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Biden says regulators’ actions on First Republic will ‘make sure that the banking system is safe and sound’


President Joe Biden on Monday said U.S. regulators’ actions on First Republic Bank
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“are going to make sure that the banking system is safe and sound” as he addressed how authorities seized the bank over the weekend and made a deal to sell most of its operations to JPMorgan Chase
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+2.46%
.

“Let me be very clear: All depositors are being protected. Shareholders are losing their investments. Critically, taxpayers are not the ones that are on the hook,” Biden said during a White House event focused on small businesses.

“Going forward, I’ve called on Congress to give regulators the tools to hold bank executives accountable, and I’ve called on regulators to strengthen regulations and supervision of large and regional banks,” Biden added, referring to statements he made earlier this year after other bank failures.

“Folks, we have to make sure that we’re not back in this position again,” he said. “I think we’re well on our way to be able to make that assurance.”

Democrats like Senate Banking Committee Chair Sherrod Brown of Ohio and Sen. Elizabeth Warren of Massachusetts echoed Biden’s call for banking-system reforms. And in a tweet, Warren raised concerns about JPMorgan growing bigger through the rescue.

Sen. Tim Scott of South Carolina, the top Republican on the banking
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panel, did not mention any need for new rules in his own statement, saying: “I’ve long expressed concerns over broad, taxpayer-funded government intervention, so I’m glad the [Federal Deposit Insurance Corp.] heeded my concerns and secured a private market solution for First Republic.”

Ian Katz, managing director at Capital Alpha Partners, said in a Monday note that the rescue of First Republic puts regulators in the hot seat.

“We will hear more questions and accusations about what regulators should have done differently. There will be wonky soul-searching about the effort to restrict bank size and the point of the resolution-planning process,” he wrote.

What’s more, Katz added, “regulators will also now have to put up with [JPMorgan Chase CEO] Jamie Dimon as a hero, which will likely add to tension when the Fed toughens capital requirements on the biggest banks.”

U.S. stocks
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+0.09%

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were trading higher Monday, as investors assessed the fallout from the fourth failure of U.S. bank so far this year.





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