Biden says banking system is ‘safe and sound’ after regulators seize First Republic

President Biden sought to assure Americans on Monday that the banking system is “safe and sound” after regulators seized San Francisco-based First Republic Bank and sold all of its deposits and the bulk of its assets to JPMorgan Chase.

First Republic is the second-largest bank to fail in U.S. history. It lost $100 billion in deposits in a March banking run following the collapse of another Bay-area lender, Silicon Valley Bank. A group of America’s biggest banks sought to rescue First Republic with $30 billion in deposits, but the bank still struggled to stay afloat.

In brief remarks from the White House Rose Garden ahead of an event honoring small business owners, Mr. Biden said his administration responded decisively to protect depositors without rewarding risk-taking executives.

“I’m pleased to say that regulators have taken actions to facilitate the sale of First Republic Bank and ensure that all depositors are protected and taxpayers are not on the hook,” Mr. Biden said. “These actions are going to make sure the banking system is safe and sound, and that includes protecting small businesses across the country who need to make payroll for workers and their small businesses.”

Americans are growing increasingly concerned, with three of the four largest U.S. bank failures occurring in the past two months. First Republic had roughly $233 billion in assets at the end of the first quarter, ranking it just behind the 2008 collapse of Washington Mutual. Silicon Valley Bank and New York’s Signature Bank, which both failed in March, rank third and fourth on that list. 

Most of the banks’ troubles have been brought on by the Federal Reserve’s rapid series of interest-rate increases to fight inflation in the past year, which prompted depositors to withdraw their money in search of better returns. The banks were stuck with lower-level returns on their mortgage portfolios.

Under the actions of the Federal Deposit Insurance Corp., a government entity that insures customers’ deposits, all First Republic branches opened as JPMorgan Chase branches on Monday morning. That will protect the bank’s depositors, but likely wipes out First Republic’s shareholders.

Trading of First Republic shares was halted Monday. Silicon Valley Bank and Signature Bank’s shareholders were left with nothing after those banks collapsed.

Mr. Biden urged Congress to pass more stringent banking regulations to prevent future bank collapses. He has previously called on lawmakers to restore banking rules that were rolled back under the Trump administration.

“Going forward I’ve called on Congress to give regulators the tools to hold bank executives accountable and I’ve called on regulators to strengthen regulations and supervision of large and regional banks,” he said. “Folks, we have to make sure we are not back in this position again.”