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First Republic Bank Seized and Sold to JPMorgan
Regulators seized troubled First Republic Bank early Monday, making it the second-largest bank failure in U.S. history. This development raises questions about the health of the U.S. banking system. Promptly, all of its deposits and most of its assets were sold to JPMorgan Chase in a fire sale. It’s the third midsize bank to fail in less than two months. The only larger bank failure in U.S. history was Washington Mutual, which collapsed at the height of the 2008 financial crisis and was also taken over by JPMorgan in a similar government-orchestrated deal.
The Bank’s Seizure: Why Did it Happen?
First Republic Bank, a San Francisco-based lender, struggled with mounting bad loans, and the decline of the Bay Area’s commercial real estate market. Its loan portfolio heavily relied on the property markets, particularly in San Francisco, New York City, and other parts of the West Coast. As a result, the bank experienced significant losses and eroded capital as borrowers struggled to pay their debts amid the pandemic’s economic downturn.
The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp (FDIC) announced the bank’s seizure on Monday, citing the bank’s inability to maintain adequate capital and liquidity levels. The seizure is seen as a measure to prevent a…
