Jamie Dimon’s rescue mission

Presented by Shut Down SHEIN

BIG AND BIGGER — Readers will be forgiven if it felt like 2008 all over again today, as giant mega-bank JPMorgan Chase and its charismatic but controversial CEO Jamie Dimon swooped in to buy up much of the assets of failing California lender First Republic and (hopefully) bring an end to the latest crisis in the banking system.

The deal, under which JPMorgan will take on all of First Republic’s deposits both insured and uninsured, drew the expected round of rebukes from progressive Democrats like Sen. Elizabeth Warren (D-Mass.).

“The failure of First Republic Bank shows how deregulation has made the too big to fail problem even worse,” Warren tweeted. “A poorly supervised bank was snapped up by an even bigger bank—ultimately taxpayers will be on the hook. Congress needs to make major reforms to fix a broken banking system.”

Both JPMorgan and President Biden tried to counter Warren, arguing that while Dimon’s giant bank is getting some backstop from the FDIC for potential losses on some of First Republic’s loans, the deal does not actually put taxpayer money at risk.

“These actions are going to make sure the banking system is safe and sound, and that includes protecting small businesses across the country,” Biden said of the deal, which followed the federal rescues and full deposit guarantees in March for Silicon Valley and Signature banks. “Depositors are being protected, shareholders are losing their investments and, critically, taxpayers are not the ones who are on the hook.”

Dimon, for his part, had even less time for critics like Warren who believe JPMorgan is getting a sweetheart deal and that giant banks like his shouldn’t even exist. “I don’t really care about gossip from other people,” Dimon said in response to a reporter’s question about critics arguing the purchase was unfair. “We bank countries, we bank the IMF, we bank the World Bank. You need large, successful banks, and anyone who thinks it would be good for the United States of America not to have that should call me directly.”

Dimon and JPMorgan — the most storied banking franchise in the nation’s history with roots dating to Aaron Burr’s founding of Manhattan Bank in 1799 — faced similar criticism during the 2008 and 2009 crisis when they swept up the smoldering ashes of failed lender Washington Mutual and cratered investment bank Bear Stearns with help from the federal government. But even in both these cases, JPMorgan took on much of the residual problems with both institutions, resulting in nearly $20 billion in regulatory settlements.

To be sure, the First Republic purchase was not an act of purely patriotic altruism, though it may bring a close at least to the current phase of bank meltdowns. These meltdowns came after SVB, Signature and First Republic found themselves with enormous deposits over the FDIC-insured cap of $250,000 and saddled with bond and other investments that have plunged in value as the Fed has rapidly boosted interest rates to battle inflation.

Depositors sensed that their money was at risk and abandoned all three. In the first two cases, the FDIC took on responsibility for all deposits. In this case, they don’t have to, which is why JPMorgan won out over other bidders. The FDIC is required to accept the bid that will wind up costing its deposit insurance fund the least.

But JPMorgan is getting valuable assets from a long-admired California institution that boasts the kind of high-net worth individuals every big bank covets. And the bank said it expects to at least make some money off the deal. JPMorgan’s stock rose around 2 percent on today, indicating shareholders also believe the deal is a good one.

This is clearly not the kind of headline the Biden administration wanted — “Nation’s Largest Bank Gets Bigger!” — but it’s not clear there was a better alternative that would not have spiked recession risk. And Warren and other progressives directed much of their ire at deregulation that took place during the Trump administration for creating the conditions that allowed all three banks to collapse in the first place.

As for JPMorgan, financial historian John Steele Gordon noted to POLITICO that it’s neither hero nor villain in the current situation. “Banks are seldom if ever heroic. That’s not their job,” he said. “So they’ll always demand a deal that will keep them whole… Banks have been getting fewer in number for decades now, and that’s a good thing, up to a point, as large banks are much safer than small ones.”

Whether or not we have passed that point where JPMorgan is simply too large and powerful is one that can only be addressed and potentially solved by significant new legislation, something not happening anytime soon. For now, Americans can at least be relieved that this part of the Fed-induced financial sector drama is probably over. There aren’t many more out there like SVB, Signature and First Republic. But there is plenty of danger potentially still lurking in other corners.

Welcome to POLITICO Nightly. Reach out with news, tips and ideas at [email protected]. Or contact tonight’s author at [email protected] or on Twitter at @EconomyBen.

What'd I Miss?

