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JPMorgan Chase Acquires First Republic Bank

by Joshua Brown
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Regulators took control of First Republic Bank early Monday and sold its deposits and many of its assets to JPMorgan Chase Bank in order to stop additional banking issues in the U.S. First Republic, located in San Francisco, is the third medium-sized bank to shut down in two months. It’s the second greatest bank failure ever in America after the 2008 economic downfall (which was also taken over by JPMorgan).

First Republic Bank had some trouble since March, so people got scared it might not be able to stay open. But on Monday, the Federal Deposit Insurance Corporation said that all of First Republic’s 84 branches in eight US states will come under JPMorgan Chase Bank and everyone can keep their money in their bank accounts without worrying.

Over the weekend, government officials were trying to figure out what to do before the U.S. stock markets opened. Some global markets weren’t open because it was a holiday on May 1, but Asian markets in Tokyo and Sydney still rose. Jamie Dimon, the CEO of JPMorgan Chase, said that they responded when they were asked by the government. On April 13th, First Republic Bank had $229 billion in total assets and $104 billion in deposits according to the FDIC (Federal Deposit Insurance Corporation).

At the end of last year, First Republic was ranked as the 14th biggest bank in the United States. The Federal Deposit Insurance Corporation predicted that it would cost them $13 billion to take over this bank. Taking over Silicon Valley Bank had set a record because it costed them a huge amount – $20 billion!

Before Silicon Valley Bank collapsed, First Republic had a very successful banking business which many other banks envied. The people who used this bank’s services were generally wealthier and more influential, and they rarely ever failed to pay their loans back. So, First Republic made a lot of profit by giving out low-cost loans to those with money – like Mark Zuckerberg, the CEO of Meta Platforms.

First Republic had a lot of money in deposits from rich people, and their total assets more than doubled to over $100 billion over the first quarter of 2019, when they had 4,600 full-time staff. However, most of these deposits weren’t backed up by the FDIC (Federal Deposit Insurance Corporation); essentially meaning that if something happened and First Republic failed then its depositors might not get all their money back. This made analysts and investors worried.

Recently, the bank reported some worrying news in their quarterly report. People took as much as $100 billion out of the bank during a time of crisis in April. Thankfully, First Republic Bank was able to keep things under control by getting help from other big banks who gave them an extra $30 billion in money that wasn’t insured.

Since the crisis, First Republic has been trying to find a way of improving their situation. This includes selling things which don’t make them much money, such as mortgages with low interest rates for wealthy customers. Additionally, they are planning to let go up to one quarter of their staff; that amounts to about 7,200 people in 2022.

People who invest their money aren’t convinced. The people in charge at the bank haven’t said anything to those investing or asking questions since the bank shared its information, and this is making the stock value of First Republic go down even more.

It’s tough to make money when you have to sell stuff fast and don’t have many people around to help you find ways to use the money. For example, it took a long time for banks like Citigroup and Bank of America to get back on their feet after the world economy crashed fifteen years ago and they were even able to rely on extra support from the government.

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