FDIC Chairman L. William Seidman called the assistance ``an interim step'' to provide needed stability to First Republic's subsidiaries and depositors.
Seidman said the FDIC was working on a long-term solution to the holding company's problems and was talking to private investors about participating in a restructuring.
But he declined to offer specifics and said he could not estimate the size of any eventual rescue package. Private analysts, however, say a rescue of First RepublicBank could ultimately cost the government as much as $2 billion to $4 billion.
The largest-ever bank rescue was the $4.5 billion rescue in 1984 of Continental Illinois National Bank & Trust of Chicago. The FDIC expects to recoup much of its initial outlay in that bailout, and anticipates its ultimate cost to be about $1.7 billion.
Seidman, however, stressed the differences between Continental and First RepublicBank. The Chicago bank's problems were attributed to management misjudgment and wrongdoing.
``It's very clear the primary reason for (the First Republic) problem is the economy of Texas,'' Seidman told a news conference.
He said the FDIC will assume some control of the subsidiary bank's operations, although not day to day. The current bank's management will remain in place for now, but changes could be discussed later, he said. The Office of the Comptroller of the Currency hopes to finish an examination of the company's books within the next several weeks.
Seidman said his agency, which insures deposits at commercial banks, would guarantee all of the subidiary banks' deposits as well as money owed to general creditors of the banks. …