US regulator seizes First Republic Bank, to sell assets to JP Morgan

[Kamaji]

US regulator seizes First Republic Bank, to sell assets to JP Morgan

By Reuters
May 1, 2023

United States regulators said on Monday First Republic Bank has been seized and a deal agreed to sell the bank to JPMorgan Chase & Co, in what is the third major U.S. institution to fail in two months.

The Wall Street major bank will take most of First Republic’s assets and all the deposits, including uninsured ones, the regulators said in a statement.

JPMorgan was one of several interested buyers including PNC Financial Services Group, and Citizens Financial Group Inc which submitted final bids on Sunday in an auction being run by U.S. regulators, sources familiar with the matter said over the weekend.

The California Department of Financial Protection and Innovation announced early on Monday it had taken possession of First Republic and the Federal Deposit Insurance Corporation (FDIC) would act as its receiver.

The FDIC estimated in a statement that the cost to the Deposit Insurance Fund would be about $13 billion. The final cost will be determined when the FDIC terminates the receivership.

*  *  *

Source:  https://nypost.com/2023/05/01/u-s-regulator-seizes-first-republic-bank-to-sell-assets-to-jp-morgan/

[Gefn]

First Republic Bank Is Seized, Sold to JPMorgan in Second-Largest U.S. Bank Failure

JPMorgan said it will assume all of First Republic’s $92 billion in deposits—insured and uninsured. It is also buying most of the bank’s assets, including about $173 billion in loans and $30 billion in securities.

As part of the agreement, the Federal Deposit Insurance Corp. will share losses with JPMorgan on First Republic’s loans. The agency estimated that its insurance fund would take a hit of $13 billion in the deal. JPMorgan also said it would receive $50 billion in financing from the FDIC.

San Francisco-based First Republic, the second-largest bank to fail in U.S. history, lost $100 billion in deposits in a March run following the collapse of fellow Bay Area lender Silicon Valley Bank. It limped along for weeks after a group of America’s biggest banks came to its rescue with a $30 billion deposit. Those deposits will be repaid after the deal closes, JPMorgan said.

https://www.wsj.com/articles/first-republic-bank-is-seized-sold-to-jpmorgan-in-second-largest-u-s-bank-failure-5cec723

[mystery-ak]

First Republic Bank fails, taken over by JPMorgan Chase
by Geoffrey Rowland, Julia Mueller and Sylvan Lane - 05/01/23 6:20 AM ET

First Republic Bank was seized by regulators and sold to JPMorgan Chase early Monday morning, making it the third major bank to fail since March.

The FDIC brokered the deal for Chase to take over First Republic following weekend-long negotiations and “a highly competitive bidding process,” according to a Monday statement.

JPMorgan Chase will take control of all First Republic deposits and assets, and all 84 branches of First Republic Bank will reopen as branches of JPMorgan Chase during Monday business hours, the FDIC said.

Bidding for First Republic lasts into the night: A guide to the latest banking crisis

Customers with accounts at First Republic will be able to access their deposits by the beginning of Monday business hours, the FDIC said. The FDIC said that deposits with the bank will continue to be insured.

As of April 13, First Republic Bank had approximately $229.1 billion in assets and $103.9 billion in deposits, the FDIC said.

more
https://thehill.com/business/3981198-first-republic-bank-fails-jpmorgan-to-buy-most-assets-in-rescue/

[DefiantMassRINO]

Great job, Federal Reserve Board of Governors.

Who could have known that rapidly devaluing 30 Year Treasury Bonds would cause insolvency at financial institutions?  Maybe their regulators at the Federal Reserve?

 

I nominate the Federal Reserve as the 2023 Winner of the Golden Turd Award.


 

[Weird Tolkienish Figure]

I'm ignorant here... why are we making JP Morgan/Chase even bigger? Too big to fail?

[Kamaji]

I'm ignorant here... why are we making JP Morgan/Chase even bigger? Too big to fail?

They apparently bid the highest for the carcass.

[sneakypete]

They apparently bid the highest for the carcass.

@Kamaji

The mere FACT that there was a bidding war for it tells pore ol ignurt me that it's assets where worth more than it's debts.

So.....,what is really going on here?

