First Republic's Collapse: Is the Domino Effect Coming for Small and Medium-sized U.S. Banks

 The recent bankruptcy of Silicon Valley Bank (SVB) has caused First Republic Bank to face its largest crisis yet, with large-scale withdrawals and a steep decline in stock prices. This has led to anxiety in the market, with concerns that small and medium-sized U.S. banks could also face collapse. In response, Jamie Dimon, Chairman of JPMorgan Chase, is gathering large banks to come up with a strategy to stabilize First Republic.

According to The Wall Street Journal (WSJ), Dimon is leading the preparation of measures to stabilize First Republic by considering ways to increase its capital with the CEOs of large banks. The options on the table include selling First Republic, injecting external capital, or direct investment by the banks. These banks are also beneficiaries of attracting deposits withdrawn from SVB and First Republic.

The situation facing First Republic is dire. After the news of SVB bankruptcy broke on the 10th, First Republic's customers withdrew USD 70 billion, which is half of the total deposit held by First Republic as of the end of last year. First Republic is expected to be the "next bankrupt hitter" due to its high proportion of uninsured deposits like SVB, and its stock prices have fallen more than 90% compared to the 8th.

In response, Dimon decided to provide $30 billion (about 39.3 trillion won) to CEOs of 10 large banks and First Republic on the 16th. U.S. Treasury Secretary Janet Yellen also asked Dimon to inject capital directly, and he called bank CEOs such as Bank of America (BOA), Wells Fargo, and City to persuade them to join. The situation is similar to when JPMorgan founder John Peermont Morgan gathered fellow bankers in 1907 to bail out lenders that ran out of deposits.

However, it remains to be seen whether the situation will improve, as Standard & Poor's (S&P), an international credit rating agency, lowered First Republic's credit rating by three notches from 'BB+' to 'B+'. On the 15th, S&P lowered it by four notches from 'A-' to 'BB+'.

Jamie Dimon has a reputation as a relief pitcher visited by the U.S. authorities during times of crisis in the U.S. economy. He acquired Bear Stearns for $2.4 billion (about 3.14 trillion won) during the 2008 global financial crisis at the request of the Federal Reserve and the Treasury, saving the U.S. financial markets from the worst-case scenario. He is considered a "crisis management genius" and already predicted the financial crisis from subprime mortgages in 2006.

Born into a Greek-Jewish family in 1956, Dimon was exposed to the financial market early on thanks to his grandfather and father, who worked as a stockbroker. After graduating from Harvard University's MBA in 1982, he worked for his father's boss, Sandy Whale, president of American Express, before leaving to establish Citigroup. However, his relationship with Whale ended when he was fired shortly after the group was launched. After being ousted, Dimon became Bank One CEO in the U.S. Midwest in 2000 and was promised a CEO position when he sold Bank One to JPMorgan Chase in 2005. JP Morgan Chase is currently ranked first in the U.S. in terms of assets, beating Citibank.