JPMorgan Chase Buys First Republic In An Effort To End The Bank Crisis

(CTN News) – According to the Federal Deposit Insurance Corporation, JPMorgan Chase has acquired First Republic Bank, the embattled lender that has suffered massive deposit losses for weeks.

Despite the collapse last month of Silicon Valley Bank and Signature Bank, regulators scrambled all weekend to complete the sale of San Francisco-based First Republic.

First Republic was shut down overnight by California’s state bank regulator, and the FDIC was appointed as receiver. All deposits and assets will be acquired by JPMorgan, which will take over all of them.

With over $200 billion in assets, First Republic was previously one of the most coveted banking franchises in America.

The bank’s demise is the latest fallout from SVB’s shocking collapse, which sparked runs at similar institutions, such as Signature.

As a result of catering to businesses and wealthy individuals whose deposits exceeded the $250,000 deposit insurance limit, all of these banks had unusually large numbers of deposits that weren’t backed by the FDIC.

There were runs as depositors became concerned about the solvency of these banks, which all had large portfolios of assets that had dropped in value.

According to JPMorgan CEO Jamie Dimon, the banking system is stable, although “no crystal ball is perfect.”

I hope this mini-bank crisis is over,” he said.

Treasury said in a statement that the banking system remains strong and resilient, and Americans should feel confident that their deposits are safe and the banking system will fulfill its essential function of providing credit to businesses and families.

According to a press release from JPMorgan, the FDIC will share some of the losses from First Republic’s residential mortgage and commercial loan portfolio. Fees from banks fund the deposit insurance fund, which is expected to take a $13 billion hit.

In a release, JPMorgan said it had purchased loans and securities worth $173 billion. A $92 billion deposit will also be assumed, “including $30 billion in large bank deposits, which will be repaid after closing or eliminated in the consolidation.”

As part of a deal to shore up First Republic’s balance sheet, 11 of the nation’s largest financial institutions, including JPMorgan, deposited $30 billion less than a week after uninsured depositors at SVB and Signature Bank were rescued by federal banking regulators.

As panic swept across the regional banking sector last month, more than $100 billion in withdrawals hit First Republic, contributing to the majority of uninsured deposits remaining.

As part of the deal, government officials avoided having to make a decision about backing uninsured deposits at a failed bank once again.

The FDIC’s new Republican board member Jonathan McKernan said he was pleased the agency wasn’t forced to use emergency powers to deal with First Republic’s failure.

FDIC use of emergency powers is grave and unfortunate,” he said. The March 12 rescue of SVB and Signature’s uninsured depositors was an admission that 15 years of reform efforts have not been a success,” arguing that the agency should avoid adding more prescriptive regulations or otherwise pushing responsible risk taking out of the banking system.

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