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The FDIC took over the embattled San Francisco bank, First Republic, and auctioned it off, with JP Morgan taking over as regulators hope to fend off a domino effect in the banking sector.

“Our government invited us and others to step up, and we did,” Jamie Dimon, chairman and CEO of JPMorgan Chase said in a statement after the purchase.

But critics point out that JP Morgan profits sizeably off the deal and argue it amounts to a government bailout.

First Republic’s collapse is the biggest bank failure since the 2008 financial crisis, when the federal government bailed out banks with billions of taxpayer dollars. In this new deal, JP Morgan took on about $92 billion in First Republic’s deposits and another roughly $203 billion in assets.

“JPM is paying about $10.6 billion, but is getting $13 billion from the FDIC, or in other words, we the taxpayer,” E.J. Antoni, an economic expert at the Heritage Foundation, said. "That means JPM already booked a profit on the deal. Another $50 billion is available from the FDIC to JPM if losses from First Republic’s assets continue to mount. To cover the existing and any future losses, the FDIC will levy a ‘special assessment’ on banks that is passed to customers.”

Dimon admitted his company “modestly benefits” in the deal.

“The service JPM is providing here is to provide a massive amount of liquidity to meet depositor’s demands,” Antoni said. “That will prevent the sale of some $30 billion in securities that First Republic had which have lost value, if sold today. If held to maturity, however, those securities will still pay their anticipated rate of return."

Other experts say comparing this to a traditional bank bailout goes too far and emphasize that stabilizing the banking sector was necessary for the sake of the broader economy. First Republic is the third U.S. bank to fail since March of this year.

Notably, the FDIC is funded by insurance premiums paid by banks, not by Congressional appropriations.

“I would not call this a bailout,” Gary Wolfram, an economics professor at Hillsdale College, told The Center Square. “It is an attempt to stabilize the banking system. The reason the FDIC was created nearly 90 years ago was to guard against ‘runs’ on banks. Individual banks hold only a fraction of their deposits on reserve with the Fed, and if we all went in to get our money you have the scene from the Jimmy Stewart movie, 'It’s a Wonderful Life.'

“While J.P. Morgan may benefit, it is taking on $92 billion in deposits that were in First Republic (as well as the loans and securities) and it is large enough that people will probably not withdraw their deposits for fear that J.P. Morgan will fail,” he added.

Antoni argues taxpayers will still foot the bill.

“The FDIC levies fees on banks which are passed on to customers. Anything, like an overdraft fee, contributes to this,” he said. “The interest rate on a loan will be slightly higher and the interest rate you get paid on your savings account will be slightly lower. This functions like a particularly regressive tax because low-income people are much more likely to pay things like overdraft fees. However, the FDIC also has an existing line of credit with the Treasury of $100 billion. Tapping into that costs the taxpayer. Additionally, when the FDIC has really gotten into trouble in the past, the Treasury has not only expanded that line of credit but simply paid for outstanding FDIC bills, meaning those dollars were never repaid.”

While calling this a bailout is up for debate, the federal government is taking the blame for fueling inflation and then hiking interest rates to compensate for inflation, which is what has put the strain on the banking sector.

“The Fed is offering an alternative to the FDIC guaranteeing all deposits as it did with the other two banks,” Wolfram said. “It is following the Swiss authorities actions with Credit Suisee. The recent swift and large increase in interest rates by the Fed resulted in a sudden decrease in the value of bond holdings of banks, such as Silicon Valley, and now it is trying to deal with the result of this. This is complicated by the massive deficits of the federal government and the Fed’s attempts to deal with inflation caused by the massive increase in the money supply (a 40% increase in M2 that started in March 2020).”

(The Center Square) – It appears Republicans in the Wisconsin Senate have secured enough votes to out-vote the governor.

Current state Rep. Dan Knodl, R-Germantown, ended Tuesday night with a nearly 1,000 vote lead over his Democratic challenger Jodi Habush Sinykin.

The Associated Press reported that Knodl had 38,594 compared to Habush Sinykin’s 37,208 with 99% of the votes counted Tuesday night.

If Knodl’s win holds, Republicans will have a supermajority in the Wisconsin Senate and will have enough votes to both override Gov. Tony Evers, and oust some of his cabinet secretaries if they chose.

