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  • Writer's pictureThe San Juan Daily Star

After days of panic, bank executives can breathe again

Ken Griffin, C.E.O. of Citadel, appears during The New York Times DealBook conference in Manhattan on Nov. 10, 2021. Citadel said it had taken a stake in Western Alliance, an Arizona bank.

By Rob Copeland

After nearly a week of tumult, the specter of a billowing crisis over the banking industry appeared to ease, at least for the moment, as pressure began to lift on the mid-size and regional lenders most in peril.

Shares of First Republic, which over the weekend had to slap together a multibillion-dollar rescue package to shore up its finances, soared over 60% Tuesday before giving back some of those gains and closing up 27%. Shares are still down by roughly two-thirds over the past five trading days.

Western Alliance, previously a little-known Arizona bank, saw its stock shoot up 50% on Tuesday after Citadel, the investment giant run by billionaire Ken Griffin, disclosed that it had taken a stake in the hard-hit lender, though that gain was pared back to 14% by the end of the day.

Some of the worst-hit banks seemed to go to extreme lengths to put on a brave face, and they had some success doing so. Zions Bank of Salt Lake City convened an emergency forum featuring both senators from Utah. Its stock bounced back to a degree Tuesday, as did shares of PacWest Bancorp of Los Angeles and Charles Schwab, the Texas financial conglomerate.

Though the financial world was suddenly glued to news of banks that only the most obsessive observers would have earlier heard of, none of their CEOs would agree to be interviewed. Some sent out mass notes to customers that sidestepped the most pressing questions of the moment: How much money was being withdrawn this week, and what was the plan if the outflows pressed on?

One bank CEO, Brad Tidwell of VeraBank, shared his personal cellphone number to all 70,000 depositors at his institution, which has roughly $4 billion in deposits. His phone lit up Monday and Tuesday with more than 50 text messages and around two dozen phone calls from customers, asking him for personal assurances that everything would turn out OK.

While stock prices aren’t a clear proxy for whether a bank is healthy or not, falling shares or even simply volatility in prices can set off panic in borrowers and lead to a bank run. The recent downturn in the industry, in fact, was set off in part by just that, when shares in Silicon Valley Bank, a technology-focused lender, plummeted after it disclosed plans to raise money that it needed to pay out some depositors.

Less than two days later, Silicon Valley Bank, which had roughly $175 billion in deposits, was taken over by federal regulators, making it the biggest bank failure since the 2008 financial crisis. Shares in other relatively small institutions have since fallen precipitously on fears that they, too, could be insolvent, though thus far only one other bank, Signature Bank, has been seized by regulators.

On Sunday, federal officials committed to paying out depositors at those fallen banks in full, even if the banks did not have sufficient money. Depositors reported Monday that they were able to take out funds, an enormous relief to employers and individuals who had been worried about when and if they would regain access to their money.

Officials stressed, however, that stockholders and bondholders in the banks themselves would still be in line to lose money on their investments.

For the first day since Silicon Valley Bank’s unwinding, there were no widespread reports of customers being denied the chance to withdraw money from ATMs and bank branches. It appeared that the worst fears of widespread cash shortages were contained for now.

Yet much uncertainty remains. As bank shares were recovering and branches returned to normalcy Tuesday, only a few institutions had provided extensive updates about the degree to which skittish customers were pulling out their money.

On Monday, First Republic’s executive chair, Jim Herbert, told CNBC in an off-camera interview that the bank was not experiencing an unusual level of withdrawals, a pronouncement that the anchors on the set greeted with visible skepticism. The bank did not respond to inquiries from The New York Times about the statement.

Charles Schwab’s CEO, Walter Bettinger, boasted in a CNBC interview Tuesday that his firm had seen positive incoming deposits this month overall, but neither he nor a Schwab spokesperson would provide figures for this week, when Schwab’s stock has been under the most acute pressure.

Bettinger said he had bought roughly $3 million in new shares Tuesday to show his faith in the company.

Zions, whose ties to the Church of Jesus Christ of Latter-day Saints stretch back to the bank’s first president, Brigham Young, has been similarly vague. On Monday, the company held a forum with high-profile political guests, including not just both senators but the governor as well. Scott Anderson, the bank’s CEO, opened by reading a script that noted Zions had a more diversified business base than Silicon Valley Bank, but he did not take questions or provide new information about his organization’s financial base during the crisis.

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