The ailing First Republic Bank (NYSE:FRC) of San Francisco was seized in the early hours of this morning by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. This is the third major U.S. bank to fail within a month and is the second largest bank failure in U.S. history.
The FDIC announced it reached an agreement JPMorgan Chase Bank (NYSE:JPM) of Columbus, Ohio, to assume all of the deposits and substantially all of the assets of First Republic Bank.
“Our government invited us and others to step up, and we did,” said Jamie Dimon, Chairman and CEO of JPMorgan Chase. “Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund. This acquisition modestly benefits our company overall, it is accretive to shareholders, it helps further advance our wealth strategy, and it is complementary to our existing franchise.”
All of First Republic’s 84 offices in eight states will reopen today and its depositors will become customers of JPMorgan Chase Bank, with full access to all their deposits. The FDIC noted that First Republic had approximately $229.1 billion in total assets and $103.9 billion in total deposits as of April 13.
The FDIC and JPMorgan Chase Bank also entered into a loss-share transaction on single family, residential and commercial loans it purchased of the former First Republic Bank. Under the agreement, the two entities will share in the losses and potential recoveries on the loans covered by the loss–share agreement. The FDIC added the loss–share transaction would maximize recoveries on the assets by keeping them in the private sector while minimizing disruptions for loan customers.
Photo by Can Pac Swire / Flickr Creative Commons
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Where is the accountability of these Bank Officers’ negligence? Dodd-Frank Laws ignored? I understand the FDIC is horribly underfunded. What happens if another major bank fails. Will the FDIC be able to cover the losses? Print more money? Hyper inflation I would imagine.
We have a horrible inflation that government does not want to see. Real Estate was and is still over inflated. A lot of money has been printed and more to come because more banks are going to need help.
Don’t think FDCI will be able to cover more losses.
Well, it’s a stacked deck…
The government controls the financial environment banks operate in, regulates the banks, enforces the regulations, then “invites” the big banks/inner circle to acquire the failing banks.
Jaimie Dimond is a very smart CEO who has been strategically positioning Chase for maximum opportunity and he did not miss this one.
Yes, failing regional banks are at risk of being gobbled up by bigger banks who are better politically positioned.
History repites Big fish eats small with government help