Monday, May 1st, 2023
Before the market opening on Monday, it was announced that JP Morgan (JPM) the biggest U.S. Bank will be “buying” First Republic Bank’s (FRC) assets and some of its liabiities, from the Federal Deposit Insurance Fund, with $50 Billion of Federal Reserve provided loans.
The failure of FRC is the second largest bank failure in U.S. Banking history, and the takeover by JPM will permit the customers and branches of FRC to open on a normal schedule on Monday morning.
If JPM hadn’t taken over FRC it may have triggered more bank runs and put the FDIC in an impossible situation, as the insurance fund does not have enough assets to cover the potential liabiities.
Jamey Dimon, CEO of JPM said the current banking crisis is over. However, who is to say what bank defaults may lie ahead as the economy slips into a possible year end recession? Charlie Munger, Buffett’s partner warns of possible further banking problems with their commercial real estate loans running into defaults.