No Sh*t Sherlock! JPMorgan IS The Federal Reserve Bank
The following headline caused my response to the news, which was unsurprising, and ultimately, inevitable.
Jamie Dimon Wins Again in First Republic Bank Deal. CEO used JPMorgan’s massive balance sheet to beat out smaller banks to buy troubled lender
Of course Jamie Dimon and JPMorgan have won again with the First Republic deal. When you own and/or control all the horses in a race, you are guaranteed to be the winner. First Republic, a leading provider of private banking and wealth management services to affluent individuals and families, had a strong track record of growth and profitability, but was only a regional bank.
The benefits of the First Republic deal for JPMorgan are:
- Increased market share in the wealth management market.
- Access to First Republic’s high-end client base.
- Strengthened presence in California and the West Coast.
- Reduced risk of regulatory scrutiny.
- Increased profitability.
JPMorgan Chase, the largest bank in the United States, and the largest shareholder of the privately owned Second District Federal Reserve Bank of New York, is the most powerful force in the privately owned Federal Reserve System, the Central Bank of the United States. Private bankers, acting in their own best interests, are responsible for:
- Conducting the nation’s monetary policy
- Supervising and regulating banks and other financial institutions
- Providing financial services to the U.S. government, U.S. financial institutions, and foreign official institutions
- Maintaining the stability of the financial system
The 12 privately owned District Banks, collectively the Federal Reserve Bank, have a number of tools that are used to influence the money supply, interest rates, and the overall economy.
- Open market operations
- Reserve requirements
- Discount rates
- Margin requirements
- Supervisory
JPMorgan Chase is a major player in the U.S. economy, and has a significant impact on the U.S.; and world financial systems.
A story by Rachel Ensign and David Benoit, updated May 1, 2023, at 4:30 pm, appeared on The Wall Street Journal website, to which I am a paid subscriber. It provides some detail of the transaction.
America’s biggest bank just got bigger. And it allows Chief Executive Jamie Dimon to play the role of industry savior once again.
Dimon appears to be riding in as the savior of the day, when in reality, he is just protecting the ‘money’ monopoly that the Federal Reserve Act of 1913 granted to his private bank, and their cohorts.
“You’re basically getting a very clean bank in the most clean way you can get it,” Mr. Dimon said on a call with analysts Monday morning.
JPMorgan shares rose about 2% Monday, a sign that investors like the math behind the deal.
Jamie should have said, “I stole First Republic Bank, at no cost to JPMorgan Chase.” Dimon has the power to order the U.S. Treasury to print whatever amount of currency he needs to accomplish his objectives, but in this case, it wasn’t even necessary.
Buying San Francisco-based First Republic also gives JPMorgan a boost in Silicon Valley, where it has for years tried to build better relationships with tech executives and startup founders. The goal is to both manage their wealth and get their investment-banking business, an offering First Republic lacked.
Still, Mr. Dimon said JPMorgan likely won’t be as quick to dole out the kind of low-rate jumbo mortgages First Republic offered.
And, unlike First Republic, it will sell many of the mortgages it makes, he said. Rising interest rates badly dented the value of First Republic’s mortgage book.
Guess who was responsible for the interest rate hikes? He’s pictured above.
…The First Republic brand will disappear. First Republic’s 84 branches in eight states will reopen Monday as branches of JPMorgan Chase.
A FINANCIAL TIMES news story, dated May 1, 2023, by James Politi and Colby Smith in Washington and James Fontanella-Khan, Stephen Gandel and Brooke Masters in New York, reported even more specifics of the ‘theft.’
Jamie Dimon’s Wall Street institution had been central to discussions about the distressed California lender since First Republic emerged as a weak spot in the banking sector this year.
Within the space of two months, JPMorgan turned from First Republic adviser — to depositor — to buyer.
Ultimately it edged out bids from rival banks in an auction run by federal regulators over the weekend and into the early hours of Monday morning.
The charade was necessary for public consumption, but you must know and understand that JPMorgan controls the “rival banks” via its control of the 2nd District Federal Reserve Bank.
Its decision to step in brought a mostly private solution to the second-largest bank failure in US history — and relief to the Biden administration. The First Republic deal was different from the structures agreed for Silicon Valley Bank and Signature Bank, the two lenders that collapsed in early March, but similar in that it was another ad hoc solution to the sector’s problems.
All deposits were taken over by JPMorgan, which meant the US government did not have to declare the bank a “systemic risk” to protect deposits over the $250,000 guarantee limit.
At the same time, JPMorgan secured a loss-sharing agreement with federal regulators to avoid any hit from the most problematic loans on First Republic’s books, a crucial sweetener for the buyer.
In other words, JPMorgan received all of the assets, and none of the liabilities of First Republic.
And although top Biden administration officials played a less prominent role in the negotiations than in the failure of SVB, the deal came together after heated discussions between Washington and Wall Street.
I’m sure he reminded Joe that, he, Jamie Dimon, is in charge of the U.S. banking system.
The US Treasury said early on Monday it was “encouraged” that the transaction minimized costs for the Federal Deposit Insurance Fund “and in a manner that protected all depositors”.
It added that the banking system was “sound and resilient”, that deposits were safe and that Americans should remain confident that it could “fulfil its essential function of providing credit to businesses and families”.
First Republic is the second largest bank failure, and just like the biggest U.S. bank failure, in 2008, the collapse of Washington Mutual, was another gift to JPMorgan Chase; the buyers of Washington Mutual. The pattern will continue, when necessary.
…The First Republic brand will disappear. First Republic’s 84 branches in eight states will reopen Monday as branches of JPMorgan Chase.
JPMorgan Chase has won again.
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