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Planet Money looks into the recent financial troubles at First Republic Bank

MICHEL MARTIN, HOST:

When there was a run on Silicon Valley Bank last month. Some other banks also looked wobbly, particularly First Republic Bank. Its stock price plummeted, and depositors withdrew their money. As Amanda Aronczyk from our Planet Money podcast wonders, if it takes a bunch of customers to cause a bank run, can a bunch of customers stop one?

AMANDA ARONCZYK, BYLINE: Both Min Park (ph) and his wife worked in banking for years. And about a decade ago, Min's wife got a job at First Republic.

MIN PARK: She was like, I love this bank. I love the people. I love everything that they do for their clients. It's so - such a personal touch.

ARONCZYK: If it sounds like Min's outside, that's because he is.

PARK: Yeah. I'm sitting in the Bay Area and enjoying a California spring day.

ARONCZYK: Delightful. Anyway, when Min gave up banking to become an investor, he moved all of his accounts to First Republic. And if you're wondering what a personal touch at a bank looks like, well, Min had two bankers assigned to him. He could call them up pretty much any time. And when he and his wife were expecting their first baby, he let his bankers know.

PARK: I actually give them a heads up. Then I'm like, when am I allowed to open this type of account for my future child (laughter)?

ARONCZYK: Yes, they could absolutely open a bank account for his new son. Min tried pushing the bankers a little further, but they had to say no.

PARK: Like, I can't open a credit card for a 1-year-old, unfortunately. But - (laughter) yeah.

ARONCZYK: No credit cards for babies. This is the bank's business model, providing a high degree of personal service. So when First Republic looked like it might be the next victim of a bank run, Min tweeted about how much he liked his bank.

Do you mind reading the tweet?

PARK: Yeah, of course. (Reading) Very much rooting for First Republic. It has been transformative as a banking partner for us in launching our own independent small business journeys.

ARONCZYK: He's not alone. All month, customers have been professing their loyalty on LinkedIn and Medium and Twitter. Despite all the nice tweets, Todd Baker, a senior fellow at Columbia and a former banker himself, says that it was the customers that put the bank in jeopardy in the first place by withdrawing $70 billion from the bank in a matter of days.

TODD BAKER: It's a prisoner's dilemma problem. It's completely irrational to start a bank run. But if somebody else starts it, it's completely rational to participate in it.

ARONCZYK: That's exactly what happened. This was right after Silicon Valley Bank folded. First Republic has a similar clientele. Both banks are based in the Bay Area. Customers began to freak out.

BAKER: No one who's alive, more or less, has any real experience with a true bank run.

ARONCZYK: Where you go to get your money out of your account and it is gone, gone. So customers were just trying to figure out what to do. Then they start looking closely, scrutinizing their bank. Are there enough deposits left? Is there interest rate risk? First Republic customer Min, he was one of these concerned customers. Yes, he tweeted his support for the bank. But he also moved money out of one of his business accounts.

PARK: I was very much conflicted because I didn't want to help accelerate the run, because that's the kind of, like, snowball that really makes that prediction come true.

ARONCZYK: So he decided he would leave the rest of his accounts with First Republic. He wants to see the bank succeed. But customers alone can't save the bank. Other banks and the federal government have also stepped in to make sure First Republic survives this moment.

Amanda Aronczyk, NPR News.

(SOUNDBITE OF LYMBYC SYSTYM'S "FALL BICYCLE (THE ALBUM LEAF REMIX)" Transcript provided by NPR, Copyright NPR.

Amanda Aronczyk
Amanda Aronczyk (she/her) is a co-host and reporter for Planet Money, NPR's award-winning podcast that finds creative, entertaining ways to make sense of the big, complicated forces that move our economy. She joined the team in October 2019.