First Republic Bank in the US Bites the Dust

Just when you thought it was safe to go back into the banking system, San Francisco-based First Republic Bank have folded and US regulators have brokered a deal for JPMorgan Chase to take over the troubled bank. 

 

The Wall Street giant said they would pay $10.6 billion to the Federal Insurance Deposit Corp, after officials shut down the smaller bank. First Republic had been under pressure since last month, when the collapse of two other US lenders sparked fears about the state of the banking system. [Refer to my post “Gold Surges Amidst Banking Crisis” published March 19, 2023]. 

 

Authorities said they hoped the deal would resolve the panic. The failure of the Californian bank is the second-largest in US history and the third in the country since March. Worth more than $20 billion at the beginning of last month, the bank known for their big home loan business and for their stable of wealthy clients, were ranked as the 14th largest lender in the US at the end of last year. 

 

The bank's 84 offices in eight states reopened on Monday as branches of JPMorgan Chase Bank and all depositors of the regional bank are now depositors of their bigger peer. 

 

In a scramble to come up with a rescue package, US officials were understood to have contacted six banks before landing on America's largest lender, according to news agency AFP. US President Joe Biden said the actions would ensure that the banking system is "safe and sound". 

 

But the deal appeared poised to renew political debate about financial regulation and the power of America's biggest banks. 

 

Jamie Dimon (left), chief executive of JP Morgan Chase, said the government had "invited" their bank, along with others, to "step up, and we did" and offered assurances about the industry. 

 

"This part of the crisis is over", he said, noting that few other banks were at risk of customers withdrawing deposits on mass, which caused the problems at First Republic and the two other lenders: Silicon Valley Bank and Signature Bank. 

 

"Down the road – rates going up, recession, real estate – that’s a whole different issue. For now, we should take a deep breath", he added.