The best thing for the broader market would be if First Republic were taken over by another bank.
The problem is that no other bank is going to pay any meaningful amount of money for it, given held-to-maturity losses of $4.8 billion and a market cap of $2.8 billion. As for shareholders of the bank, they're not going to accept a bid of $1/share when the companies shares are still trading at $9.39.
So what has to happen? It's likely to end up as some kind of Japanese-style zombie bank until it bleeds low enough of government officials step in. A report just out cites multiple people saying that FRC is struggling to come up with a viable option but that a large bank or the FDIC could take over, like with SVB.
They note that officials from the White House and Treasury have held talks with First Republic in recent days and that the administration is concerned that time is running out.
The report said that the White House isn't worried about contagion but that could change with PacWest set to report after the bell. If deposits miss expectations, it could be more trouble. Alternatively, something like a 10% drop in deposits y/y might stabilize sentiment.
