From Breakingviews: JPMorgan’s boss Jamie Dimon is leading another bail out. His mega-bank agreed to take over First Republic. It’s good for shareholders, but also entrenches the too-big-to-fail mentality, says TheRealLSL
can only watch as their biggest rival gets bigger. The 4% rise in JPMorgan’s shares on Monday also indicates Dimon’s ability to use the government’s largesse to his advantage.
The handling of First Republic begs questions about the next bank to fall. By asking 11 lenders, including JPMorgan, to inject $30 billion of deposits into First Republic in late March, the FDIC made itto compromise those positions later. It left the agency in a precarious negotiating position and speaks to the idea that it is still struggling with how to safeguard U.S. savers without introducing additional moral hazard.
The situation also gives Dimon a leg up. He has saved First Republic’s depositors and, in some ways, the FDIC. There can be no assurance that taxpayers will be better off once he rides into the sunset. The challenge is to ensure it’s his last rodeo.JPMorgan said on May 1 it had bought most of First Republic Bank’s assets and assumed its deposits and other liabilities from the Federal Deposit Insurance Corp after the agency said it had seized the lender on the same day.
As part of the deal, the FDIC will provide a five-year, $50 billion fixed-rate term loan. The regulator also will provide 80% loss coverage on single-family residential mortgages and commercial loans, including commercial real estate, which make up nearly 80% of First Republic’s loan portfolio.Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
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