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That’s what happens when you loan a lot of IO money at fixed rates for long periods of time and your cost of funds moves. Massive deposit withdrawals also hurts that first issue creating a failure
That’s what happens when you loan a lot of IO money at fixed rates for long periods of time and your cost of funds moves. Massive deposit withdrawals also hurts that first issue creating a failure
Why are larger banks willing to step in and buy insolvent ones? Good business decision?
Quote:
JPMorgan is getting about $92 billion in deposits in the deal, which includes the $30 billion that it and other large banks put into First Republic last month. The bank is taking on $173 billion in loans and $30 billion in securities as well.
The Federal Deposit Insurance Corporation agreed to absorb most of the losses on mortgages and commercial loans that JPMorgan is getting, and also provided it with a $50 billion credit line.
The bank is booking a one-time gain of about $2.6 billion and expects to spend about $2 billion on integration costs over the next 18 months.
Furthermore, the acquisition will add over $500 million of profit annually to JPMorgan, excluding the one-time costs. As part of the transaction, JPMorgan said it was making a payment of $10.6 billion to the FDIC.
JPM shares are up 3% this morning, so the market feels it got a good deal. One can argue government corruption, but probably the FDIC wouldn't have found a bank to take over all deposits and assets of FRC without some concessions. Then FRC depositors would be in limbo, not knowing when they would have access to their money even if their deposits are insured.
Why are larger banks willing to step in and buy insolvent ones? Good business decision?
It's a great deal for JPMorgan. First Republic had a great reputation for customer service for its wealth management accounts. This is what JPMorgan is buying - First Republic's wealth management accounts.
It's cheaper and easier for JPMorgan to purchase First Republic than growing this bank product from the ground up. With First Republic's network, JPMorgan can now compete with Morgan Stanley.
First Republic was a good bank hit hard by Federal Reserve's policy mistakes. The Fed is fighting inflation (which it created) with higher interest rates. It's not working!
It's a great deal for JPMorgan. First Republic had a great reputation for customer service for its wealth management accounts. This is what JPMorgan is buying - First Republic's wealth management accounts.
It's cheaper and easier for JPMorgan to purchase First Republic than growing this bank product from the ground up. With First Republic's network, JPMorgan can now compete with Morgan Stanley.
First Republic was a good bank hit hard by Federal Reserve's policy mistakes. The Fed
is fighting inflation (which it created) with higher interest rates. It's not working!
But only a good deal since the FDIC agreed to absorb the losses. I guess there’s a bottomless pot of $..
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