American megabank JPMorgan Chase & Co will make a distressed acquisition of First Republic Bank after attempts by federal officials to rescue the chain failed late Sunday night.
The purchase, worth $63 billion, will give JPMorgan control of $92 billion in deposits and $203 billion in assets put at risk when First Republic experienced a stunning collapse in March. The San Francisco-based chain was the second to fall after a run by investors on Silicon Valley Bank as panic spread about lack of liquidity in the system. Both chains were heavy investors in the local tech market which has slumped as stockholders shed high-risk assets in favor of bonds and more established American industries.
As part of the agreement, the Federal Deposit Insurance Corporation agreed to split losses with JPMorgan, absorbing $13 billion through its insurance while offering JP Morgan $50 billion in financing options.
The latest deal means JPMorgan, already worth $2.4 trillion, is set to rise even higher as investors sock away money in its too-big-to-fail institution. Even before the deal, the megabank estimated it had accepted $50 billion from investors who feared other banks would fail in the wake of First Republic. JPMorgan’s stock jumped sharply on Monday following news of the deal.
Peter St. Onge, an economist with the Heritage Foundation, shared pointed criticism of the deal on Twitter where he said the FDIC, which offers “threadbare coverage” for depositors, had already lost $22.5 billion on its deal to absorb the loss of Silicon Valley Bank.
First Republic bailed out for $63 billion pic.twitter.com/EQXRH7JX30
— Peter St Onge, Ph.D. (@profstonge) May 1, 2023
The failure of First Republic means that three of the four largest bank collapses in American history have occurred in just the last two months. In addition to SVB and First Republic, New York-based Signature Bank also failed for similar reasons, though First Republic, with $233 billion in assets, was the largest and rivaled the spectacular collapse of Washington Mutual Inc. in 2008.