Time is running out for First Republic Bank (NYSE:FRC). According to a report from CNBC journalist David Faber, FDIC receivership is seen as the most likely scenario for the troubled bank.
The FDIC is talking to banks about a solution, but the solution would include receivership, not a private deal. Several banks are interested in First Republic, but only as part of deal involving the FDIC. Banks are being asked for bids under this scenario.
There is still some hope for a so-called “open market solution” which would not include receivership but would involve aid from banks, but time is running out and this is not the most likely outcome, since this would require government involvement to force banks to act against their overall interest by buying assets above their market value.
There would be less pollical fallout if First Republic Bank goes into receivership. It is also not seen as creating systemic risk.
Shares of First Republic Bank declined following the report, falling over 20%. Shares were volatility and were halted several times for volatility late Friday morning.
Faber suggested official news on First Republic Bank may come this weekend, if not as soon as this evening.