Regulators seized First Republic Bank early Monday and struck a deal to sell most of its operations to JPMorgan Chase, averting a wider banking crisis even as some Republicans say the Biden administration’s economic policies create the risk of more trouble.
JPMorgan agreed to assume all of First Republic’s $92 billion in deposits and to buy assets of about $173 billion in loans and $30 billion in securities. The Federal Deposit Insurance Corp. will cover about $13 billion in losses on the loans and provide about $50 billion to JPMorgan.
President Biden, at a White House event celebrating small businesses, said regulators’ action ensured that First Republic’s depositors are protected from losing any money. The president also said taxpayers “are not on the hook.” “We have to make sure that we’re not back in this position again, and I think we’re well on our way to be able to make that assurance,” Mr. Biden said.
Stocks were flat in trading Monday. The Dow Jones Industrial Average dipped 47.25 points, or 0.1%, to close at 34,050. The FDIC said keeping the coverage limit of $250,000 “fails to address the financial stability challenges” of uninsured deposits. “A default by the U.S. government — including the failure to pay any of the United States’ obligations — would be an economic catastrophe, sparking a global downturn of unknown but substantial severity,” Mr. Nostrand said. “Even if Congress ultimately raises the debt limit before a default occurs, the ensuing uncertainty could raise borrowing costs and induce other financial stress that would weaken our labor market and our standing in the world.
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