Another Bank Goes Down
Happy Tuesday! Hollywood writers launched their first strike in 15 years last night, presumably frustrated that The Super Mario Bros. Movie recently became the highest-grossing film of the year.
Quick Hits: Today’s Top Stories
- Treasury Secretary Janet Yellen said Monday the U.S. could run out of money to pay its debts as early as June 1 if Congress does not raise or suspend the debt limit. In response, President Joe Biden invited the leaders of both houses of Congress—including House Speaker Kevin McCarthy—to the White House on May 9 for negotiations over raising the debt ceiling, which McCarthy and his GOP colleagues want to link to spending cuts. House Republicans narrowly passed a bill to that effect last week, but it will not be taken up by the Democratic-controlled Senate.
- The Supreme Court agreed on Monday to hear a case that could overturn the so-called Chevron doctrine, which instructs the courts to defer to federal agencies when interpreting ambiguous federal statutes. The case—Loper Bright Enterprises v. Raimondo—challenges the National Marine Fisheries Service’s insistence that herring fishing companies are responsible for paying a federally mandated monitor’s salary; the plaintiff argues the federal statute does not specify who must pay the salary of the monitor. Justice Ketanji Brown Jackson—who heard the case when she sat on the D.C. Circuit Court—recused herself.
- Turkish President Recep Tayyip Erdoğan claimed Sunday Turkish intelligence services had killed the leader of ISIS, Abu al-Hussein al-Husseini al-Qurashi, in a region of northern Syria controlled by Turkey-backed rebels and hit hard by a February earthquake. The announcement comes as Erdoğan promises to continue fighting terrorism ahead of a presidential election in Turkey on May 14.
- The Florida board governing Disney World’s new Central Florida Tourism Oversight District voted Monday to counter-sue Disney in state court. Disney filed a federal lawsuit against the board and Florida Republican Gov. Ron DeSantis last week, alleging they infringed upon the entertainment giant’s free speech rights by retaliating after it criticized a Florida law limiting discussion of sexuality and gender identity in K-3 classrooms.
- Democratic Sen. Ben Cardin of Maryland, 79, announced Monday he will not seek reelection in 2024, opening a safe blue Senate seat up to Democratic hopefuls. Prince George County Executive Angela Alsobrooks and Rep. David Trone, both Democrats, have been hiring campaign staff ahead of the announcement and are likely to seek the seat. Democratic Rep. Jamie Raskin of Maryland—who announced last week his cancer is in remission—may be another candidate. Meanwhile, Democratic Washington Gov. Jay Inslee said Monday he will not run for a fourth term.
First Republic’s Last Days
On an investor call last November, Jim Herbert was exuding confidence. “Clients stay with us,” the founder of First Republic Bank said. “They grow, they compound, their deposits compound, their loans compound, and they bring their friends. It’s not a complicated model, and it works in all environments.” Six months later, First Republic Bank is no more.
After the San Francisco-based bank imploded last week, financial regulators spent the weekend scrambling to place it in receivership and arrange for a sale to another institution. On Monday, First Republic customers woke up to discover they were now JPMorgan Chase customers. Industry analysts hope First Republic’s failure—the second-largest in U.S. history—represents the end of the volatility triggered by Silicon Valley Bank (SVB) and Signature Bank’s stunning collapses in March, but questions remain about the stability of the financial sector.
After a bidding process that closed on Sunday, JPMorgan Chase—already the largest bank in the country—agreed to assume all of First Republic’s $92 billion in deposits and most of its $200-plus billion in assets. The bank said it will receive $50 billion in financing from the Federal Deposit Insurance Corporation (FDIC) over the next five years, and it’ll assume some of First Republic’s losses while the FDIC takes on an estimated $13 billion. “Our government invited us and others to step up, and we did,” Jamie Dimon—CEO and chairman of JPMorgan Chase—said in a statement. “Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund.” Several other banks—including PNC Financial Services and Citizens Financial Group—submitted bids to the FDIC over the weekend, but JPMorgan was reportedly the only institution prepared to purchase the entire bank, enabling a quick and clean sale.