan from from First Republic that would essentially help it to heal its balance sheet and so the clock is ticking. And we simply don’t know at this point what that will mean whether the bank will be successful in navigating the days ahead or whether the FDIC, Jim, will have to simply say you’re done, which of course, will then result in a $30 billion hit to the FDIC spun most likely assessments on those same very banks that would potentially have been asked to come to its assistance that already did to a certain extent back on March 16th when they deposited 30 billion at the bank to try to bolster confidence. You know, JPMorgan alone is about 11% of the FDIC insurance fund. So, if there’s an assessment, it gets assessed 11% of whatever that.
JIM CRAMER: Well David, how about the let’s say flailing offer that First Republic’s giving these banks. You can get some equity, maybe you get something going on if you give us more money, or is that just good after bad?
FABER: You know, their feeling is listen, you don’t get the assessment you otherwise will if we’re actually taking over, you don’t deal with the risk of another bank failure and what that will mean to the system. By the way, you’re a depositor here and it is going to require the FDIC to essentially change, you know, its definition in terms of its it’s going to require them to make a systemic exemption to allow all deposits to be covered. I mean, will they actually say no, they won’t, unlikely.
CRAMER: How about the loans which nobody would want I imagine because they were offering mortgages at terrible rates for the bank and great rates to the rich.
FABER: Yeah. Well, the bank I mean, that’s the other side is that many of these large banks will say, well, we’re getting the customers anyway. The Wealth Advisors are already moving over to our platforms, the assets are already moving. We’re going to be able to move in on your mortgage business and your high-net-worth client base over time. So why are we going to put anything up to save you to be able to compete against us in the future?
CRAMER: Well when Jamie Dimon lent, puts a deposit in, doesn’t he expect that the bank itself will start discussions, finding some some deep pocketed investors, making some moves.
FABER: Well, the problem—
CRAMER: What did they do? They brought Tom Barrack in.
FABER: Yeah, the problem all along has been that finding a buyer as we’ve said was virtually impossible without a government assistance of some kind because you would take such a big hit to your own book value, given the writedowns that would have to take place on their assets. 25 billion is the number I’ve been using quite some time.
CRAMER: Yeah, that’s what I’m hearing.
FABER: So it’s getting close now. You know, we’ve got to stay, stay focused on it. That said, and again, the reason that government may be very reluctant to get involved is it’s not seen as a systemic risk. It’s weeks now, Carl, since the mini banking crisis really occurred and they’ve given the market time to adjust.