A spokesperson for Habush Sinykin said the margin is too close, and said they are not ready to concede in the race.

Bail Reforms Pass

Voters in Wisconsin on Tuesday said they want to change how bail works in the state.

Both of Wisconsin’s bail reform constitutional amendments passed by overwhelming margins.

The first question that would change the constitution to allow judges to keep people in jail, or set higher bails for people accused of serious, violent crimes passed with about 67% of the vote. The second question that allows judges to look at more than just a suspect’s likelihood of returning to court passed with about 68% of the vote.

The amendments come after years of working to update the Wisconsin Constitution’s bail requirements, and after the state’s cash bail system came under fire because of the Waukesha Christmas Parade attack.

The changes will now go forward, though there is some uncertainty. The Republican-controlled legislature passed a plan last month to clarify just what the constitutional amendment means by “serious bodily harm” and “violent crime,” but Gov. Evers has yet to sign that legislation.

Welfare Work Requirement Passes

Just over eight-in-10 voters in Wisconsin want people on welfare to have to work to receive public benefits.

The advisory question on Tuesday’s ballot that asked "Shall able-bodied, childless adults be required to look for work in order to receive taxpayer-funded benefits?" got just over 80% of the vote.

Preliminary returns show that more than 1.4 million people voted to require some work in exchange for welfare.

The vote doesn’t really matter. State law will not change, and anyone receiving public benefits in Wisconsin will not need to find a job. The question was advisory only.

(The Center Square) – Voters will now have their say on whether the bail system in Wisconsin should change.

The State Assembly on Thursday approved the proposed constitutional amendment that would allow judges to consider a suspect’s criminal history and level of danger when setting bail.

Republicans looked back to the Waukesha Christmas Parade attack that killed six and injured 60 others. It was that attack that gave some urgency to the plan, but Waukesha state Rep. Scott Allen said the massacre at the parade is, sadly, not the only time when a suspect was out on low or no bail and killed someone.

“Perhaps we could think of it as a one-off problem, but the reality is that the Brooks case is not an isolated incident,” Allen said during Thursday’s debate. “There are too many crimes occurring by individuals awaiting trial, with a lengthy record already attached to their name.”

The Wisconsin Constitution currently only allows judges to consider whether a suspect will return to court when setting bail. The proposed amendment would expand the options for judges, and allow them more latitude when deciding who to keep behind bars.

Democrats at the State Capitol argued the proposed amendment criminalizes poverty.

“When you use monetary funds as a way to determine if dangerous people should be held in custody or not, you are opening the door to creating a two-tied system,” Rep. Dora Drake, D-Milwaukee, said. “One that is focused on those who are poor, and one that is focused on those who have financial resources.

Allen said the changes won’t guarantee any more people will be held on any higher bails.

He said the amendment simply allows judges to keep some dangerous people behind bars for some dangerous crimes.

“We need to take away the shield from these soft-on-crime judges who are harming our communities,” Allen added. “And we need to give a better tool to judges who actually care about public safety.”

Rep Adam Neylon, R-Pewaukee, said, ultimately, the people of Wisconsin who now decide if they want to see the bail system changed in the state.

“We’re allowing it to go to a vote amongst the people, to see if it’s something that they agree with,” Neylon explained. “This is a very positive step. And I don’t want to lose sight of that when we start to poke holes in the original system.”

The Wisconsin Senate approved the same amendment earlier this week. Voters will have their say on the question in April.

(The Center Square) – One of the authors of Wisconsin’s proposed constitutional amendments on bail reform doesn’t understand why opponents don’t want judges to have the full picture of people in their courtrooms.

Rep. Cindi Duchow, R-Delafield, told News Talk 1130 WISN’s Jay Weber Thursday that it doesn’t make sense to limit a judge to only considering whether someone is a flight risk when setting bail.

“This is common sense,” Duchow said. “Why wouldn’t we want a judge to look at your past criminal convictions and your danger to society when setting bail? Why wouldn’t we want the judge to have the full picture of the criminal when making these decisions? I don’t know why giving them all of the information is a bad idea.”

Duchow started working on the bail reform proposal back in 2017, but it gained momentum after Darrell Brooks Jr. killed six people and injured 60 others in his attack on the Waukesha Christmas Parade.

Duchow said a Milwaukee County judge released Brooks on $1,000 bail just days before the attack, despite his long criminal history.

