Once again, the government must intervene: First Republic Bank, the second largest US bank ever to collapse | outside

It is the third bank in two months to go bankrupt. To combat high inflation, the US Federal Reserve raised interest rates, but this reduced the value of outstanding loans issued at low interest rates.

In addition, after the collapse of the Silicon Valley bank in March, customers withdrew $100 billion in deposits from the First Republic. America’s largest banks tried to bail out the San Francisco company by giving it $30 billion, but that did nothing to boost First Republic’s stock price. It lost another 48 percent of its value at the end of last week.

California regulator DFPI has now taken over the bank and has designated the FDIC as the recipient. In a press release, the latter reported that JPMorgan Chase, the largest bank in the world, is buying all credits and almost all assets of First Republic. The main bank and the American Guarantee Fund also agree to divide the loan losses between themselves. That would cost the FDIC about $13 billion.

The bank’s mortgages, which were issued at relatively low interest rates mainly to attract wealthy clients, have fallen in value and would incur significant losses if they were sold.

First Republic’s 84 offices in eight US states will open Monday where JPMorgan branches and clients of the bankrupt bank can easily access their funds, even if they exceed the $250,000 guarantee limit.

First Republic specializes in private banking services for high net worth clients. Like Silicon Valley Bank, it has also provided venture capital. In July 2020, First Republic was the 14th largest bank in the United States according to its own data. At the end of last year there were 7,200 employees.