PacWest announced a $3.5 billion sale of loans to alternative investment manager Ares Management, providing another lift to a regional bank hammered during the industry chaos earlier this year. PacWest is one of several regional lenders that struggled to keep depositors following the March 10 failure of Silicon Valley Bank. Since then, those stocks rallied for four of the last six weeks on optimism that the worst was over for regional banks.
First Republic's stock price dropped nearly 30% on Wednesday after losing more than $100 billion in deposits during last month's banking system turmoil. The bank and its advisers are now considering a variety of alternatives to save the lender without being seized by US regulators, from the creation of a so-called "bad bank" to divesting $50 billion to $100 billion of long-dated securities and mortgages to make an eventual capital raise easier. The bank has a potential to avoid being seized by regulators, but it will require assistance from the US government.
Top officials at the Federal Reserve are debating whether or not to raise interest rates further amid concerns over bank stress and the economic outlook. Some officials argue that the Fed should hold off on further rate hikes until there is more clarity on the impact of recent market volatility and global economic risks, while others believe that the Fed should continue to gradually raise rates to prevent inflation from rising too quickly.
The Federal Reserve's upcoming meeting has left analysts uncertain about whether the central bank will pause further rate hikes or delay releasing new economic projections due to recent trouble among banks and a clouded economic outlook. The Fed must balance the need to keep pressure on the economy to lower inflation, strike the right note of caution about financial stability, and avoid any missteps that could make investors think things are worse - or better - than they are. Some analysts suggest the Fed should delay any further rate hikes and withhold economic projections to avoid creating more chaos than clarity.