— McCarthy defends Ukraine aid: Speaker Kevin McCarthy offered his most forceful backing of continued U.S. aid to Ukraine in its war against Russia during a press conference following remarks to Israel’s Knesset today. Responding to a Russian reporter, McCarthy made clear his support for Ukraine in its war with Russia. “I support aid for Ukraine,” he said to applause. “I do not support what your country has done to Ukraine. I do not support your killing of the children either. And I think for one standpoint, you should pull out, and I don’t think it’s right and we will continue to support because the rest of the world sees it just as it is.” McCarthy has repeatedly hedged on continued Ukrainian aid, which has divided congressional Republicans, by saying he would not continue to offer a “blank check” to Ukraine.

— Cardin not running for reelection: Maryland Democratic Sen. Ben Cardin will not seek reelection in 2024, his spokesperson Sue Walitsky confirmed this morning. Cardin has served in the Senate for three terms and his vacancy will create a wide-open race to succeed him in the blue state.

— Inslee won’t seek fourth term: Washington Gov. Jay Inslee announced today that he would not seek a fourth term, kicking off what will likely be a competitive primary on the West Coast. Inslee, a Democrat, was first elected to the post in 2012, and subsequently won reelection in 2016 and 2020. He briefly ran for president in 2020 as well, suspending his campaign in the summer of 2019 and pivoting to running for governor and winning a third term.

Nightly Road to 2024

WISH LIST — With just one left week to go in the annual legislative session, Florida’s Republican-led lawmakers have largely delivered on Gov. Ron DeSantis’ top policy priorities — but there are still a handful of items left unfulfilled, writes POLITICO’s Gary Fineout.

While DeSantis has clearly succeeded in pushing GOP lawmakers to support his long list of legislative requests, lawmakers resisted passing a bill that made it easier to sue journalists, and the legislation is now dead. It even received push-back from conservative media outlets. And although legislators are likely to pass the governor’s signature immigration overhaul, they likely won’t include some key provisions, including a repeal of the state law that allows some undocumented students to qualify for in-state tuition rates. DeSantis has rolled out a host of high-profile legislation in Florida ahead of a possible presidential run.

AROUND THE WORLD

INDEPENDENCE NOW — French Polynesia has elected a pro-independence party, giving fresh impetus to long-standing calls for a referendum in France’s sprawling overseas territory in the South Pacific, writes Sam Wilkin.

The Tavini Huiraatira party, led by former president Oscar Temaru, won an absolute majority in the Assembly of French Polynesia, taking 38 of the 57 seats, French newspaper Le Figaro reported. The assembly will elect a president of the territory for a five-year term later this month, who could then push an independence bid.

French Polynesia already has a degree of autonomy, with responsibility for policies including health care, primary and secondary education, and the environment. In this regard it is closer to British and Dutch overseas territories than to other French possessions such as Réunion and Guadeloupe, which are treated the same as continental departments. Nevertheless, Paris retains control over issues such as higher education and defense policy. Independence has been an issue for decades: Temaru founded the Front de libération de la Polynésie, which would later become Tavini Huiraatira, in 1977.

Winning an absolute majority may give Tavini Huiraatira its best shot yet at independence, though this will need approval from Paris.

DOUBLE LIFE — In April 2008, a senior British intelligence official flew to Tel Aviv to deliver an explosive revelation to his Israeli counterparts: Britain had a mole in Iran with high-level access to the country’s nuclear and defense secrets. On Jan. 11, the execution in Iran of a former deputy defense minister named Alireza Akbari on espionage charges brought to light something that had been hidden for 15 years: Mr. Akbari was the British mole, the New York Times reports. Mr. Akbari had long lived a double life. To the public, he was a religious zealot and political hawk, a senior military commander of the Revolutionary Guards and a deputy defense minister who later moved to London and went into the private sector but never lost the trust of Iran’s leaders. But in 2004, according to the officials, he began sharing Iran’s nuclear secrets with British intelligence.

Nightly Number

RADAR SWEEP

ALL EYES ON ME — As celebrities from around the globe descend on New York City this evening to celebrate the annual Met Gala — the fashion industry’s most high-profile event of the year — this year’s theme has turned some off. Rather than honor a movement or a style, this year’s event has chosen to honor a person: late designer Karl Lagerfeld, who died in 2019, and his giant body of work. Lagerfeld had a huge influence on the industry, but also made contentious comments over the years — about the #MeToo movement and immigrants into Europe, among others. Read Channing Hargrove on his legacy in the digital media project andscape.

Parting Image

Did someone forward this email to you? Sign up here.