Written by Andrea Schalal and Beth Schroeder
WASHINGTON (Reuters) – JPMorgan Chase & Co.’s deal to buy First Republic Bank has pushed the Biden administration into a corner, leaving officials scrambling to explain how their positions against mergers squared while allowing the largest U.S. bank to get even bigger.
At a White House event on small business on Monday, President Joe Biden hailed the sale of the troubled San Francisco-based lender, saying it would protect all depositors and avoid a government bailout. He did not mention JPMorgan and reiterated his call for tighter banking regulations.
Senator Elizabeth Warren, a Democrat and a member of the Senate Banking Committee who has been pushing for tighter banking regulations, criticized the decision, sounding like an idea that could haunt Biden, who announced last week that he is bidding for another term in the White House. suffer from low approval rates.
“Poorly supervised bank has been hijacked by a bigger bank – eventually the taxpayers will be on the hook,” Warren wrote on Twitter.
White House press secretary Karen Jean-Pierre said JPMorgan’s acquisition of First Republic’s assets was necessary to ensure the banking system remained resilient and was not without cost to taxpayers.
“No recent administration has done more to promote competition, to address concentration across industries,” she said at a White House press briefing.
Jean-Pierre added that Biden administration officials appreciate the fact that community banks provide services to those who might not otherwise have banking access.
The failed lender’s deal comes amid a growing debate among US regulators about tougher rules on bank mergers, with officials growing concerned that a merger could undermine financial stability and leave communities wanting to be served.
Management officials, aware of the impact of the JPMorgan takeover on the banking sector, prodded smaller lenders to bid and worked hard to find a different solution, but the size of JPMorgan’s bid ultimately gave it an edge, according to people familiar with the process. .
The current law means the FDIC is legally obligated to choose the lowest-cost offer, said Aaron Klein, a former Treasury official and Senate staffer who helped draft the Dodd-Frank reform bill passed in the aftermath of the global financial crisis.
In the end, former officials said, the need to avoid contagion in the banking sector outweighed concerns about JPMorgan’s increasing power.
said Ben Harris, who left his position as assistant secretary of the Treasury for economic policy at the end of March and served as chief economist for Biden when he was Vice President Barack Obama.
(Reporting by Andrea Shalal and Pete Schroeder; Additional reporting by David Lauder, Sruthi Shankar, Chris Prentice and Douglas Jellison; Editing by Leslie Adler)