PNC, JPMorgan Want to Buy First Republic After Government Seizure

A pedestrian walks past a First Republic Bank location in San Francisco, Wednesday, April 26, 2023.InternationalIndiaAfricaOn March 9, customers at Silicon Valley Bank reported problems withdrawing or transferring money from their accounts. The next day, regulators took over the bank and promised to make depositors whole. However, the incident caused a crisis of confidence for customers at other banks, resulting in more bank runs.PNC Financial Services and JPMorgan Chase are both vying to buy First Republic Bank amid reports the US government may soon take control of the troubled financial entity.Citing insiders with knowledge of the developments, US media has reported that both the seizure and the purchase could be completed this weekend. Reports that the regulators plan to take over First Republic began to emerge Friday afternoon.

Both JPMorgan and PNC have a history of taking over failed banks during crises; JPMorgan bought the embattled Bear Stearns in 2008 and took over Washington Mutual after a government seizure.

Also during the 2008 crisis, PNC purchased National City Corp with assistance from the government, a Cleveland bank that was struggling.

First Republic Bank has been teetering on the edge of collapse since the March 10 collapse of Silicon Valley Bank (SVB). The SVB collapse reportedly led to a bank run on First Republic, with over $100 billion being pulled out by customers in a matter of days.Since the SVB collapse, First Republic Bank stock has lost nearly 97% of its value. A group of banks, including JPMorgan Chase and PNC, had tried to shore up the bank with a $30 billion injection to no avail.First Republic had attempted to find a buyer without a government seizure, sought outside investments and floated the idea of selling its loans and securities above market value but none of those plans came to fruition.The troubled financial institution had $233 billion in assets before the collapse and it is likely to become the second-largest bank to fail in US history. A spokesperson declined to comment to US media.EconomyUS Federal Reserve Blames Itself, Bad Management for SVB CollapseYesterday, 22:19 GMTThe bank’s fate seemed sealed on Monday when it released its earning reports and revealed it had shored up customer deposits by taking expensive loans from the Federal Reserve and Federal Home Loan Bank. The loans effectively put the bank in a position where it would pay more in liabilities than it could earn from its assets. The report sent First Republic’s stock price into a free fall, losing 50% of its value in one day.

The 2023 US banking crisis began when concern skyrocketed about the health of multiple mid-sized banks and depositors with more than the FDIC-insured $250,000, with clients opting to pull their money out in large numbers as a precaution. The sudden drawdown caused SVB to collapse and the New York-based Signature Bank to fail just days later.

The government bailed out both banks – though they did not use that language – and made depositors at both banks whole.

On Friday, the Federal Reserve, FDIC and Government Accountability Office released separate reports on the bank failures, pointing the finger not only at bank mismanagement but also at regulators for acting too slow and without enough force. They also blamed relaxed regulations on small and medium-sized banks.

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