By merging First Republic, US biggest bank gets bigger: WSJ

NEW YORK -- JPMorgan Chase had some 800 people working over the weekend to scour First Republic's books and assess its business, eventually beating out bids from at least three smaller peers to scoop the bank into pocket, which in effect helps US federal regulators score a strong deal and make America's largest lender get even bigger, reported The Wall Street Journal (WSJ) on Tuesday.

"JPMorgan was also the only bank with the appetite to buy substantially all of First Republic at a competitive price, including mortgages that other banks didn't want," said the report. "That was a priority for the Federal Deposit Insurance Corp (FDIC) because it removed uncertainty over any assets left behind that it would have to sell."

Some politicians and regulators have become concerned that growth and consolidation have created banks that present risks to financial stability, according to the report.

"Officials have sought to put new limits on bank mergers to prevent large banks from getting even bigger," said WSJ. "But with the First Republic sale, they set those concerns aside, a recognition that the largest lenders possess unmatched firepower to step in during times of financial stress."

"The recent bout of banking turmoil is poised to help the largest banks grow further, reinforcing their already pronounced dominance," it noted.

The largest U.S. banks grew rapidly in the decade after the last financial crisis, benefiting in part from the presumption that they were too important to the financial system to be allowed to fail, according to the report.

"They became fabulously profitable, putting them in position to weather the regional bank meltdown of the last two months -- and even thrive," it said. JPMorgan led a group of 11 banks to temporarily rescue First Republic in March by depositing $30 billion at the bank to help replenish the money that customers withdrew in a panic after two midsize banks failed in one weekend.

The growth has stirred concerns that the big banks have become too powerful, said WSJ, adding that the Joe Biden administration and some FDIC officials have taken a skeptical attitude toward bank mergers that could accelerate their growth.