The end of the banking crisis?
“For now, let’s take a deep breath,” says JPMorgan Chase’s CEO Jamie Dimon. “This part of the crisis is over.” Dimon’s bank took over San Francisco-based First Republic Bank this week after the latter became the latest institution to be undone by rising interest rates.
On Monday, US regulators seized control of First Republic and then immediately sold it on to JPMorgan for $10.6bn, says The New York Times. First Republic is the secondlargest US bank by assets to collapse in history, behind only the 2008 failure of Washington Mutual.
First Republic catered for a wealthy clientele, many of whom held deposits in excess of the $250,000 federally insured limit. That made it especially vulnerable to the bank run that started with the failures of Silicon Valley Bank and Signature Bank in March. The federal deposit insurance fund will pay out $13bn as part of the deal, which will prevent First Republic customers from losing any of their deposits. The acquisition makes JPMorgan, already America’s biggest bank, “even bigger”.
Shares in JPMorgan rose in Monday trading in response to the news. The KBW Bank index, which tracks the 24 top US bank stocks, plunged by 25% in March when the crisis began and has yet to recover the lost ground.
Yet beyond the banking sector, “stockmarkets have largely escaped collateral damage”, says Ross Clark in The Spectator. Including Credit Suisse, “we have now had four major banking collapses in the space of six weeks, with remarkably little spillover into the economy at large”. Many analysts think that First Republic’s failure draws a line under the turmoil. Yet if “one of the too-big-to-fail banks got into trouble” the crisis could yet take on a wholly different scale. “Only a brave person” would say we are past the worst.