The FDIC took ownership of First Republic Bank and sold it to JPMorgan Chase on Monday, marking the second-largest bank collapse in American history, and the third bank failure in less than two months.
Dr. Thomas Hogan, senior research faculty at the American Institute for Economic Research and former chief economist for the Senate Committee on Banking, Housing and Urban Affairs, told the DCNF that frequent bank failures could also drain the DIF and require taxpayers to eventually foot the bill.
“The FDIC charges all insured depositors a monthly fee, a portion of which is saved in the Deposit Insurance Fund (DIF),” Hogan said. “When an insured bank fails, the FDIC compensates any losses on insured deposits using funds from the DIF. If many banks fail, the losses may exceed the total funds in the DIF, in which case, the difference is covered by the federal government, i.e. taxpayers.”
President Joe Biden said the agreement between the FDIC and JPMorgan Chase will ensure the banking system is secure in remarks at a National Small Business Week Event on Monday.
“Critically, taxpayers are not the ones that are on the hook,” he said, receiving applause.
First Republic was the 14th-largest commercial bank in the country, according to the Federal Reserve. In addition to receiving all of First Republic’s deposits from the FDIC, JPMorgan Chase acquired the substantial majority of its assets, according to JPMorgan Chase’s press release.