JPMorgan Chase Buys First Republic

Headquarters of JPMorgan Chase finance company in New York, the USA.InternationalIndiaAfricaMary ManleyThe buyout resolves just one of the latest US banking failures since the start of the year following the Silicon Valley Bank collapse. The Federal Deposit Insurance Corporation (FDIC) briefly took over First Republic Bank and sold it JPMorgan Chase on Monday after it lost about $100 billion worth of deposits since the start of 2023.JPMorgan Chase CEO Jamie Dimon detailed shortly after news broke on Monday of First Republic’s buyout that the current banking crisis was just about done.Dimon admitted to analysts during a call that there “are only so many banks that were offsides” in the manner that First Republic was left. “There may be another smaller one, but this pretty much resolves them all,” Dimon said. “This part of the crisis is over.”JPMorgan earlier announced they were acquiring First Republic after winning an auction over the weekend, with the lender stating they were acquiring nearly all of First Republic’s deposits and most of its assets after it was momentarily seized by the FDIC.

The deposits which JPMorgan will assume make up $92 billion, both insured and uninsured. The company will also be buying $173 billion in loans and $30 billion in securities from the collapsed bank.

The FDIC will share losses with JPMorgan on First Republic’s loans as part of this weekend’s deal, and will receive $50 billion in financing from the FDIC.In March, two midsized banks – Silicon Valley Bank and Signature Bank – collapsed and caused panic to spread among investors, who then fled to giants like JPMorgan. JPMorgan Chase is a global bank with assets that range in the $2.6 trillion range, according to their site.

First Republic, which is based in San Francisco, is the second-largest bank to fail in US history and suffered following the collapse of its neighbor Silicon Valley Bank.

The largest US bank failure remains the plummet of Washington Mutual, which crashed and burned in September 2008 after losing $307 billion in assets.

In response to growing concern over the latest banking buyout, White House Press Secretary Karine Jean-Pierre underscored that the current financial setbacks were “very different” from the 2008 crisis.

"This is not 2008," the press secretary stressed to reporters when asked for comment on the development and its impact on the First Republic failure.

Stephen Kelly, a senior researcher at the Yale Program on Financial Stability, reiterated those claims made by the White House.“This is the last stages of that initial panic. First Republic’s problems started as a result of SVB and Signature,” said Kelly. “This isn’t the story of 2008, where one bank went down and investors focused on the next biggest bank, which would wobble.”

One of the main contributors of the 2008 crisis was the use of subprime mortgages, which carried high risk as they were typically given to traditionally unqualified loan applicants. When the housing bubble burst, it effectively left banks with trillions in poor investments, prompting an increasing number of lenders to file for bankruptcy – Lehman Brothers chief among them.

The crisis marked the worst economic fallout since the Great Depression and took years before much of the American public was able to recover, as many lost their jobs and homes in mass nationwide foreclosures.

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