2023-05-16

The aftermath of JPMorgan Chase's acquisition of the First Republic and whether it will ignite a more serious storm in the future may be worth pondering by decision-makers.

After JPMorgan Chase acquired First Republic earlier this month, the local banking crisis in the United States appeared to have temporarily subsided. The Biden administration is now focusing on solving the problem of raising the Debt limit by next month to avoid the financial risks caused by the federal government's default. But judging from the mystery behind JPMorgan Chase's selection to acquire the second largest failed bank in history, it is probably too early to say that the local banking crisis has come to an end; It is difficult to say that the role played by JPMorgan Chase this time will not turn into a thorny issue for the US government in the future.

Looking back at the last minute announcement of JPMorgan Chase's outstanding acquisition of First Republic, there may have been different evaluations and opinions from the market and various sectors, but this result was generally not surprising. JPMorgan Chase has always been known for its stable business style and limited investment in high-risk businesses. If the First Republic falls into its hands, it should not lead to a crisis; What's more, during the global financial tsunami in 2008, JPMorgan Chase also bought the investment bank Bear Stearns and the commercial bank Washington Mutual with the support of the federal government. Therefore, the First Republic was not the first large-scale acquisition.

In fact, precisely because of J.P. Morgan's prominent position on Wall Street and its record of acquisition actions during the financial tsunami, it did not immediately play the role of financial savior during the period of turmoil spreading in the local banking system in March. The Financial Times revealed that from March to early April, US regulatory agencies were quite concerned that large banks may take advantage of the opportunity to attract small banks due to antitrust considerations, leading to a political storm. During the process of getting into trouble in March and going bankrupt in early May, JPMorgan Chase played different roles, first serving as an advisor to the other party in dealing with the difficulties, then becoming one of several banks that injected deposits to help the other party overcome difficulties, and then the acquisition bank that the federal government had finalized.

The antitrust concerns of the U.S. regulators began to loosen only after a Republican congressman accused the Federal Deposit Insurance Corporation (FDIC) in April of ignoring potential buyers of Silicon Valley Bank (SVB), questioning whether the bias against larger institutions led to some reasons for the absence of private entity solutions. Without such loosening, JPMorgan Chase would not have been able to obtain regulatory approval to acquire banks of the same size as the First Republic under normal circumstances.