Your Evening Briefing: Dimon Sees First Republic Deal as End of Bank Crisis

After another tense spring weekend for American banking, JPMorgan agreed to acquire troubled First Republic in a US government-led deal. The transaction, revealed in the wee hours of Monday morning after First Republic was seized by regulators, makes the biggest US bank even bigger while minimizing further damage to the Federal Deposit Insurance Corp.’s guarantee fund. For those keeping score, it means First Republic becomes the fourth regional US lender to collapse since early March and the second-biggest bank failure in US history. Maybe—just maybe—this mini-financial conflagration is finally burning itself out. “Hopefully this helps stabilize everything,” JPMorgan Chief Executive Officer Jamie Dimon said, pointing out how some regional banks “had some pretty good results” in the first quarter. One of his rivals agreed with the sentiment, though with a dollop of blame. Citigroup CEO Jane Fraser said the US banking system is the “envy of the world.” But as for banks that failed over the past two months, she concluded they just weren’t well managed. Still, others are less sanguine about the near-term prospects for stability. “This is another one-off solution to the liquidity crisis,” James Fotheringham, an analyst at BMO Capital Markets, told clients this morning. “We worry the market will find another target for funding concerns.”

With all sighs of relief having been breathed, assessments of the JPMorgan deal started rolling in. Mohamed A. El-Erian writes in Bloomberg Opinion that what emerged Monday morning was far from perfect. US government institutions are caught up in the policy implications of a “second best” world, he writes—the repeated inability to come up with an optimal solution. What’s emerged will come with collateral damage and unintended consequences, he warns.