| Officials move to contain U.S. banking crisis |
| In the early hours of Monday morning, U.S. government officials seized First Republic Bank and then sold it to the country’s biggest bank, JPMorgan Chase. Their action appears, for now, to have quelled nearly two months of turmoil in the banking sector that followed the sudden collapse of Silicon Valley Bank and Signature Bank in early March. |
| For Jamie Dimon, JPMorgan’s chief executive, it was a reprise of his role in the 2008 financial crisis, when JPMorgan acquired Bear Stearns and Washington Mutual at the behest of federal regulators. But the acquisition has also brought to the fore debates about whether some banks have become too big to fail partly because regulators have allowed or even encouraged them to acquire smaller financial institutions. |
| JPMorgan is likely to make a lot of money from the acquisition, according to experts. JPMorgan will pay $10.6 billion to acquire First Republic, and the government expects to cover a loss of about $13 billion on First Republic’s assets. JPMorgan said that it expected the deal to raise its profit this year by $500 million. |
| Context: Normally a bank cannot acquire another bank if doing so would allow it to control more than 10 percent of the nation’s bank deposits — a threshold JPMorgan had already reached before buying First Republic. But the law includes an exception for the acquisition of a failing bank. |
| An end to the crisis? No other prominent lenders appear to have a similar set of urgent challenges: First Republic had extensive real estate loans that lost value as interest rates rose and a customer base of wealthy depositors who pulled their funds when the bank wobbled. |
