Depositors protected but shareholders wiped out in country’s second-largest bank… via IrishTimesBiz
First Republic, which is marginally bigger than SVB, is the third bank to be taken over by the FDIC in less than two months, as rising interest rates have weakened banks that relied on low-cost deposits.
First Republic had been teetering on the brink of failure for nearly two months as deposits fled and its business model of providing cheap mortgages to wealthy customers was squeezed by rising interest rates. Its funding costs also rose rapidly and it racked up large paper losses on its mortgage book and other long-dated assets.
“Our government invited us and others to step up, and we did,” said JPMorgan’s chief executive Jamie Dimon. “Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimise costs to the deposit insurance fund.”
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