First Republic Bank bailout appears ‘corporatist and based on agreements between government and big banks’
In an interview that aired on Friday’s show of Bloomberg’s “Wall Street Week,” the Harvard professor, economist, director of the National Economic Council under President Barack Obama and Treasury Secretary under President Bill Clinton, Larry Summers, said the First Republic Bank bailout ‘was not an objective assessment of the private sector to have faith in the First Republic. And ‘seemed a bit corporate and deal-based to me. between the government and the big banks.
Summers said: “It was JPMorgan and a number of other banks that were apparently brought together by the secretary and by JPMorgan. I don’t know what to do with it. The government has pledged to put money there at par above the market value of the securities for a year. The fact that the banks have committed for 120 days so that they can get out well before the government at an interest rate that we do not yet know what it is, with what the agreements are in the agreement with the Treasure. I guess having everyone playing will make people a little more confident. But it made me nervous. It was not an objective assessment of the private sector to trust the First Republic. So I don’t know what to do with it. It seemed to me a bit corporatist and based on agreements between the government and the big banks. But we’ll have to see how that plays out. And I hope there will be full transparency on all agreements.
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