Troubled First Republic Bank seized by regulators, then sold to JP Morgan Chase

Regulators seized control of First Republic Bank early Monday, making it the third financial institution taken under government control this year, then promptly accepted a bid from JP Morgan Chase for all of First Republic’s assets, a California agency said.

The state’s Department of Financial Protection and Innovation (DFPI) said it had taken over San Francisco-based First Republic and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. The DFPI said the FDIC then “accepted a bid from JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all deposits, including all uninsured deposits, and substantially all assets of First Republic Bank.”

The DFPI said it acted under California law regarding a financial entity “conducting its business in an unsafe or unsound manner” and being in a “condition that … is unsafe or unsound” to transact banking business.”

The moves were made nearly a week after First Republic revealed that customers withdrew more than $100 billion during a panic last month — a revelation that further fueled concerns First Republic couldn’t survive on its own. 

First Republic follows Silicon Valley Bank and Signature Bank, both of which experienced runs last month and were taken over by the government. As with Silicon Valley, a significant share of First Republic’s deposits were uninsured, which made it more prone to withdrawals from skittish customers.

In a rare move, 11 of the nation’s largest financial institutions gave First Republic $30 billion in deposits last month to prop up the troubled bank. 

Federal officials from the FDIC, Treasury Department and Federal Reserve held private talks with other banks on Friday hoping to find a bailout plan for First Republic, Reuters reported, but no private rescue materialized. Takeover talks continued all weekend in the hope a deal could be struck before U.S. stock markets opened Monday.

The bank went into FDIC receivership while holding roughly $233 billion in assets. Its shares have lost 97% of their value since January, taking more than $21 billion off First Republic’s market value.

On the CBS News broadcast “Face the Nation” Sunday, Gary Cohn, a former Goldman Sachs president who served as former President Donald Trump’s top economic adviser, was on-target, predicting that, “The FDIC would prefer to sell the bank in its entirety than the pieces. What will most likely happen is the FDIC will seize control and then simultaneously resell the asset to the successful bidder.” Cohn is now IBM vice chairman.