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JPMorgan Chase to take over deposits and most of the assets of First Republic Bank

LEILA FADEL, HOST:

Another U.S. bank has failed - the third one this year, after Silicon Valley Bank and Signature Bank.

A MARTÍNEZ, HOST:

Overnight, California regulators closed First Republic Bank and put it into receivership. Then federal regulators announced JPMorgan Chase, the biggest of the big banks, has bought the majority of First Republic's assets and deposits.

FADEL: NPR's David Gura joins us now with the latest.

Good morning, David.

DAVID GURA, BYLINE: Hey, Leila.

FADEL: OK. So what is JPMorgan Chase buying, and how did this sale come to be?

GURA: Well, JPMorgan is buying all the deposits at First Republic Bank, about $100 billion of them in total, and most of First Republic Bank's assets as well. That's according to the Federal Deposit Insurance Corporation, the FDIC, which is First Republic Bank's primary regulator. You know, last week, as the trouble that the bank was in worsened, the FDIC approached several larger lenders and said, basically, take a look at First Republic. If it's something you'd want, submit a bid by Sunday. And we know several banks did that. The FDIC evaluated those bids. We learned about First Republic's failure and the outcome of that process shortly after midnight California time, just after 3 o'clock in New York. And I'll note, unlike what happened with Silicon Valley Bank and Signature Bank, this time around, the FDIC did not use its emergency powers to do this. And JPMorgan's CEO, Jamie Dimon, said in a statement, the bank made its bid in a way that will minimize costs to the FDIC's deposit insurance fund. And, Leila, it says the cost will be about $13 billion.

FADEL: Now, this is the third bank in the U.S. to fail. What happened this time at First Republic Bank that led to this failure?

GURA: Well, in the immediate aftermath of the collapse of those two banks in March, there was this fear we would see more bank runs. First Republic was swept up in that, and it immediately sought to reassure its customers and investors. It lined up additional financing. And when that didn't calm nerves, 11 of the biggest banks in the U.S. stepped in to offer First Republic a lifeline. They deposited $30 billion at First Republic Bank. That still didn't make much of a difference. First Republic's share price just kept falling. And last week, when First Republic reported its earnings, we learned its customers had withdrawn way more money than Wall Street expected - more than $100 billion in deposits in March. So this was a bank that was really suffering. And we were at this cliffhanger moment, as one Wall Street analyst put it to me, everyone wondering what would happen next, Leila, recognizing the situation was bad enough that something had to happen.

FADEL: So, David, what does this announcement mean for customers of First Republic Bank?

GURA: For them, regulators and JPMorgan stress it should be business as usual. There are more than 80 First Republic Bank branches in eight states in the U.S., including in California and New York. And those customers will be able to access their money at those branches today. They're now automatically customers of JPMorgan Chase. I'll stress, taxpayers are not on the hook here. JPMorgan and the FDIC are going to share in any losses on First Republic's loans. And that $13 billion cost I mentioned just a minute ago, that'll come out of a fund that banks pay into.

FADEL: Now, David, there are probably people listening right now thinking, is my money safe in whatever bank I'm banking at? What does this move mean for the health of the banking sector, the markets? Is there more turmoil ahead?

GURA: Analysts I spoke with emphasize the circumstances around the failure of First Republic are unique, and this is unlikely to lead to the kind of volatility we saw after Silicon Valley Bank and Signature Bank collapsed. And many other lenders said in their earnings recently that deposits at those banks have stabilized. Now, in terms of the market, there was hope and an expectation, really, among investors a deal like this would get hammered out before markets opened in Asia. Of course, that didn't happen, but this was squared away pretty tidily before the opening bell in New York.

FADEL: NPR's David Gura.

Thanks, David.

GURA: Thank you. Transcript provided by NPR, Copyright NPR.

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Leila Fadel is a national correspondent for NPR based in Los Angeles, covering issues of culture, diversity, and race.
David Gura
Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.
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