5/1/23 UPDATE 0426 ET:
The financial world was saved from rampant speculation overnight as the rumors began to swirl around midnight on the savior of the FDIC and First Republic. The hints were dropped just after midnight as to who that might be.
Sure enough, just before 4 a.m. ET this morning, JP Morgan Chase got their sweetheart deal from the FDIC:
The FDIC agreed to enter into a Shared Loss Agreement with JP Morgan Chase which means the taxpayers are on the hook for billions in yet undetermined losses while JP Morgan gets to cherry pick the winning garbage off the books as the nightmare is sorted out in the months ahead. From the press release:
The FDIC estimates that the cost to the Deposit Insurance Fund will be about $13 billion. This is an estimate and the final cost will be determined when the FDIC terminates the receivership.
Of course that’s just $13 billion today. By the end of next year it could be substantially more. I am completely amazed at just how incompetent the FDIC and US Treasury was in this matter as the problems with this institution were visible to anyone for a month now and more so when they reported their delayed quarterly results.
If this is an example of how Janet Yellen and the Biden junta is going to handle this problem in the months ahead, expect massive disruptions to America’s financial system and especially its bond markets.
4/30/23 UPDATE:
So the FDIC hasn’t “officially” announced the receivership or closure of the situation because they want to sell the bank without the First Republic Bank’s approval and force the issue. Then this news hits which means PNC is probably a great short play when markets open.
Sold to you….more as the news breaks closer to the Asia open.
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Sorry folks, I just have to do this in honor of the 2006-2010 fun we had here and on the radio….
Tonight the FDIC seized and shut down First Republic Bank of California (Symbol: $FRC) in what was the least shocking bank failure of this year.
No one wanted to buy them.
Their books probably would have made Angelo Mozilo blush.
And America is ignoring the 14th largest bank failure after the 2nd and 3rd ones like the Titanic just hit the iceberg because the bartenders ran out of fresh ice for the cruise.
The stock chart looks as bad as one could expect, in fact at WaMu levels of bad:
Thankfully it bounced off the $1.60ish range after hours as some idiots think the FDIC will “save” them or something:
I shall post the initial FDIC press release below, and when the full statement comes out, I shall have further comment on the actions of futility as we march headstrong into a major credit crisis. But don’t tell Apple, they have a market to save next week.
And as yours truly was waiting on the FDIC release for what we already know is a done deal, this gem of a headline pops up at 9:47 p.m. ET:
The bigger question is just how much will the taxpayer have to guarantee. Back to the waiting game…
Full FDIC press release from their website just before 4 a.m. on May 1, 2023:
JPMorgan Chase Bank, National Association, Columbus, Ohio Assumes All the Deposits of First Republic Bank, San Francisco, California
WASHINGTON — First Republic Bank, San Francisco, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect depositors, the FDIC is entering into a purchase and assumption agreement with JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all of the deposits and substantially all of the assets of First Republic Bank.
JPMorgan Chase Bank, National Association submitted a bid for all of First Republic Bank’s deposits. As part of the transaction, First Republic Bank’s 84 offices in eight states will reopen as branches of JPMorgan Chase Bank, National Association, today during normal business hours. All depositors of First Republic Bank will become depositors of JPMorgan Chase Bank, National Association, and will have full access to all of their deposits.
Deposits will continue to be insured by the FDIC, and customers do not need to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. Customers of First Republic Bank should continue to use their existing branch until they receive notice from JPMorgan Chase Bank, National Association, that it has completed systems changes to allow other JPMorgan Chase Bank, National Association, branches to process their accounts as well.
As of April 13, 2023, First Republic Bank had approximately $229.1 billion in total assets and $103.9 billion in total deposits. In addition to assuming all of the deposits, JPMorgan Chase Bank, National Association, agreed to purchase substantially all of First Republic Bank’s assets.
The FDIC and JPMorgan Chase Bank, National Association, are also entering into a loss-share transaction on single family, residential and commercial loans it purchased of the former First Republic Bank. The FDIC as receiver and JPMorgan Chase Bank, National Association, will share in the losses and potential recoveries on the loans covered by the loss–share agreement. The loss–share transaction is projected to maximize recoveries on the assets by keeping them in the private sector. The transaction is also expected to minimize disruptions for loan customers. In addition, JPMorgan Chase Bank, National Association, will assume all Qualified Financial Contracts.
The resolution of First Republic Bank involved a highly competitive bidding process and resulted in a transaction consistent with the least-cost requirements of the Federal Deposit Insurance Act.
The FDIC estimates that the cost to the Deposit Insurance Fund will be about $13 billion. This is an estimate and the final cost will be determined when the FDIC terminates the receivership.
FDIC: PR-34-2023
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