JPMorgan acquires First Republic, but is not taking on bank's corporate debt or preferred stock - Yo

May 02, 2023
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JPMorgan acquires First Republic, but is not taking on bank's corporate debt or preferred stock - YouTube

That means institutional investors aren't going to be made whole. They are now fourth on the list of creditors to be paid out, after depositors, general unsecured creditors, and subordinated debt. They have to go to the FDIC and file a claim for their investment. Likelihood of getting their money back is unlikely, reportedly.

This is because instead of JPM buying FR, they waited until after the FDIC seized FR and then they bought FR's assets (some, not all, ie not their debt) from the FDIC.

Also a way for the bank to surpass the 10% of the market short deposits limit (anti-trust regulation). "It was the only thing that could be done."

Dimon said JPM only switched from being an advisor to FR to being its buyer only after the government asked it to step up, so it wasn't an 'entirely private deal.' The deal also had a $50b line of credit and a loss-sharing agreement with the FDIC (FDIC will bear 80% of credit losses on FR's mortgages and commercial loans).

The FDIC sold FR (its assets) a bit cheap, financed with this loan, and made attractive with attractive regulatory treatment. This will effect not just moving the problem to another bank, leaving the banking system as shaky as before, its instead reducing the risk, in the banking system. Otherwise, JPM would have offered less money, and the FDIC would have had a bigger cost to its insurance fund than $14b.
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<div><a target="_blank" href="https://www.youtube.com/watch?v=7eVzFyDdsWg">JPMorgan acquires First Republic, but is not taking on bank's corporate debt or preferred stock - YouTube</a> <br></div><div><br></div><div>That means institutional investors aren't going to be made whole. They are now fourth on the list of creditors to be paid out, after depositors, general unsecured creditors, and subordinated debt. They have to go to the FDIC and file a claim for their investment. Likelihood of getting their money back is unlikely, reportedly. </div><div><br></div><div>This is because instead of JPM buying FR, they waited until after the FDIC seized FR and then they bought FR's assets (some, not all, ie not their debt) from the FDIC. <br></div><div><br></div><div> </div><div>Also a way for the bank to surpass the 10% of the market short deposits limit (anti-trust regulation). "It was the only thing that could be done."<br></div><div> <br></div><div>Dimon said JPM only switched from being an advisor to FR to being its buyer only after the government asked it to step up, so it wasn't an 'entirely private deal.' The deal also had a $50b line of credit and a loss-sharing agreement with the FDIC (FDIC will bear 80% of credit losses on FR's mortgages and commercial loans). <br></div><div><br></div><div>The FDIC sold FR (its assets) a bit cheap, financed with this loan, and made attractive with attractive regulatory treatment. This will effect not just moving the problem to another bank, leaving the banking system as shaky as before, its instead reducing the risk, in the banking system. Otherwise, JPM would have offered less money, and the FDIC would have had a bigger cost to its insurance fund than $14b. <br></div><div><br></div><div><br></div>
JPMorgan acquires First Republic, but is not taking on bank's corporate debt or preferred stock - YouTube

That means institutional investors aren't going to be made whole. They are now fourth on the list of creditors to be paid out, after depositors, general unsecured creditors, and subordinated debt. They have to go to the FDIC and file a claim for their investment. Likelihood of getting their money back is unlikely, reportedly.

This is because instead of JPM buying FR, they waited until after the FDIC seized FR and then they bought FR's assets (some, not all, ie not their debt) from the FDIC.

Also a way for the bank to surpass the 10% of the market short deposits limit (anti-trust regulation). "It was the only thing that could be done."

Dimon said JPM only switched from being an advisor to FR to being its buyer only after the government asked it to step up, so it wasn't an 'entirely private deal.' The deal also had a $50b line of credit and a loss-sharing agreement with the FDIC (FDIC will bear 80% of credit losses on FR's mortgages and commercial loans).

The FDIC sold FR (its assets) a bit cheap, financed with this loan, and made attractive with attractive regulatory treatment. This will effect not just moving the problem to another bank, leaving the banking system as shaky as before, its instead reducing the risk, in the banking system. Otherwise, JPM would have offered less money, and the FDIC would have had a bigger cost to its insurance fund than $14b.

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