Sen. Elizabeth Warren, D-Mass., greets FDIC Chairman Martin Grunberg during a hearing of the Senate Banking, Housing and Urban Affairs Committee in the Dirksen Building, Tuesday, March 28, 2023. .
Tom Williams | Cq-roll Call, Inc. | Getty Images
WASHINGTON — Sen. Elizabeth Warren is demanding answers from federal financial regulators about what she calls “deeply troubling” deals JPMorgan Takeover of the First Republic Bank.
In an advance letter to the regulator Senate hearing For that matter, Warren emphasized that the deal is expected to yield $2.6 billion in earnings For JPMorgan, the FDIC’s deposit insurance fund lost $13 billion.
Warren’s letter on Wednesday was addressed to Martin Grunberg, chairman of the FDIC, and Michael Hsu, the acting comptroller of the currency, the independent branch of the Treasury Department.
Both Gruenberg and Hsu will testify before the Senate Banking Committee on Thursday. CNBC has reached out to the FDIC and the Office of the Comptroller of the Currency for comment.
Warren wrote: “In the absence of a full regulatory review, the Federal Deposit Insurance Fund paid $13 billion, America’s largest bank — too big to fail — got a cheap deal from a bankrupt bank, That makes it even bigger,” D Mass.
JPMorgan, the largest U.S. bank, bought deposits and most of First Republic’s assets on May 1 after regulators seized the bank — leading to the biggest bank failure since the 2008 financial crisis. First Republic was seen as the weakest link in the banking system following the collapse of Silicon Valley Bank and Signature Bank in March.
“Our government invited us and others to come forward, and we did,” JPMorgan CEO Jamie Dimon said in a May 1 press release. “Our financial strength, capabilities and business model allow us to develop Bid, execute the transaction in a way that minimizes the deposit insurance fund’s costs.”
Warren, a longtime Wall Street critic, said the FDIC allowed JPMorgan to take over First Republic’s entire assets for less than they were worth. Meanwhile, the agency will cover 80 per cent of the bank’s credit losses on mortgages and business loans, she said.
She also asked questions about JPMorgan’s process for selecting bidders.
The Massachusetts Democrat is turning to Grunberg and Hsu for answers on whether the agency did, as required by law, resolve bank failures at the minimum cost to federal insurance funds.
The FDIC declared a systemic risk exception to avoid taking the least-cost route to securing uninsured deposits after SVB and Signature failed, but that approach does not apply to First Republic. Instead, Warren said the insurance fund was allowed to cover billions of dollars in losses after saving billions of dollars worth of uninsured bank deposits during the deal.
“The FDIC appears to be prioritizing First Republic’s uninsured deposits in banks over insurance funds,” she said.