U.S. financial regulators have seized troubled First Republic Bank and sold its assets to JPMorgan Chase Bank in what is the third major American bank failure in two months.
In a statement early Monday, the Federal Deposit Insurance Corporation said all depositors at San Francisco-based First Republic will become customers at JPMorgan and have immediate, full access to their money.
Under the deal, JPMorgan acquired “substantially all” of First Republic assets and agreed to assume responsibility for its deposits, including those above the federal insurance limit of $250,000 per account. First Republic had about $229.1 billion in assets and $103.9 billion in deposits.
But JPMorgan is not assuming First Republic’s corporate debt or preferred stock, JPMorgan said in a statement. As a result, First Republic’s failure is expected to cost the FDIC about $13 billion, the agency said. The money will come from the FDIC’s deposit insurance fund, to which insured banks contribute every three months.
U.S. President Joe Biden told reporters, "Regulators have taken action to facilitate the sale of First Republic Bank and ensure that all depositors are protected, and the taxpayers are not on the hook."
"These actions,” he added, “are going to make sure that the banking system is safe and sound, and that includes protecting small businesses across the country who need to make payroll for workers and for small businesses."
"Let me be very clear: While depositors are being protected, shareholders are losing their investments,” Biden said.
The closure and sale of First Republic comes seven weeks after the abrupt closing of Silicon Valley Bank in California and New York’s Signature Bank in March, three of the four biggest-ever U.S. bank failures after the 2008 collapse of Washington Mutual. The recent failures have been caused by bad financial investment decisions by the banks’ managers and sharp withdrawals by depositors.
At First Republic, depositors withdrew more than $100 billion in recent weeks.
JPMorgan Chief Executive Jamie Dimon told financial analysts on Monday there is no guarantee that other banks won’t also fail but believes the immediate emergency has been resolved and that the broader U.S. banking system is sound.
“This part of the crisis is over,” Dimon said.
He acknowledged, however, that as interest rates continue to rise, the U.S. economy, the world’s largest, could encounter more difficulties.
“Hopefully, people will be properly prepared for it,” Dimon said.
Even before the First Republic takeover, JPMorgan Chase was the biggest U.S. bank, with $2.4 trillion in deposits at the end of March. Following the March bank failures, JPMorgan said it received about $50 billion in new deposits from people worried about keeping their cash in smaller banks.
