The Big Take
First Republic’s Jumbo Mortgages Brought On Bank’s Failure
- Chairman Jim Herbert helped pioneer mega loans in the 1980s
- Buyer JPMorgan will share any mortgage losses with the FDIC
The seeds of First Republic Bank’s downfall were sown in the jumbo mortgages of Silicon Valley, where a unique strategy to loan wealthy individuals extraordinary sums of money blew up in spectacular fashion.
In the early 1980s, First Republic Chairman Jim Herbert, then running San Francisco Bancorp, wanted to get into a new line of business. The Bay Area’s high earners were coming to him and asking for unusually large loans to buy pricey properties in the area.