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On today’s episode of the 5 Things podcast: First Republic Bank seized
USA TODAY Money and Personal Finance Reporter Medora Lee has the latest after First Republic Bank was seized and sold to JPMorgan Chase. Plus, President Joe Biden calls congressional leaders to the White House for talks on the debt ceiling, Florida Gov. Ron DeSantis signs a measure making child rape subject to the death penalty, Montana state Rep. Zooey Zephyr sues Republican leadership after they voted to censure her and USA TODAY NOW Editor Anika Reed recaps the Met Gala.
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Hit play on the player above to hear the podcast and follow along with the transcript below. This transcript was automatically generated, and then edited for clarity in its current form. There may be some differences between the audio and the text.
Taylor Wilson: Good morning. I’m Taylor Wilson and this is 5 Things you need to know Tuesday, the 2nd of May 2023. Today, a look at the fallout after First Republic Bank was seized and sold to JP Morgan Chase. Plus, President Joe Biden invites congressional leaders to the White House for talks on avoiding a default on the nation’s debt, and we have a recap from the Met Gala.
◆Regulators seized First Republic Bank yesterday and sold all of its deposits and most assets to JP Morgan Chase. The move marks one of the biggest bank failures in US history. I spoke with USA TODAY Money and Personal Finance Reporter Medora Lee to learn more. Hello Medora.
Medora Lee: Hi, how are you?
Taylor Wilson: Good, thanks. So, First Republic Bank has been sold off to JP Morgan Chase. What’s the latest here?
Medora Lee: So the latest is, after a lot of wrangling over the weekend, JP Morgan Chase has decided that it will take up First Republic Bank. So that means that they are going to take over all of the unsecured deposits that First Republic Bank has, so everybody’s money is safe, so that’s a good thing. And they are going to split some of the losses that the bank has for some of its mortgages and other sort of debt instruments and they’re going to split it with the FDIC.
Taylor Wilson: And Medora, who used First Republic?
Medora Lee: So it was mostly wealthy people who put their money into First Republic Bank. First Republic Bank had this kind of strategy, they prided themselves in customer service for their wealthy clients to get their money to deposit into the bank. And then they would take that money and they would use it for loans, for houses or whatever, for other rich people. And so the big lure was the CEO thought that they could get away with this, offering very little interest when interest rates were low and maybe putting out a mortgage for like 3% rate or something less than that even. And so they would just make the difference.
But when interest rates started to rise, their rich people decided they really didn’t need all those great services that First Republic was giving them and they started moving their money to higher interest-bearing accounts. So this caused a huge problem. First Republic had to cover those deposits, but at the same time now they were losing money on those mortgages because interest rates had shot up so much. So this was where that big hole really came to fruition here and got them in trouble.
Taylor Wilson: And how does this compare to the two other bank collapses that we saw earlier this year?
Medora Lee: It was pretty similar. A lot of those banks also had what they call interest rate risk. The other banks were too invested in long-term treasuries because everything was paying so little. And then when the Fed started to raise interest rates so much and the value of those treasuries dropped, they started having these big holes in their balance sheets.
Taylor Wilson: So Medora, this is the second-biggest bank failure in US history. How worried should people be that this could spread to other banks around the country?
Medora Lee: This is the million-dollar question. If you listen to Jamie Diamond, the CEO of JP Morgan Chase, he reminds us all that the financial system is sound, but I think there’s still some worries out there. The whole thing is we are only supposed to save the biggest and most important banks. And here, are we kind of reaching now into regional banks that we have to save, too? and then where’s the line? And people get nervous and now that we’ve saved so many banks, are they going to target another bank? I don’t know. I’m not really sure, and plus the Fed’s not done raising rates yet. We still probably are going to expect another one on Wednesday. And after that, for June, nobody’s really sure whether the Fed’s going to have to raise rates again or take a pause. There’s still a lot of uncertainty out there. For now though, I think everybody’s money is safe. How long that’s going to last? I’m not positive.
Taylor Wilson: Medora Lee, thanks as always.
Medora Lee: Okay, thanks Taylor. Have a good day.
◆Taylor Wilson: President Joe Biden yesterday summoned House Speaker Kevin McCarthy and other congressional leaders to the White House for talks next week on avoiding a default on the nation’s debt. Biden’s call to McCarthy came just an hour after Treasury Secretary Janet Yellen warned the federal government may not be able to pay its bills as soon as June 1st. Biden has been under pressure to talk to McCarthy after House Republicans passed a bill to raise the debt limit while cutting spending. Biden has maintained that the debt limit be raised without conditions.
