The U.S. government has entrusted the same person to buy the remains of the second-largest bank failure in the nation's history whom it also entrusted to oversee the first-largest. As was true in 2008 when Jamie Dimon was beckoned by Uncle Sam to shell out $1.9 billion for Washington Mutual, the…
The U.S. government has entrusted the same person to buy the remains of the second-largest bank failure in the nation's history whom it also entrusted to oversee the first-largest. As was true in 2008 when Jamie Dimon was beckoned by Uncle Sam to shell out $1.9 billion for Washington Mutual, the JPMorgan Chase CEO is once again responsible for cleaning up the collapse of First Republic Bank.
Once again, JPMorgan hedged against rising interest rates throughout 2021, hoarding cash instead of purchasing the Treasurys that Silicon Valley Bank and First Republic stockpiled. The assumption that the Federal Reserve would not raise interest rates in response to the worst inflation in 40 years led the real value of SVB and FRB assets to plummet, and once more, the federal government has banked on Dimon to bail out depositors.
"Interest rate exposure, the fair value of held-to-maturity portfolios and the amount of SVB’s uninsured deposits were always known — both to regulators and the marketplace. The unknown risk was that SVB’s over 35,000 corporate clients — and activity within them — were controlled by a small number of venture capital companies and moved their deposits in lockstep. It is unlikely that any recent change in regulatory requirements would have made a difference in what followed.
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