Banks

On 1 May 2023 the FDIC sold First Republic Bank to JPMorgan Chase. JPMorgan paid $10.6 billion to the FDIC and gave it a five-year $50 billion note at 3.4%. The FDIC agreed to share 80% of losses on the loans. JPMorgan took about $173 billion of loans, about $30 billion of securities and about $92 billion of deposits, and booked an after-tax bargain-purchase gain of about $2.7 billion, finalised at about $2.9 billion after later adjustments. The purchase took JPMorgan's share of US deposits above the 10% statutory cap on acquisitions, which was permitted because failed-bank purchases are exempt. The FDIC's Deposit Insurance Fund absorbed an initial cost of about $13 billion, put at about $15.6 billion in the FDIC inspector general's final estimate. In the worst banking spring since 2008, the largest US bank had grown larger, at a discount, with the government's help.

It was the third time in fifteen years. In March 2008 JPMorgan bought Bear Stearns, first at $2 a share (about $236 million) and then at $10 (about $1.2 billion), with about $28.8 billion of New York Fed financing behind it (announced on 24 March as $29 billion) and a first-loss loan of about $1.15 billion from JPMorgan; the Fed sold the last of those Maiden Lane assets in 2018 at a net gain of about $2.5 billion. In September 2008 it paid $1.9 billion for the banking operations of Washington Mutual, which, with about $307 billion of assets, remains the largest bank failure in US history. Each time the buyer was the bank that Jamie Dimon had spent years making able to say yes. This chapter explains how banks make money, why the industry is consolidating, and why balance-sheet strength has become a competitive weapon rather than a cost.