First Republic is a hot mess. The reason has a lot to do with its wealthy clientele

In 2008, First Republic was near collapse due to heavy losses in the subprime mortgage market.

First Republic is a hot mess. The reason has a lot to do with its wealthy clientele

CNN New York --

It might seem strange that First Republic, a bank that caters to wealthy clients in coastal States, was a threat to the American banking system. The government had to intervene.

This is due to the fact that high-net-worth individuals who bank there have a lot of influence on it.

Sources close to the deal to infuse First Republic $30 billion of cash with cash within 48 hours said that it was "the biggest example of a bank which could go down but shouldn't go down"

The cash injection came from 11 competitors, including America's largest lenders. First Republic in San Francisco, which is based in San Francisco, was the 14th-largest banking institution in the country.

Jamie Dimon, CEO of JPMorgan Chase, reached out to Treasury Secretary Janet Yellen, and Federal Reserve Board Chair Jerome Powell on Thursday. 'Very quickly, the conversation turned to First Republic', a source said to CNN.

The government-organized rescue is not a bailout. Its goal is to provide enough cash for customers to withdraw and to assure investors that the bank can withstand the turmoil that has shaken the sector over the past week.

It has not had the desired effect.

JPMorgan Chase (JPM), down 3%, and Bank of America(BAC) down 4% are the other rescuers.

"The market is saying that this is not enough. We need more," Ed Mills, Washington policy analyst for Raymond James, said to CNN on Friday.

What was the point of First Republic having a target on its backs?

Investors noticed similarities between First Republic Bank and Silicon Valley Bank, a failed lender based in the Bay Area with a large client base.

Patricia McCoy, a Boston College law professor, said that these depositors are especially trigger-prone. "They are sophisticated and know that they have other options. They also have the mechanisms in place to quickly move money.

McCoy, who founded the Consumer Financial Protection Bureau, stated that this 'particularly volatile' depositor base poses a risk to investors.

JPMorgan Chase and other big banks have diversified their depositor base to include more of McCoy's'sticky deposits'. This means that regular people who have less than $250,000 of FDIC-insured bank deposits.

Two-thirds of First Republic’s deposits were not insured. This is a far lower percentage than Silicon Valley Bank's 94% uninsured deposits. However, First Republic had an unusually high 111% loan-to deposit ratio at the end last year according to S&P Global. This means it has lent out more money than it has deposited.