The rescue of the First Republic fails to calm the turmoil in the markets

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By Webdesk

Regional bank stocks suffer double-digit losses despite JPMorgan Chase’s takeover of the troubled lender.

The rescue of First Republic failed to allay market fears about the integrity of the US banking system, with shares of regional banks plummeting for a second straight day.

US regional banks suffered heavy losses on Tuesday after the troubled lender to JPMorgan Chase failed to assure investors that the banking sector’s woes were over.

Los Angeles-based PacWest Bancorp saw its share price fall nearly 30 percent, while Western Alliance Bank and KeyCorp fell 21 percent and 10 percent, respectively.

Major lenders, including Citigroup and Bank of America, also took a hit, albeit with less steep declines.

“If a ‘confidence crisis’ can happen to First Republic, it can happen to any bank in this country,” Jake Dollarhide, CEO of Longbow Asset Management, told Reuters news agency.

“This is potentially a big problem, which hopefully won’t lead to anything major.”

The losses marked the second day of turbulence for Wall Street banks, despite the US government-sponsored bailout of San Francisco-based First Republic, which has been under pressure since the collapse of Silicon Valley Bank last month.

First Republic’s bankruptcy marks the second-largest bank collapse in U.S. history, behind Washington Mutual Bank in 2008.

JPMorgan Chase acquired most of First Republic on Monday in a deal overseen by the Federal Deposit Insurance Corporation (FDIC), which previously took control of the troubled lender.

Under the bailout deal, JPMorgan Chase purchased “the substantial majority of assets” from the lender without assuming its corporate debt, and received $50 billion in funding from the FDIC.

FDIC also agreed to cover 80 percent of all losses on certain First Republic loans for up to seven years.

Regional banks have been under heavy scrutiny since the collapse of Silicon Valley Bank and Signature Bank in March amid fears of a crisis of confidence that could engulf the wider banking sector.

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