Jamie Dimon is getting involved in rescuing banks again.
The JPMorgan CEO is taking the lead in discussions on how to save First Republic Bank, reports the Wall Street Journal.
First Republic Bank has been pressured by depositor outflows since the collapse of Silicon Valley Bank earlier this month. Banking heads, including Dimon, are now considering investing directly into First Republic Bank, after a $30 billion deposit from 11 banks before the weekend failed to calm nerves. The Journal reports that the banks might convert their deposits into a capital infusion.
Dimon also helped corral his fellow banking CEOs to agree to the multi-billion dollar deposit, suggested by U.S. Treasury Secretary Janet Yellen earlier in the week, according to Bloomberg. First Republic tapped JPMorgan for liquidity as early as March 12, just a few days after Silicon Valley Bank was taken over by federal regulators.
A spokesperson from JPMorgan declined to comment.
First Republic Bank is the latest U.S. bank to stumble since the banking crisis began earlier this month, following the collapse of Silvergate, Silicon Valley Bank and Signature Bank of New York in the U.S., and the hastily agreed deal for UBS to buy its fellow Swiss bank Credit Suisse for $3.2 billion.
Not the first time
Both JPMorgan and Jamie Dimon have stepped in to rescue failing and failed banks before—and it didn’t work out so well.
JPMorgan bought the failed investment bank Bear Stearns in March 2008 for $1.4 billion, in a deal shepherded by the U.S. Federal Reserve. The Wall Street Bank later bought the banking subsidiaries of Washington Mutual later that year for $1.9 billion, after the savings and loans association failed in what is still the largest bank failure in U.S. history.
JPMorgan’s deal to buy Bear Stearns was backed by the U.S. Federal Reserve, which offered $30 billion to support the deal. The Federal Reserve also took over Bear Stearns’ most toxic assets, which JPMorgan refused to take.
Still, buying the two banks put JPMorgan on the hook for all of their problems, and Dimon publicly grumbled that U.S. regulators were suing his bank for misdeeds at Bear Stearns before the acquisition. Eventually, JPMorgan had to pay a total of $19 billion to settle disputes with regulators stemming from its purchases of Bear Stearns and Washington Mutual.
“No, we would not do something like Bear Stearns again,” Dimon wrote in a 2015 letter to shareholders. “I don’t think our board would let me take the call.”
First Republic Bank
JPMorgan, along with 10 other banks, deposited $30 billion into First Republic Bank on Thursday, in a bid to give the struggling regional bank needed liquidity to get through the crisis. The consortium of banks reportedly pledged to keep the money in First Republic Bank for at least three months, giving the bank more runway to find a solution.
At the time, First Republic Bank said the deposit “reflects the ongoing quality of our business, and is a vote of confidence for First Republic and the entire U.S. banking system.”
It doesn’t seem to have convinced everyone. Rating agencies downgraded First Republic Bank to junk status, citing continued concerns about funding despite the rescue effort from the nation’s biggest banks.
Customers have pulled $70 billion in deposits from the bank, or about 40% of its total, reports the Wall Street Journal, though outflows have slowed since the $30 billion deposit on Thursday.
Shares in First Republic Bank crashed 47.1% on Monday, the first day of trading following the UBS rescue of Credit Suisse. First Republic Bank’s shares are now down 90% for the year, with almost the entire decline happening since the collapse of Silicon Valley Bank.
Update, March 21, 2023: This article has been updated with a response from JPMorgan.
