Global Courant 2023-05-18 21:26:42
Senator Elizabeth Warren, D-Mass., greets Martin Gruenberg, president of the Federal Deposit Insurance Corporation, at the hearing of the Senate Banking, Housing, and Urban Affairs Committee at the Dirksen Building on Tuesday, March 28, 2023.
Tom Williams | Cq-roll Call, Inc. | Getty Images
WASHINGTON — Senator Elizabeth Warren is asking federal financial regulators for answers to what she called a “deeply troubling” deal that saw JPMorgan Chase to acquire First Republic Bank.
In a letter to supervisors before a Senate hearing on the matter, Warren stressed that the deal is expected to pay off a profit of $2.6 billion for JPMorgan resulted in a $13 billion loss to the FDIC’s Deposit Insurance Fund.
Warren’s letter, dated Wednesday, is addressed to Martin Gruenberg, chairman of the Federal Deposit Investment Corp., and Michael Hsu, acting comptroller of currency, an independent division of the Treasury Department.
Both Gruenberg and Hsu will testify before the Senate banking committee on Thursday. A spokesman for the Office of the Comptroller of the Currency said the agency does not comment on congressional correspondence. A representative from the FDIC told CNBC it will respond directly to Warren.
“Without a full regulatory overhaul, and at a cost of $13 billion to the Federal Deposit Insurance Fund, the nation’s largest bank — already too big to fail — got a bargain from a bankrupt bank that made it even bigger. made,” wrote Warren. D mass.
JPMorgan, the largest U.S. bank, acquired First Republic’s deposits and most of its assets on May 1 after regulators seized the bank, resulting in the largest bank failure since the 2008 financial crisis. the weakest link in the banking system after the defaults of Silicon Valley Bank and Signature Bank in March.
“Our government invited us and others to step forward, and we did,” Jamie Dimon, CEO of JPMorgan, said in a May 1 press release. to minimize costs to the Deposit Insurance Fund.”
The FDIC allowed JPMorgan to take over First Republic’s entire package of assets for less than they were worth, according to Warren, a longtime critic of Wall Street. Meanwhile, the agency will bear 80% of the credit losses on the bank’s mortgages and commercial loans, she said.
She also questioned the process of selecting JPMorgan from a pool of bidders.
The Massachusetts Democrat is seeking answers from Gruenberg and Hsu as to whether the agency did indeed resolve the bank failure at the lowest cost to the federal insurance fund as required by law.
The FDIC declared a systemic risk exception to avoid taking the cheapest route to guarantee uninsured deposits after SVB and Signature failed, but this method was not applied to First Republic. Instead, the insurance fund was allowed to take a multibillion-dollar loss after billions of dollars in uninsured deposits were saved from the bank during the deal, Warren said.
“The FDIC seemed to prioritize First Republic’s uninsured deposits with the bank over the insurance fund,” she said.
