First Republic Bank Went Belly Up ... What Happens to Customer’s Money?

First Republic Bank Went Belly Up ... What Happens to Customer’s Money?
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This post was originally published as part of the On The Daily newsletter. You can subscribe to this free newsletter here.

The world has been crazy for banks lately. With banks disappearing and going through a shotgun marriage courtesy of the FDIC. This weekend, another bank went under, and the question remains, what happens to the money?

One of the largest banks in the country, JPMorgan Chase, announced in a press statement on Monday that it would purchase deposits from the struggling First Republic Bank as well as a "substantial portion of their assets and certain liabilities."

First Republic has been taken over by the Federal Deposit Insurance Corporation, the corporation that insures deposits will get their money back. This is the third time this year that the US government, through the FDIC,  has taken over a US bank.

Federal regulators intervened in March to defend Silicon Valley Bank and Signature Bank, clients. They took the unprecedented step of insuring all deposits at the two banks, even those that surpassed the FDIC's $250,000 insurance threshold, citing possible risk to the larger financial system.

While shareholders who lost everything to the bank were not bailed out, the government did protect bank customers. The simultaneous collapses of Silicon Valley Bank and Signature Bank raised the prospect of additional bank robberies. However, recent earnings reports from other banks indicate that hasn't happened.

  • First Republic lost deposits of $100 billion in the first three months and the company's death spiral got under way.
  • Last week, the New York Stock Exchange had to stop the stock from trading dozens of times due to the bank's shares becoming so volatile.
  • First Republic stock fell more than 97% year to date as of Friday's close, closing at $3.51.

First Republic tried to sell itself, but there weren't enough buyers, so the only alternative was a government-led rescue. In the end, if you had deposited money at First Republic Bank, your money is safe, and now in what is essentially a JP Morgan Bank. If you had First Republic stock, you lost everything.

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