(Bloomberg) — “The banking crisis is over,” Odeon Capital analyst Dick Bove said after reports that the nation’s largest private bank will provide $30 billion in liquidity to stabilize First Republic Bank.
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In an effort by the US government to stabilize California’s troubled lenders, JPMorgan Chase & Co, Bank of America Corp and Citigroup Inc, as well as $5 in deposits from smaller institutions, the people said. Billion will be contributed.
Bove said in an interview, “The Federal Reserve doesn’t have the money to stop bank runs, but the banking system itself has that money, and they’re going to keep it going forever.”
Read more: First Republic set to receive deposits of up to $30 billion
The KBW Bank index rose as much as 4.2% on news of the rescue attempt on Thursday after falling 3.7% earlier in the trading session. First Republic Bank also erased an earlier 36% decline, prompting several volatile trading halts as it jumped as much as 28%.
According to Bove, the plan to shore up the California bank, which could be announced as soon as Thursday, is “big enough to prevent a bank failure or ‘run’ of any meaningful size”.
He says the effort is reminiscent of 1998 when 14 banks banded together to rescue long-term capital management, rescue struggling hedge funds and prevent the collapse of global financial markets.
“It is clear that bank accounting needs to change,” Bove said. “The banks took advantage of a whole bunch of accounting opportunities to present a false picture of what they were doing. They destroyed trust in their system.”
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