U.S. Fed and JPMorgan Chase Take Extraordinary Measures To Keep First Republic Bank from Failing

March 16, 2023, 2022 (EIRNS)—Coincident with the Swiss National Bank’s $54 bailout of Credit Suisse, the U.S. Treasury, Federal Reserve and JPMorgan Chase are taking extraordinary steps to prevent the $212 billion in asset First Republic Bank from failing.

On March 12, the San Francisco-based First Republic Bank announced it was on life support with “additional borrowing capacity from the Federal Reserve, continued access to funding through the Federal Home Loan Bank, and ability to access additional financing through JPMorgan Chase,” the nation’s largest bank with $3.8 trillion in assets. In instances like this, JPMorgan Chase acts as an unofficial conduit for funds to distressed banks, with some unspoken secret arrangement with the Fed and Treasury that they will backstop the JPMorgan Chase should there be difficulties. First Republic said that it now had access to $70 billion in funds.

Despite that arrangement, on March 13, Moody’s rating service placed First Republic under review for downgrade. A very high 70% of First Republic’s deposits are uninsured, leaving it vulnerable to runs.

In 2008 the failure of the $310 billion Washington Mutual Bank was the largest bank failure in American history. The next two largest have been the failure of Silicon Valley Bank and Signature Bank this week. Were First Republic Bank to fail, then First Republic, Silicon Valley Bank, and Signature Bank would constitute the second, third, and fourth largest bank failures in U.S. history.