JPMorgan Will Become Bigger After Saving First Republic

US Dollar Illustration (Photo: Doc. Antara)

JPMorgan Chase has about 800 people working over the weekend to calculate First Republic's books and also assess its business. This is to reduce smaller offerings to reap the bank.

"This basically helps US federal regulators strike a strong deal and make the America's biggest lender bigger," The Wall Street Journal (WSJ) reported on Tuesday (2/5).

"JPMorgan is also the only bank that wants to substantially buy the entire First Republic at competitive prices, including mortgages that other banks don't want," the report said. "That's a Federal Deposit Insurance Corp. (FDIC) priority for eliminating uncertainty over any lagging assets that have to be sold."

Some politicians and regulators fear that growth and consolidation have created banks that pose risks to financial stability, according to the report.

"Officers have been trying to put new limits on bank mergers to prevent big banks from becoming even bigger," said WSJ.

"But with First Republic sales, they ruled out those concerns, a recognition that the biggest lender has unrivaled weapons to intervene during the financial pressure," he said.

"The recent battle of banking turmoil is ready to help the largest banks grow further, strengthening their already real dominance," he noted.

The largest US banks grew rapidly in the decade after the latest financial crisis, in part benefiting from the notion that they were too important to the financial system to be left to fail, according to the report.

"They have become very profitable, putting them in a position to tackle the regional bank crisis in the last two months -- and even thrive," he said.

JPMorgan led a group of 11 banks to temporarily save First Republic in March by depositing 30 billion US dollars in the bank to help replenish customer withdrawals in panic after two middle banks failed in one weekend.

The growth raises concerns that major banks are becoming too strong, the WSJ said, adding that the Joe Biden administration and several FDIC officials have been skeptical of the merger of banks that could accelerate their growth.