[Kamaji]

@Kamaji

The mere FACT that there was a bidding war for it tells pore ol ignurt me that it's assets where worth more than it's debts.

So.....,what is really going on here?

That's not how the procedure works.  The question is what assets does the bidder agree to assume, and what will it pay for the assets it is taking over.

Bank receiverships and problem resolution is a very complex area of business and law; it's not like putting a repossessed car up for sale at an auction.

For example, oftentimes the bank will be split into two banks - the old "bad bank" which retains certain loans and other obligations that are going to be resolved by the FDIC or other bank regulator, and a new "good bank" that has good assets, such as deposits and performing loans.  The bidding is usually for the "good bank" not the "bad bank".

[DefiantMassRINO]

Its assets may be worth more than its debt ... for now ... rising rates, customer withdrawals, future loan defaults, and mark-to-market valuation of assets could make any instituion insolvent at any time.

In 2008, it was NINJA loans, Collateralized Debt Obligations, and Credit Default Swaps - all risky private sector financial instruments constructed around Federally insured mortgages.

In 2023, it's 30 Year Treasury Bonds, so far - which is worse considering that US Treasury Bonds were considered to be the safest of safe assets.

[sneakypete]

That's not how the procedure works. 

The question is what assets does the bidder agree to assume, and what will it pay for the assets it is taking over.

@Kamaji

Seems to ME like a bunch of laws were written to protect big banks by giI ving them "flea market" bids on what valuable assets failing banks own.

I will probably be in a minority here,but I think that if you bid for the assets of a failing bank,you should also be bidding for responsibility of the negatives associated with that bank. You  get it all,or you get none of it.

[sneakypete]

Its assets may be worth more than its debt ... for now ... rising rates, customer withdrawals, future loan defaults, and mark-to-market valuation of assets could make any instituion insolvent at any time.

In 2008, it was NINJA loans, Collateralized Debt Obligations, and Credit Default Swaps - all risky private sector financial instruments constructed around Federally insured mortgages.

In 2023, it's 30 Year Treasury Bonds, so far - which is worse considering that US Treasury Bonds were considered to be the safest of safe assets.

@DefiantMassRINO

That's more than a little bit scary to me.

[Kamaji]

@Kamaji

Seems to ME like a bunch of laws were written to protect big banks by giI ving them "flea market" bids on what valuable assets failing banks own.

I will probably be in a minority here,but I think that if you bid for the assets of a failing bank,you should also be bidding for responsibility of the negatives associated with that bank. You  get it all,or you get none of it.

The point of the bank resolution system is to keep banks operating and to avoid runs on banks or losses to depositors, and to maximize the possibilities of recovering on bad assets, such as failed loans, in order to make other participants as whole as possible.

You may not like it, but it generally operates in an effective manner.

And JP Morgan certainly assumed a heaping helping of debt as well, and will need temporary financing to get its minimum capital ratios up to where they're supposed to be.

[bigheadfred]

The point of the bank resolution system is to keep banks operating and to avoid runs on banks or losses to depositors, and to maximize the possibilities of recovering on bad assets, such as failed loans, in order to make other participants as whole as possible.

You may not like it, but it generally operates in an effective manner.

And JP Morgan certainly assumed a heaping helping of debt as well, and will need temporary financing to get its minimum capital ratios up to where they're supposed to be.

Where does that temporary financing come from?

[catfish1957]

Payne had a nice op-ed piece on FBN a few months ago about this, and he is thinking the banking industry is (will) be taking a faux crisis approach and undergo a huge consolidation......   Which we all know hurts competitiveness for the customers, whether it is on the borrowing or savings end.

[catfish1957]

In 2023, it's 30 Year Treasury Bonds, so far - which is worse considering that US Treasury Bonds were considered to be the safest of safe assets.

Ever in your life time did you ever expect a 2% reverse differential between 6 mo. and 30 yr. treasuries?

That is how bearish the investment community is in, locking money into Fedzilla.

