What to Know in Washington: Democrats Begrudgingly Back Bank Buy
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Congressional Democrats usually critical of massive banks are begrudgingly backing the nation’s biggest bank growing even larger in the wake of yet another financial institution failing.
The government over the weekend brokered JPMorgan’s purchase of First Republic Bank as it teetered on the brink of collapse. It comes on the heels of the failures of the Silicon Valley Bank and Signature Bank earlier this spring.
The acquisition likely saved further economic hardship. But it tested Democrats’ stomach for consolidation amid their long-standing warnings against making too many banks “too big to fail.”
“The broader question about how many big banks there are and consolidation there is a fair question,” said Sen. Chris Van Hollen (Md.), a Democrat on the Banking Committee. “But I think given the emergency they were facing, this was the best of the bad solutions.”
First Republic is the second-largest bank to fail since the 2008 financial crash. Absent federal interference, lawmakers have worried such collapses could set off domino effects throughout the financial sector.
“If the alternative was a bank failure, this is a better option,” said Sen. Mark Warner (Va.), a senior Democrat on the Banking Committee.
The FDIC in announcing the sale it brokered said its funds would bear a $13 billion hit after “highly competitive bidding” over First Republic’s remains. The Federal Deposit Insurance Act requires those regulators to seek the lowest cost in such transactions.
House Progressive Caucus Chair Pramila Jayapal (D-Wash.) said the sale of First Republic was a Faustian bargain. While she said the FDIC ultimately did the right thing by protecting investor and taxpayers, First Republic should have never been so close to failing in the first place. Zach C. Cohen has more perspectives from lawmakers.
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