U.S. officials spearhead First Republic rescue discussions. Three sources said U.S. authorities are organizing urgent negotiations to save First Republic Bank (FRC.N) since private-sector attempts headed by the bank’s advisors have failed.

The sources claimed the FDIC, Treasury Department, and Federal Reserve have just begun to organize talks with financial businesses to discuss a lifeline for the ailing lender.

One source said the government’s participation brings banks and private equity firms to the table.

The U.S. may join a private-sector First Republic rescue. However, one source claimed the government’s involvement had encouraged First Republic management as they tried to negotiate a deal to avoid a takeover by U.S. authorities.

In March, rich clients the First Republic courted to fuel its rapid development began withdrawing money, causing the U.S. regional banking crisis.

Because conversations are private, sources requested anonymity.

“We are engaged in discussions with multiple parties about our strategic options while continuing to serve our clients,” First Republic stated.

After hours, the Treasury Department, FDIC, and Federal Reserve did not reply to email requests for comment.

Since 11 of the top U.S. lenders deposited $30 billion into the First Republic on March 16 to stanch a regional banking crisis that led to the demise of Silicon Valley Bank and Signature Bank, Wall Street banks have been seeking a solution for the First Republic.

After the First Republic reported deposit withdrawals of over $100 billion in the first quarter on Monday, negotiations accelerated. The bank reported its deposits had steadied, but it was losing money because it had to replace withdrawn deposits with interest-bearing Federal Reserve funds.

Two sources said that U.S. officials view a private-sector deal as preferable to First Republic falling into FDIC receivership.

But many of the options proposed – including selling assets or creating a “bad bank” that would isolate its underwater assets – have failed to yield a deal, the sources added.

Any solution would have to cover the losses that the First Republic or a potential bank acquirer would assume if there were a transaction. These losses would stem from First Republic’s loan book and fixed-income portfolio, whose low-yielding assets would be marked down to account for a rise in interest rates.

One of the sources said that First Republic is contemplating a major hit, and even a total loss for shareholders, as part of the options that would prevent U.S. regulators from taking it over. First Republic shares have lost 95% of their value since the regional banking crisis started on March 8.

No decision on a way forward has been made, and no deal is certain, the sources said.