[Kamaji]

The JP Morgan press release on the acquisition:  https://www.jpmorganchase.com/ir/news/2023/jpmc-acquires-substantial-majority-of-assets-and-assumes-certain-liabilities-of-first-republic-bank

They say they will be doing an analysts' call:

As noted above, JPMorgan Chase will host a conference call for analysts and investors on Monday, May 1, at 8:30 a.m. (ET) to discuss the transaction. The general public can access the call by dialing  (888) 324-3618 in the U.S. and Canada, or (312) 470-7119 for international callers; using passcode 1364784#. Please dial in 15 minutes prior to the start of the call. The live audio webcast and presentation slides will be available on the Firm’s website, www.jpmorganchase.com, under Investor Relations.

Feel free to sign in and provide some reportage.

[sneakypete]

Where does that temporary financing come from?

@bigheadfred

Excellent question!

I would add "And how much are the interest rates on the loans they take out to buy out the failing bank?"

[mountaineer]

Matt Allen
@investmattallen
Congresswoman Lois Frankel sold First Republic Bank in March before the stock dropped 80%

After she sold First Republic, she bought JP Morgan Chase which just bought First Republic. She clearly had inside information.

If me or you did this then we would be in prison.
5:02 PM · May 1, 2023

[mountaineer]

Democrat Sold First Republic Stock, Bought JP Morgan Before Collapse
By Andrew Stanton
 On 5/1/23 at 3:39 PM EDT

Representative Lois Frankel recently sold shares of First Republic Bank as well as purchased stock in JP Morgan, which on Monday took over First Republic following its collapse.

First Republic Bank (FRC) was seized by California regulators and sold to JPMorgan Chase (JPM), which will now assume responsibility for its debts and assets, on Monday. Shares in First Republic, a San Francisco-based bank founded in 1985, fell more than 75 percent last week after the bank announced that depositors withdrew $100 billion in March. ...

According to an April 28, 2023, financial disclosure report, Frankel first sold shares of the bank on March 16 following SVB's collapse. Just days later, on March 22, Frankel also purchased shares in JP Morgan Chase & Co, according to the report. ...

Newsweek

[catfish1957]

Matt Allen
@investmattallen
Congresswoman Lois Frankel sold First Republic Bank in March before the stock dropped 80%

After she sold First Republic, she bought JP Morgan Chase which just bought First Republic. She clearly had inside information.

If me or you did this then we would be in prison.
5:02 PM · May 1, 2023

SEC has become the proverbial Fox guarding the Hen House.

[mountaineer]

Rep Frankel is not the only member of Congress cashing in on the bank failures, apparently.

Nancy Pelosi Stock Tracker ♟
@PelosiTracker_

You just can't make this up
Rep. Dan Goldman (D) timed selling $PACW perfectly
He sold on 3/6, avoiding the not only the initial drop in $PACW but also the 50% drop after hours today
And guess which district he represents? Wall Street
5:23 PM · May 3, 2023

[catfish1957]

Rep Frankel is not the only member of Congress cashing in on the bank failures, apparently.

What has done more damage to our equity markets is the premise, and often recentlyy correct, that there are "winners" and "suckers".
Until the SEC does something, we are going to see a continued erosion of confidence in our markets.  Like right now, the ratio of speculators vs. pensioners is likely as high  as it has been in my investment life.

When the tipping point gets reached, and the general population starts thinking it is truly rigged, we will likely see some serious market corrections.

[Right_in_Virginia]

Chuck Callestro
@ChuckCallesto

REPORT: Bank Stocks CRASHING After Hours – PacWest Down over 60%, Western Alliance Down 30%, Metropolitan Bank Down 20%..

JOE'S AMERICA...

6:51 AM · May 4, 2023

[catfish1957]

Chuck Callestro
@ChuckCallesto

REPORT: Bank Stocks CRASHING After Hours – PacWest Down over 60%, Western Alliance Down 30%, Metropolitan Bank Down 20%..

JOE'S AMERICA...

6:51 AM · May 4, 2023

Gold at an all time high- $2052/oz
VIX shooting up and is up 8% in early trading patterns.

Decent barometer of an ETF of Mid-sized Capped Regional Banks- (IAT) is down 6%

Broader markets are down fractionally.  At least early on, the damage has been contained.

[Kamaji]

Members of Congress should not be permitted to knowingly trade in the stock market.  It should all be handled through blind trusts.