Regulators Seize First Republic Bank, Assets Sold to JPMorgan Chase

Regulators seized troubled First Republic Bank and sold all of its deposits and most of its assets to JPMorgan Chase in a bid to head off further banking turmoil in the U.S. San Francisco-based First Republic is the third midsize bank to fail in two months. It is the second-biggest bank failure in U.S. history, behind only Washington Mutual, which collapsed at the height of the 2008 financial crisis and was also taken over by JPMorgan. According to a Reuters report, this marks the largest U.S. bank failure since 2008.

Government Intervention and JPMorgan’s Role

“Our government invited us and others to step up, and we did,” said Jamie Dimon, chairman and chief executive of JPMorgan Chase. First Republic’s 84 branches opened Monday as branches of JPMorgan Chase, which acquired the bank’s $92 billion in deposits and $203 billion in loans and other securities. The bank’s shareholders are likely to be wiped out as part of the deal.

A Troubled Business Model

Before this year, First Republic was the envy of the banking industry. However, that business model of catering to the rich became a liability with the collapses of Silicon Valley Bank and Signature Bank. These banks had large amounts of uninsured deposits, and as was the case with Silicon Valley Bank and Signature Bank, First Republic clients with large accounts were quick to pull their money at the first sign of trouble. Timothy Coffey, an analyst with Janney Montgomery Scott, noted that too many First Republic customers showed their true loyalties were to their own fears.

A Desperate Attempt to Survive

First Republic planned to sell off unprofitable assets, including low-interest mortgages that it provided to wealthy clients. It also announced plans to lay off up to a quarter of its workforce, which totaled about 7,200 employees in late 2022. However, analysts saw it as too little, too late. The bank seemed to be on the brink of failure for weeks.

President Biden’s Response and Call for Regulation

U.S. President Joe Biden on Monday hailed the deal for protecting depositors without making taxpayers foot the bill. He repeated his call for stronger bank regulation and supervision. “These actions are going to make sure that the banking system is safe and sound,” Biden told an event at the White House. “Critically, taxpayers are not the ones that are on hook.”