◆Florida Governor Ron DeSantis has signed a measure making child rape subject to the death penalty, defying a US Supreme Court ruling. At a press conference, he said that in the worst of the worst cases, the only appropriate punishment is the ultimate punishment. In 2008, Supreme Court Justices issued a five-four ruling barring states from imposing the death penalty for the rape of a child when the crime does not involve a child’s death. The court ruled that applying the death penalty in such cases would amount to cruel and unusual punishment. DeSantis though has said he thinks the current conservative majority Supreme Court may be willing to revisit the earlier ruling.
◆Montana State Democratic Rep. Zooey Zephyr is suing Republican leadership after they voted to censure her for comments she made criticizing colleagues over a bill restricting gender-affirming healthcare. The first openly transgender woman elected to Montana’s legislature tweeted yesterday that recent actions violate her First Amendment rights as well as those of her constituents. The American Civil Liberties Union of Montana, along with several attorneys, filed the suit on her behalf in state court yesterday against the state of Montana. The Press Secretary for Montana Department of Justice Attorney General, Austin Knudsen, called the suit, “performance litigation.”
◆It was a glamorous night at the Met Gala, and this year’s theme recognized the work of late fashion designer Karl Lagerfeld. I spoke with USA TODAY Now Editor Anika Reed to hear all about it. Hi Anika, thanks for hopping on the show.
Anika Reed: Hi, thank you for having me.
Taylor Wilson: So let’s start here for those who maybe don’t know, what is the Met Gala?
Anika Reed: So the Met Gala is also referred to as fashion’s biggest night. If you’re a sports fan, think of it as the Super Bowl of fashion. If you’re an entertainment fan, think of it as the Oscars of fashion. Basically, the biggest event that you can think of having to do with fashion and art and history all combined into one. It’s actually an invite-only fundraiser that helps the Metropolitan Museum of Arts Costume Institute, and it’s held annually. Typically, it’s on the first Monday in May. We had a little bit of a blip in the system with the pandemic and having it not be held on the first Monday in May for a couple of years, but we returned last year and we’re back again this year.
The Met Gala is basically every major celebrity who you can think of dressing up, having to do with a theme, and this year’s theme was Karl Lagerfeld: A Line of Beauty. And yeah, this year’s Met Gala was a huge showcase of fashion and legacy and the art that is design.
Taylor Wilson: And the celebrities who showed up, did they stay on theme with the Karl Lagerfeld theme for the most part?
Anika Reed: For the most part, absolutely. I think a lot of the invitees had a personal connection to Karl. And that being said, they wanted to honor him, honor his legacy. He died a few years ago and this exhibit really looks back at his entire career in fashion, and so we saw a lot of black and white, kind of nods to his typical suiting that he would wear. We saw a lot of pearls. We saw some gold and a lot of black and white. So, looking at some of the Chanel bride dresses and some archival pieces from people. So I’d say for the most part, yes, everyone stayed on theme, including Rihanna, who closed out the carpet and was wearing basically a giant Chanel-esque flower as her look, and was stunning.
Taylor Wilson: Yeah, absolutely massive look from Rihanna. What were some of the other big outfits on the night from celebrities?
Anika Reed: One of the big looks was Kim Kardashian. She was wearing Schiaparelli and she stopped and talked to us for a minute on the carpet. She just wanted to pay honor and tribute to Karl Lagerfeld, as I said, a personal connection there. Everyone from Dua Lipa, who was one of the co-chairs of the event, she showed up in a gorgeous white gown. White was definitely a big hit on the carpet this year. You had Gisele Bündchen in this huge feathery cape almost, all white as well. You had Diddy who was wearing a Sean John original, big black cape. He came with Yung Miami as his date. Anyone who you can think of, Usher was there, Russell Westbrook was there. Tom Ford was there. Naomi Campbell, Kate Moss, anyone who you can think of was probably there.
Taylor Wilson: All right, Anika Reed, thanks so much.
Anika Reed: Thank you.
Taylor Wilson: Before we go, happy National Teacher Appreciation Day. If you have a chance, say thanks today to the teacher in your life. Thanks for listening to 5 Things. You can find us every morning right here wherever you get your audio. I’m back tomorrow with more of 5 Things from USA TODAY.
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