“This will help us hold those Milwaukee judges’ feet to the fire,” Duchow added. “I am hoping that the elected officials in Milwaukee will step up and say to these judges ‘It’s time to be reasonable. We can’t let someone with 20 past convictions for beating-up someone back on the street.’”

Duchow’s amendment passed both the state Assembly and Senate last year, with support from both Republicans and Democrats. The amendment had a hearing this week in both an Assembly and Senate committee.

The hope is to vote again on the amendment in time to get it on the April ballot.

Duchow hopes to have Democratic support this time around as well.

“I know that, for sure, I’ve got a couple that are going to sign-on and vote with us next week,” Duchow said of Democrats. “They’re the ones who have the biggest problems. They’re the ones who should be asking for this.”

President Joe Biden on Wednesday touted a federal program to delay insolvency for private unions’ pension funds, but critics say taxpayer dollars should not be used to “bail out” pensions negotiated by unions.

Biden spoke in Cleveland, Ohio, about the American Rescue Plan’s Special Financial Assistance program, which will protect more than 10 million Americans in multi-employer plans from seeing their benefits slashed when their plan becomes insolvent, which many are projected to do in the next few years.

Biden called the plan "historic."

“This was $90 billion, O.K.?” Biden said in his remarks. "But it is small in comparison to the bailouts of businesses and major corporations and banks..."

Multi-employer pensions are those negotiated across an entire industry, like mining or construction, with private unions and employers running the plans. The Biden administration announced a final rule this week regarding the rates of return and kinds of investments these pensions can utilize.

“The backbone of the country are the working women and men, the middle class, and you know there’s a middle class for one reason: American unions,” Biden said.

Critics, though, say it will be regular Americans who foot the bill.

“[Biden] is saving private union pensions by making ordinary Americans pay for them,” said Rachel Greszler, an expert at the Heritage Foundation. “And 6% of private sector workers are unionized so many of the blue collar workers that aren’t part of a union, or maybe they are part of a union that no longer has a pension plan, they are the ones who are going to bear the burden.”

Democrats praised Biden’s decision, saying it will help millions of Americans keep their benefits.

“Today’s action by the Biden-Harris Administration establishes the final rules for the multi-employer pension rescue program that will protect millions of Americans’ retirement security and save tens of thousands of businesses,” said U.S. Rep. Robert C. “Bobby” Scott, D-Va., who chairs the House Committee on Education and Labor. “For years, workers, retirees, businesses, and taxpayers sought a solution to the multi-employer pension crisis. In response, Congressional Democrats delivered a historic victory through the American Rescue Plan that keeps the promises made to retirees, saves businesses from going under, and shields taxpayers from the even greater cost of a multi-employer pension collapse.”

When some employers who originally were in the pension negotiations went out of business, their unfunded pension liabilities remained and were absorbed by other employers, worsening the problem.

“[Unions] have consistently promised more than they have set aside to pay,” Greszler said. “The incentives are all wrong here because the union can say to their members, ‘see we got you a higher pension benefit. We weren’t able to get you increased wages, but we were able to get you the pension benefit,’ and they can tell the employer, ‘we know you can’t afford higher wages, and we are not going to have you contribute more to the pension. We are just going to tweak our interest rate assumptions so that we can promise more but you don’t have to pay anything more.’

“So that’s the problem, that historically they have assumed very high rates of return like 8% where all financial economists will say if you have a guaranteed benefit like a pension, you should be using a riskless rate of return or at best a conservative bond rate. … instead they used stock market rates that translate into being able to make good on your promises only 50% of the time, and when their returns fell short, plans consistently failed to make adjustments,” she said. “The promises were decades into the future, so they got away with it until recently when plans started failing and the entire system is on track to pay only 42 cents on the dollar in promised benefits.”

Critics also say the federal funds are a true bailout because the federal funds are not requiring any major reforms from the unions. The funds are also only enough to delay the insolvency of a fraction of the funds, critics say, and not fix the problem.

“It actually makes it worse because it creates incentives in the short term for plans to promise more and to make worse assumptions than they already were so they can qualify under this short window to get bailouts, and there are no consequences going forward,” Greszler said. “And now that the federal government established that we are going to bail out these plans, plan administrators know that the sooner their plans become insolvent, the higher the likelihood they have of getting that bailout.”